Tuesday, August 16, 2011

Walmart Seeks to Expand Into Africa

kirsten west-savali, wal-mart in africa

by Kirsten West-Savali, Your Black World

Corporate conglomerate, Wal-Mart, may discover that the stranglehold it has on entrepreneurial endeavors in the United States may not come to fruition in Africa.

Pepkor Ltd., South Africa’s largest clothing company, makes plans to expand into Nigeria, as Wal-Mart continues its mission to hold the monopoly on discount shopping.  However, Chairman of Pepkor, Christo Wiese, is not concerned about the competition:

“Africa is awakening,” said Weise. “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 follows Wal-Mart’s business model of targeting low-income earners, plans to invest $100 million rand ($14 million U.S. dollars) in the first stage of expansion. First on the agenda is a store in Nigeria, with plans on another 50 outlets in the foreseeable future.

With a 16.5 billion purchase, Wal-Mart now owns 51 percent – the controlling stake – in Massmart Holdings Ltd, the largest wholesaler in South Africa. Still, Weise in undeterred. He believes that the African economy will expand at a more rapid rate than the U.S. and Europe.

“There’s enough for everybody. It’s a growing market,” said the 69-year-old billionaire.

According to Bloomberg, Wiese has a net worth of an estimated $1.6 billion, 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.

Though Wal-Mart has its supporters – despite the legal issues that continue to plague the corporation – many believe that the “evil empire,” known just as well for slave wages and alleged sexual harassment as it is for discount prices, would be poisonous to the African economy. Among the detractors is Christy Hoffman, deputy general secretary of UNI Global Union, who describes Wal-Mart as a competing nation:

“With annual sales of more than $400bn, if Walmart were a country, it would be the world’s 25th-largest economy. Its annual sales are nearly double the size of South Africa’s annual GDP of $227bn. As the world’s biggest company, Walmart single-handedly sets the standard for retail practices worldwide. Its business model is based on ever-lower prices. While low prices sound welcome, when those prices come at the expense of suppliers, workers and communities, the cost is just too high.”

With Pepkor positioning itself to be the African Wal-Mart, it remains to be seen what this struggle for dominance will entail for small business owners. However, it is certain that with economic collapse threatening to weaken the financial systems of the United States and Europe and the need for fresh markets becoming a necessity, the world’s eyes, once again, turns to Africa.

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