JOHANNESBURG: When Brait SE agreed to pay about $1.2 billion for UK fashion chain New Look last month, South African billionaire Christo Wiese’s investment company took a leaf from an increasingly popular book.
Amid a lack of acquisition opportunities on its home continent, Brait followed the likes of retailers The Foschini Group Ltd and The Spar Group Ltd in bypassing the potential of Africa’s growing middle class and targeting European consumers instead.
“They’re buying established businesses with established brands, distribution channels and shops, and this in a market that’s showing recovery,” said Byron Lotter, a money manager at Johannesburg-based Vestact Ltd, which oversees about R2.3 billion ($185 million) of assets. “Expansion into Africa is slower and a lot more difficult.”
While sub-Saharan Africa has long-term potential, a shortage of retail locations and high transportation costs are among factors limiting expansion opportunities in that region, according to Guy Hayward, chief executive officer of Wal-Mart Stores’ South African unit Massmart Holdings Ltd. That’s preventing companies taking full advantage of middle class households – those consuming $15 to $115 a day – that Johannesburg-based Standard Bank Group Ltd estimates will grow to 40 million by 2030 from 15 million now.
