Africanisation of south African Ratiling Essay

Custom Student Mr. Teacher ENG 1001-04 14 April 2016

Africanisation of south African Ratiling

The internationalisation of retail businesses has become a global phenomenon as retailers around the world expand their operations beyond national borders. This phenomenon has attracted some academic attention. In Africa, South Africa appears to be more advanced in this regard, with Shoprite at the forefront of the Africanisation of South African retailers. A review of Shoprite’s expansion into the continent results in two propositions and some challenges that affect this process.

The wider significance of the propositions is further examined by a study of other South African retailers expanding into Africa. The review finds that although there are opportunities for retailers in African countries, there are also significant challenges that can negate the opportunities.

Most importantly, the chosen mode of entry into African countries plays a significant role in the overall internationalisation process and should be a primary concern of management teams considering making such a move, and it is established that the mode of entry comprises at least five areas of critical decision making. Key words: Africanisation, retailing, international retailing, South African retailing, African markets, mode of entry, ICTs, international business.

Since 1994, South Africa has moved to become part of the African continent, even to the point that it developed 1 and championed an African agenda . This move opened up opportunities for South African businesses within the continent. In this regard, leading South African retailers (including Shoprite, Woolworths, Massmart, Truworths) have already invested in, and now operate in diverse African countries. In the past decade, the continent has also seen shopping centres and malls built in most African cities, some of which are also South African investments (Miller, 2006). There is still huge potential for all kinds of South African businesses to expand within the continent, and there are benefits for all concerned.
Already the six primary sectors of the South African economy: mining, retail, construction and manufacturing, financial services, telecommunications, and leisure and *Corresponding author. E-mail:


African agenda in this case refers to former president Mbeki’ s vision of an African renaissance, and the establishment of the New Partnership for Africa’s Development (NEPAD).

tourism, are in one way or another investing in the continent (Daniel et al., 2003). Furthermore, the completion of the SEACOM’s East African submarine cable and the up coming West African cable system that will provide fibre optic connection from Africa to the rest of the world will open more business opportunities on the continent. It is, therefore, not surprising to see an increasing number of South African retail companies expanding into the rest of the continent to seek growth and explore new strategic opportunities. The Shoprite Group operates its own stores in 15 African countries outside South Africa, including Angola, Botswana, Ghana, Lesotho, Madagascar, Mauritius, Mozambique, Namibia, Nigeria, Swaziland, Tanzania, Uganda, Zambia and Zimbabwe (Shoprite, 2008). The group’s operations have been generally successful in most of these countries and in some cases income has exceeded their projections and expectations. This performance has triggered numerous growth and expansion plans for most of the countries listed above. For example, with the opening of one supermarket in Accra, Ghana (in November, 2007), the group immediately started investigating the possibility of opening five more stores around the Accra area (Shoprite, 2008). This report also indicates that their Dakora et al.

African operations have produced higher turnover growth
than their South African counterparts.
However, this is not the case with their operation in
India where foreign retail ownership is forbidden by
government regulations. Shoprite had to operate by
means of franchising in Mumbai (Shoprite, 2008).
Revenues do not match those achieved in Africa,
highlighting the mode of entry as a key factor in the
successful achievement of retail internationalisation.
Yet, even in Africa, it has not all been easy. Due to lack
of suitable acquisition targets and alliance partners, and
given the informal nature of the retail sector in most
African countries, they are obliged to open their own
stores (Games, 2008). The Shoprite annual report
(Shoprite, 2008) indicates that they are currently facing
competition from other South African retailers who are
also moving into Africa. For example Massmart, also
expanding into Africa, will give Shoprite a run for its
money in markets for hard goods. Also, as a
consequence of their go-it-alone approach to
Africanisation, Shoprite often does not gather enough
market knowledge and contacts before entering and
establishing a foothold in these new markets, which in
itself becomes a problem (Games, 2008).
There are also reports of supply issues haunting the
company in its Africa operations. Nigeria is reported to
have government-imposed import restrictions on some
products. This is in a bid to protect the local economy and
suppliers. Miller (2008) points out that the issue
concerning local suppliers is politically controversial for
South African companies operating in foreign African
countries. Although South Africa has moved to be part of
the continent and has championed an African agenda (as
noted at the start of this paper), there are concerns that
this commercial activity might become another form of
colonisation. As a result, these companies have to
demonstrate their support and participation in local
development in those foreign countries or risk being
accused of “exporting Apartheid” into Africa (Miller,
2008). Of course, the circumstances of each country
might vary: Miller found that the Shoprite Group entered
Zambia under favourable conditions that did not attempt
to protect local producers and suppliers.
Despite the increase in retail internationalisation in
Africa led by the South African retailers, little research
has been done in this area. This paper is a review based
on a study of annual reports and other publicly available
sources; it seeks to develop a foundation for more
detailed case study work on the phenomenon. The paper
discusses how the Shoprite Group’s expansion into Africa
has been achieved, and how it secured its position as the
largest food retailer on the continent. Two propositions
concerning challenges affecting the decision of entry
mode are established, based on the Shoprite study. The
issues that inform these propositions are, however,
limited to the results of the Shoprite’s review, and,
therefore, preclude other issues that might be relevant to


