Competition the name of the game in S.Africa retail space - CNBC Africa

Competition the name of the game in S.Africa retail space

Southern Africa

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Spanish clothing retailer Zara is one of many international stores growing their presence in South Africa. PHOTO: Getty Images

“There are, I think, even up to 23 shopping centres that will be built above 17,000 squares in the next two to three years, so the 14 are ones that we believe to be much more definite because these things go through various stages of planning,” Sesfikile Capital fund manager and director Kundayi Munzara told CNBC Africa.

According to Sesfikile Capital, 14 malls are to be commissioned this year. Not all of them will however come online in 2014, but the development is nonetheless significant for South Africa.

“If we look at the South African economy from the last census, the population’s gone up. There are a couple of drivers to the retail proliferation, or the mushrooming of shopping centres. One is immigration, and also migration within Southern Africa. Ten years ago, South Africa was about 55 per cent urbanised. Now it’s 62 per cent urbanised. That’s big for retail,” Munzara explained.

Popular retailers or chain stores are often the anchor tenants for shopping malls. In some cases, malls will not be built until developers are certain that the retailers in question will take up space. A combination of local and international retailers is therefore crucial for the success of a shopping mall. A growing middle class has is also a key ingredient to that success.

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“We looked at research done by Dirk Prinsloo, and what is showed was that in terms of the demographic in the last 10 years, the Living Standards Measure (LSM) 8 to 10 was about 16 per cent of the population, now it’s 24. In addition to that, a lot more people have moved out of the lower LSM. LSM 1 and 2 [have] moved to 5 to 7. That is a big part of the population.”

The Living Standards Measure is a marketing research tool developed in Southern Africa that divided the population into 10 LSM groups. Ten is the highest ranking and 1 is the lowest ranking.  

Munzara added that the Living Standards Measure does not however indicate exactly how wealthy a person is. It attempts to indicate one’s level of wealth according to different aspects, such as according to one’s ability to access credit, among others.

As international and local retailers begin to expand their presence in the country, competition in South Africa is expected to continue its thriving as it provides more consumer options.

“What’s driving the growth from a retail perspective, part of it is defending market share. A lot of the international market retailers we speak of – Zara, Topshop, Cotton On – they already have [a number of] stores already in South Africa and expanding that. With those [retailers] coming in, our local guys also have to defend the market share,” said Munzara.

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