South Africa’s biggest clothing company, Pepkor Ltd., plans to expand into Nigeria as retailers including Wal-Mart Stores Inc. (WMT) fight for a share of some of the world’s fastest growing retail markets.
“Africa is awakening,” Pepkor Chairman Christo Wiese said in an interview in Cape Town on Aug. 10. “It’s a huge market of almost a billion people with huge resources and a young population. People spend when they’re young.”
Pepkor, which targets low-income earners, plans to open its first Nigerian store this year and may invest as much as 100 million rand ($14 million) in the first stage of its expansion, which may see about 50 outlets opened in Africa’s most populous nation, the billionaire said.
Pepkor’s expansion mirrors the growth strategy of other international retailers, including Wal-Mart, which bought a controlling stake in South Africa’s Massmart Holdings Ltd. (MSM) to gain a foothold on the continent. The 16.5 billion-rand purchase gave Bentonville, Arkansas-based Wal-Mart 51 percent of the largest wholesaler in South Africa, which also has operations in 12 other African nations.
Wiese, whose net worth is an estimated $1.6 billion according to Forbes Magazine, controls Shoprite Holdings Ltd. (SHP), Africa’s largest grocer, and holds more than a third of Brait SA (BAT), the biggest South African private equity company.
Faster African Growth
The 69-year-old is betting economies in Africa will expand faster than the U.S. and Europe. The entry into Africa of Wal- Mart, the world’s largest retailer, hasn’t changed Wiese’s plans, he said. “There’s enough for everybody. It’s a growing market.”
Pepkor will “ride on the coat tails” of Shoprite, which has 76 supermarkets in 15 African countries outside of South Africa. Pepkor will then expand in “nodes” across the continent, as it adds to its 2,800 stores in southern Africa, which include the Pep, Ackermans and Best & Less brands.
Pepkor’s expansion follows a June reorganization of the retailer’s shareholding, which Wiese and Johannesburg-based Brait used to increase their stakes in the 46-year-old company. Pepkor’s shareholders can now “take a long-term view and don’t have the pressure of having to close their investment in the company,” he said.
‘Not For Sale’
The “synergistic benefits” between Pepkor and Shoprite also makes it unlikely Shoprite will be sold, Wiese said. “As it stands, our business is not for sale,” he said.
Wiese’s son, Jacob, 30, is already involved in his businesses while his two daughters will probably retain ownership of his companies when he retires.
“It’s a family business,” he said. “I believe I am good for another five to seven years.”
Wiese’s Tradehold Ltd. (TDH), which owns property and retail assets in the U.K., will make acquisitions within the next year outside of its existing businesses, he said, declining to be more specific.
“Tradehold has been my stepchild,” he said. “We’ve been fighting fires there and most of these have been dealt with.”
Any acquisitions would be the first step in making sure Tradehold has “more firepower,” Wiese said.
The son of a farmer and gas station owner in Upington in South Africa’s Northern Cape, Wiese will also push the African expansion of Invicta Holdings Ltd., a distributor of bearings, seals and agricultural machinery.
‘Unlimited Agricultural Potential’
“We’re looking at growth opportunities” for Invicta, which will include acquisitions, to help triple sales into the continent as it benefits from increased agricultural production, he said. “The agricultural potential of Africa is unlimited.”
For the continent to lure more investment, African governments must improve governance while ensuring they allow immigrants to transfer skills and removing bureaucracy that stifles entrepreneurial development, Wiese said.
South Africa, the continent’s largest economy, is losing its advantage as an entry point into Africa because of impediments to starting new businesses, allowing foreign workers into the country and its labor legislation, he said.
Companies, labor and the government should hold talks to solve South Africa’s unemployment crisis in the same way that negotiations were held that led to the end of apartheid in 1994, he said. “We’ve been debating issues and don’t have agreement,” he said. “Let’s first get people employed.”
Talk by the youth wing of the ruling African National Congress about whether South Africa’s mines and banks should be nationalized is also “regrettable” as it makes “the atmosphere less conducive to a growing economy,” he said.
“The debate on nationalization won’t be very long amongst clever people,” he said. “Those who support it must come and put their case forward and show where it works.”
To contact the reporter on this story: Sikonathi Mantshantsha in Johannesburg at firstname.lastname@example.org