the phenomenon but not obvious in this study. The
propositions are further examined by looking at a range
of other cases of South African retailers’ expansion into



In recent years, the world of retailing has seen a dramatic
increase in international activities by retailers around the world (Park and Sternquist, 2008; Myers and Alexander,
2007; Dawson and Mukoyama, 2006). The phenomenon
of retail internationalisation has become an important
feature of global business. As consumer products and
services become global, and around the whole world
consumers’ styles of consumption and attitudes
increasingly become similar, retailers are prompted to
respond to this trend. This results in the emergence of
international (and in some cases global) retail companies
(Federzoli, 2006).
As Jack Shewmaker, director of Wal-Mart points out; “it
is absolutely clear the biggest opportunity facing retailers [today] is internationalisation” (McGarriagle, 2008:12). In exploiting this window of opportunity, the world has seen
retail businesses grow into multinational corporations
contributing to economies on a worldwide basis. The
rising levels of internationalisation among retail
businesses can be attributed to three factors: growth in
size, growth in technological sophistication and the need
to respond to the changing demands and behaviours of
customers (Myers and Alexander, 2007).
However, retailing is geographically tied, and
international companies must have a physical presence
in the foreign countries concerned in order to conduct
their business (Sternquist, 2007). According to Dawson
and Mukoyama (2006), the internationalisation of retailing
is evident in many ways including: the sourcing of
products for resale, the operation of stores in foreign
countries, the use of foreign labour, the adoption of
foreign ideas and the use of foreign capital. There has
been an increase in all these aspects in terms of volume
and spatial reach, Dawson and Mukoyama indicate. This
increase in retail expansion has continued across the
world, characterised by large retail chains, mainly from
the most developed countries, moving into less
developed ones, and this has attracted some academic
However, most research in the area of retail
internationalisation has focused on the developed world
with little attention being paid to developing economies,
especially those in Africa. Zhang and Dodgson
(2007:336) observe that most research in the field of
international business and entrepreneurship concentrates
on “early internationalisation of firms based in developed countries, especially Europe and United States”. Where
Africa is studied, little attention is paid to retailing, as


Afr. J. Bus. Manage.

most previous research has always focused on
manufacturing and pure service industries despite the
recent increase in retail internationalisation (Park and
Sternquist, 2008).
The review takes into consideration South African retail companies that have expanded their operations beyond their home region, the Southern African Development Community (SADC) in a significant way. Pure service retailing is beyond the scope of this paper. Shoprite is the largest food retailer in Africa, and also the pioneering retailer to embark on a continent wide expansion

strategy. A review of Shoprite’s Africanisation process is carried out with the view of gaining some understanding of the phenomenon. Therefore, the propositions and challenges around the issue of modality are limited to what is obvious in the Shoprite study. The significance of these propositions and the relationships between them are further examined by the study of other cases of purposively selected South Africa companies moving into Africa. Since the intention is to understand the phenomenon under study, purposive sampling enhances the potential of understanding

(Devers and Frankel, 2000). As indicated earlier, the study has largely been based on annual reports and other publicly available sources, and, therefore, the review took a content analysis
approach. Due to its ability to assess the effects of environmental variables like regulation, socio-economic issues, and location characteristics such as market attractiveness, credibility and likability (Kolbe and Burnett, 1991) in the internationalisation process, content analysis techniques was useful in this study.






