Retail, Steady, Go

African consumer on the radar. The management consultants AT Kearney have just released their influential 2017 Global Retail Development Index which ranks the top 30 developing countries for retail investment based on wide array of indicators covering:

(i) country & business risk (i.e. GDP growth, debt, government stability, crime);

(ii) market attractiveness (i.e. retail sales per head, urban population, regulatory environment);

(iii) market saturation (i.e. market share of leading retailers, modernity of retail facilities);

(iv) time pressure - how quickly the retail sector is developing.

The annual index has run since 2004 and therefore facilitates the performance tracking of African markets. The key message is a dramatic jump in their attractiveness since 2015. Over 2004-15, African nations comprised only around 12% of markets worthy of attention. Moreover, until 2010, when South Africa entered, these markets were all in North African nations such as Tunisia, Egypt, Morocco and Algeria. Subsequent years have seen increased Sub-Saharan representation with Botswana, Namibia, Nigeria, Ivory Coast, Ghana, Angola, Zambia, Kenya and this year Tanzania stepping into the ranking.

Risk vs Rewards. Although African markets are increasingly seen as viable retail investment destinations, they tend to be clustered towards the bottom end of the ranking. The reasons revolve around the familiar themes of perceived elevated risk in terms of economic performance as well as regulatory burdens and infrastructure shortfalls. While these frictions are countered by a relatively informal and fragmented overall retail offering, with consumer sectors developing rapidly, the time available to capture the lowest hanging fruit appears to be quickly diminishing.