The Shoprite Group of companies came into existence
with the acquisition of a supermarket chain in the
Western Cape, in 1979 (Shoprite, 2009a). This expansion
strategy has continued and has helped the expansiondriven company to show its presence across the country, and the group now comprises Shoprite, Checkers,
Checkers Hyper, Usave, OK Furniture, OK House and
Home, OK Power Express and OK Franchise Division
(with a number of stores and brands under it). The
national growth and expansion strategy of Shoprite, as
observed, has been through mergers and acquisitions,
but it modified and extended this strategy when moving
It achieved international expansion by opening its own
stores in the foreign countries in which it operates, so that in 2008, out of a total of 984 stores, 100 supermarkets
were being operated in 16 countries outside South Africa
(Shoprite, 2008). The company claims that the
international stores operate with the same standards of
sophistication as in the home country, South Africa.
Hence, Shoprite now confidently proclaims its name as
the largest food retailer in Africa. The expansion into
African was a bold decision that has continued to
influence the future of the Shoprite Group to the present
day. However, this could not have been possible without
clear vision, strategy and the appropriate choice of mode
of working. The following points highlight some of the key

factors that contributed to Shoprite’s success in Africa:
Suitability of business model
Most of Africa’s populated cities are home to middle to
high income earners who yearn for quality of life, and
Shoprite’s provision of a world class shopping
environment and a wide range of products at arguably
affordable prices meets their dreams of a better life. The
opening of shopping centres and malls has been a
feature of the Shoprite business model, as expressed by
the Chairman of the group, C H Wiese in their annual
report (Shoprite, 2008:8), “we have brought a developed
country’s shopping experience to millions of people who
have never been exposed to trading of this nature”. In
essence, this goes beyond the activities of retailing; it is actually development, as the bright shopping outlets and
malls have become part of a new urban development and
modernity (Miller, 2006).
Mode of working
Shoprite’s choice of mode for its expansion programme
has largely been by opening up its “own stores” in the
countries where it operates. This strategy allows the
company to have absolute control over all its operations,
both local and foreign, and managing them from its head
office in Cape Town. Park and Sternquist (2008) found
that retail companies embarking on global strategies
prefer opening branches or establishing wholly-owned
subsidiaries for their international operations, although
franchising has been widely used in this regard. This is
because the wholly-owned entry mode allows for more
control and involvement in the operations of the new
establishment. Opening their own stores also offers
potentially greater returns in terms of profit (Park and
Sternquist, 2008).
However, wholly-owned subsidiaries or own stores are
seen as the most expensive mode of internationalisation
for any particular company as it requires more resource
commitment, including management time and finance
(Doole and Lowe, 2004). Doole and Lowe contend that
this mode is used when a retail company is certain that
its products and services will do well in the long-run, in a foreign market of a politically stable country, since it
allows the internationalising company to have full
ownership and the control necessary to meet its strategic
objectives. Whatever ever the situation, the choice of
entry mode is one of the most critical and strategic
decisions the company has to make before attempting to
internationalise (Venter et al., 2007).
Empowerment, jobs and training
Despite Shoprite’s approach of opening its own stores
and shopping centres, it also invested and continues to

Dakora et al.

invest in the human capital of the foreign countries where
it operates. The group employs more than 8 000 local
people in its stores outside South Africa, some of whom
have been trained to become managers (Shoprite, 2008).
Further, local small scale farmers are being supported to
upgrade their production standards so as to supply the
Shoprite stores. It has also been reported that the
Shoprite Zambian operation is already self-sufficient in
vegetable supplies, thanks to the engagement with local
Supply chain efficiency
Selling fresh foods in multiple countries through whollyowned stores could pose a logistical nightmare. But, thanks to Shoprite’s sophisticated supply chain network
and strategically located distribution centres this has
been possible and it has been a success (Shoprite,
2008). Another important element here is their ability to
develop the necessary skills, backed by advanced
information systems, to enable them to source and
deliver products to all their stores from anywhere in the
world, says their 2008 annual report. This element
summarises the whole essence of retailing – delivering
the right products and/or services to the right customers,
at the right place, in the right condition or form, and
certainly at the right price. As indicated by Dawson and
Mukoyama (2006) the most important function of retailers
is to make a range of products available to consumers for
potential purchase.
Information systems and technology
Information systems and technologies not only support
supply chain management, but also management
processes. For the Shoprite Group to manage all its
stores and operations from one head office, it has to have
reliable information systems and technology in place.
They have invested in the most sophisticated information
technology and systems available to the retail industry,
and employ talented people to manage them, according
to the Chairman’s report (Shoprite, 2008). With this
advancement in information technology, their systems
are able to place up to 490 000 orders per month to
reorder products automatically from their existing
suppliers, the report indicates. In his report Whitey
Basson (Chief Executive Officer) indicates that their
investment in information technology and infrastructure
has improved efficiencies at all levels of the business,
and no doubt the capacity to handle increased supply
chain activity in an international context (Shoprite, 2008). DISCUSSION
It has come to light from the Shoprite review that both
political issues and company-level issues affect South


African retailers in their quest to tap into the African
market in a fulsome way. In an interview with the Classic
FM business programme on 18 February 2009 (Shoprite,
2009b), Basson said:
South Africa has not woken up to the fact that
they are part of that big global village, and there
are a lot of laws that need to be changed to
make African traders work better with each
other, in and out, it’s a hell of a job to actually
get through the red tape and make trading
easier. So I feel very strongly about it that they
should look at that and say listen, as SA become
part of the African continent and a leading role
player, we should actually form some
committee…that makes the trading easy; get
[taxes] structured properly…, [so that] a truck
can go to and be cleared within an hour going
from one border to the next and not stand and
wait for four or five days in between borders… I
think we [are] just lagging in that process.
Moreover, in her research into the conditions of Shoprite
workers in Lusaka (Zambia) and Maputo (Mozambique),
Miller (2006:36) found that “across the categories of age, gender, skill and permanent or casual status, workers felt
misused and mistreated by Shoprite management”.
Miller’s research reveals that workers complain about
wages, working conditions, hours, and overtime pay. Due
to high costs of living, the wages earned could not
support their basic needs, although Shoprite’s pay
bettered the legislated minimum wage at the time.
In general, the expansion of the Shoprite Group into the
rest of Africa has shown that modality is important; and
the issue of mode is much more than opening wholly
owned stores, franchising and others, as it also concerns
the relationship with local producers, suppliers and
workers and other stakeholders. Speaking to Fin24
(Shoprite, 2009c), Basson had this to say about going
into Africa:
We can double our African business if we can
get rid of all the red tape and all problems of just
getting stores and merchandise out there. So it’s
really still very, very tough and there is very little
help from anybody, be they manufacturers or
government from both sides to make the African
continent a global trading area like you have in
Europe or the Americas.
The review of the Shoprite story, and its African
expansion strategies, demonstrate that the mode of entry
into African markets is of strategic importance. While it is evident that there are still more opportunities for
expansion into African countries, there are significant
challenges, and these challenges revolve around the
choice of entry mode. Therefore the concept of mode and
mode differences are important as businesses have to


Afr. J. Bus. Manage.

take some important decisions about mode. These
observations from the Shoprite study suggest the
following propositions:
Proposition #1: It is not easy getting into African
markets; there are significant mode differences which
present various challenges.
Proposition #2: Components of the modal issues and
the nature of the challenges include:
a. Support for local economies, producers and suppliers,
and labour is critical;
b. Efficient supply chain management, and good
information systems help;
c. Movement of goods across borders can pose logistical
d. Competition emerges as many South African retailers
expand into the continent;
e. Government interventions are needed to open up the
continent for trade.
The mode is therefore a mix of how these challenges
are handled, and this is indicative of the mode choices.
Moreover, the challenges regarding support for local
producers and labour, and supply chain management are
particularly important. South African retailers have come
under scrutiny in recent years for dumping South African
products in African markets, little support for local labour and pushing local companies out of business (Games,
2008); an issue Shoprite is said to be working hard on
(Shoprite, 2008). Also, although most of the newly
economically empowered populations of Africa want to
spend their money in shopping mall, there are those
people who are driven to be concerned about climate
change because of the globalisation of the issues of
climate change and the significance of carbon footprint
management in running a business.
This raises the importance of merchandise range
management, as some consumers might prefer locally
produced organic products. Therefore, there might be a
need for the re-ranging of product lines of South African
retailers in their African operations.
The wider significance of the propositions established,
and the relationships and interdependencies between
them can be investigated by a review of other South
African retail businesses moving in the same direction.

that the company now operates 12 Game stores in 10
sub-Saharan African countries outside of South Africa
including: Botswana, Ghana, Malawi, Mauritius,
Mozambique, Namibia, Nigeria, Tanzania, Uganda and
Zambia; most of the stores are said to perform better (in
terms of sales) than their South African counterparts
(Massmart, 2008). Other format stores are located
elsewhere. The report also indicates that the company
buys from local suppliers and also import from different
countries including South Africa.
According to the annual report, the excellent
performance of stores in Africa caught management’s
attention, and “this prompted us to revise our earlier
policy to limit our African footprint to one store per
country (with exception of Botswana and Namibia)”. As a
result there are new stores under development for
Malawi, Zambia, Ghana, Nigeria, Angola, and others, as
However, in an interview with fin24 the Massmart CEO,
Grant Pattison indicated just how difficult it is to operate in African markets outside of South Africa, especially
when it comes to acquiring property (Massmart, 2009).
He said “we can work on a property for ten years” and
explained how that can hamper their expansion process.
Having said that, he also indicated that “the more difficult it is to operate, the more opportunity there is for a good
operator” and in the final analysis they do not consider it particularly difficult to operate in foreign African countries (Massmart, 2009).
Truworths is one of the leading South African apparel
retailers, selling multiple brands of women’s, men’s,
teenager’s and children’s fashions and related products
(Truworth, 2008). Truworths is an investment holding
company with subsidiaries. Like other South African
retailers, the group is expanding into the continent, and
currently operates 25 franchised stores in both foreign
African countries and in the Middle East (Truworths,
2009). Unlike the Shoprite and Massmart Groups,
however, Truworth’s strategy for expansion has been
through franchising. The group has a presence in the
following African countries beyond the borders of South
Africa: Botswana, Ghana, Kenya, Lesotho and Tanzania
under its multiple brand labels. However, reports of how
well those franchised stores perform are not indicated.

Massmart group


Massmart is a wholesaler and retailer of general
merchandise and other streams of goods. Since 1994 the
company has expanded its business operation beyond
the borders of South Africa to tap markets in the rest of
the continent. In its 2008 annual report, it is explained

Woolworths, like Truworths, is one of the major fashion
and accessories retailers in South Africa; the company
also operates a supermarket chain and pharmacies. It
operates nationwide and also offers franchise
opportunities, both in the local market and foreign African

Dakora et al.

countries (Woolworths, 2008). As reported, the company
operates franchise stores in foreign African countries,
including Botswana, Ghana, Kenya, Lesotho, Mauritius,
Mozambique, Namibia, Nigeria, Swaziland, Tanzania,
Uganda, Zambia and Zimbabwe. The performance of the
franchised foreign operations is, however, not indicated
(Woolworths, 2009).
Retail opportunities in Africa are extensive, as some
African countries are experiencing strong economic
growth and are benefiting from political reforms. The
“doing business” report of the World Bank (2008)
indicates an increasing trend of countries implementing
reforms to facilitate cross-border trade globally, and
shows that Africa is at the forefront of this trend. The
report observes that Ghana, Kenya, Mauritius, Rwanda
and Tanzania have all reformed in recent years, and that
African countries such as Botswana, Mozambique and
Rwanda and Ghana have been able to create positive
and stable governments. The resultant boost in their
economies has been noticed, and the opportunities are
clearly visible (Mahajan and Gunther, 2009).
As well as economic expansion, it is worth noting that
the combined population of African countries is also
growing rapidly. With Africa still showing the highest birth rate, its population is projected to reach two billion by
2050, despite average life expectancy remaining low
(Venter et al., 2007). Within African countries there is a
growing highly-educated labour force, that can make a
contribution to companies expanding into the continent;
there is also a growing proportion of middle-income
earners who seek to enjoy the services of these
In talking about the continent’s market size, potential
and opportunities, Mahajan and Gunther (2009:3) help to
put things in perspective:
Africa has more than 900 million consumers.
Despite the challenges, every day they need to
eat. They need clean water. They need shelter,
clothing, and medicine. They want cell phones,
bicycles, computers, automobiles, and education
for their children. Businesses are already seizing
these opportunities in building markets across
As we have noted, prominent among the companies
seizing opportunities in Africa are South African retailers, and this is evident in the rising shopping malls and South
African retail stores in cities across the Continent (Miller, 2006; Mahajan and Gunther, 2009). Moreover, the
increased communications connectivity and usage in
African countries also opens up a lot of opportunities. The
information economy report hailed this technology


expansion as the source of the strong wave of innovation
that changed the face of the global economy during the
last quarter of the 20 century” (United Nations, 2007).
With the launch of the East African Submarine Internet
cable, that connects Eastern and Southern African
countries to the rest of the world in cheaper and faster
ways, ICTs will continue to be a positive factor.
However, Mahajan and Gunther indicate that most
emerging markets have serious problems that cannot be
ignored by businesses operating within them, and Africa
has its own unique situation; this issue is discussed
under the next heading.




Infrastructure (including transport, electricity, water,
sanitation, medicine, and technology) has always been at
the forefront of challenges faced by companies operating
in Africa, but these challenges actually present
opportunities to businesses that can meet them (Mahajan
and Gunther, 2009). All the same, it is still difficult and
costly to move goods from one country to another when
there are poor rail and road networks (Economist
Newspaper, 2008). This poses logistical difficulties for
retailers who need to move perishable or fast-moving
consumer goods from warehouses to stores, in
geographically far-flung locations within the continent, as
indicated earlier in the discussion of Shoprite.
Additionally, cross-border trade is affected by road
blocks, red tape and slow custom clearances at most
borders. As explained in his interview with Fin24
(Massmart, 2009), the CEO of Massmart said “[When] we
supply goods into Lagos, it might take 12 weeks on the
water, [but it can take] 14 weeks to clear”. Obviously, this precludes any consideration of the supply of fresh
As international retailing becomes a reality in Africa, the
complexities of the phenomenon, coupled with the unique
African situation, need academic attention to help
demystify the process. South African retailers have
moved into the continent quite cautiously, and most are
achieving growth, in some cases even more than within
their home operations.
This generally positive
experience merits more study so that it can be
understood and used to accelerate the benefits for all,
especially the African consumer.
This paper has focused on the mode of internationalisation as an important issue that demands the attention of retail managements considering moving into
Africa. For example, it is interesting that Shoprite and
general merchandise retailer, Massmart have opened


Afr. J. Bus. Manage.

their own stores, whereas clothing retailers, Truworths
and Woolworths operate via franchising. As a result,
while Shoprite and Massmart have full ownership and
control over their operations in foreign African countries,
they nevertheless have to shoulder the challenges in
those markets as discussed. In the case of their
franchised counterparts, this has been avoided, at the
cost of ownership and some control. It is already evident
that there are many variations on these simple themes
that all need to be studied and understood.
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Federzoli D (2006). Concept and test of a comprehensive mode of international strategy for retail companies. Int. Rev. retail, Distribution Consum. Res. 16(4): 415-431.
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Miller D (2006). Spaces of resistance: African workers at Shoprite in Maputo and Lusaka. Afr. Dev. 31(1): 27-49.
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Shoprite (2009c). Fin24 interview with Shoprite CEO. [20 July 2009].
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Venter D, Erwee R, De Lange R (2007). Economic and social
development initiatives for South Africa and Africa. In: Hough J, Neuland E (eds). Global business environment and strategies: managing for global competitive advantage. 3rd ed. Cape Town: Oxford University Press.

Woolworths (2009). Website. [20 July 2009]. Woolworths (2008). Annual report. [20 July 2009].
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Zhang M, Dodgson M (2007). “A roasted duck can still fly away”: A case study of technology, nationality, culture and the rapid and early internationalisation of the firm. J. World Bus. 42: 336-349.

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