Massmart Plans Wholesale Expansion in Angola, Congo

By Garth Theunissen

Massmart Holdings Ltd., South Africa’s largest food and goods wholesaler, plans to open new units in Angola, Senegal, Rwanda and the Democratic Republic of Congo after the company’s sub-Saharan Africa sales soared.

The Johannesburg-based retail group also plans to open new stores in Nigeria and Ghana, Chief Executive Officer Grant Pattison said in a telephone interview today. Revenue from Africa has the potential to increase to half the size of Massmart’s South African operations, which account for more than 91 percent of earnings, Pattison said separately in a presentation in Johannesburg today.

“We plan to be a big player in Africa, which has potential in all formats of our business,” Pattison said. “Africa has the potential to be 50 percent of the size of the South African business.”

Massmart is the third-largest distributor of consumer goods in Africa and operates 254 stores in 14-sub-Saharan African countries. The company today reported a 14 percent rise in profit to 868.3 million rand ($87 million) in the 26 weeks ended Dec. 28. Revenue from Africa, excluding South Africa, increased 45 percent in the period, the company said.

The retailer’s shares gained 2.05 rand, or 2.9 percent, to 73.30 rand, giving Massmart a market value of 14.8 billion rand.

Repatriating Earnings

Economic growth in Africa will slow to about 3.3 percent this year, half the average rate since 2000 and down from 5.2 percent in 2008, the International Monetary Fund said on Feb. 19. Global economic growth is expected to decelerate to 0.5 percent in 2009 as the U.S., the U.K., Japan and the euro-region countries experience the first simultaneous recession since World War II, the IMF said last month.

South Africa’s economy will expand 1.2 percent this year, the slowest in more than a decade, the nation’s finance minister said this month.

“Massmart has experienced increased difficulty in repatriating earnings from “four African countries” due to their “extremely illiquid foreign-exchange markets” and strict “monetary authorities,” Chief Financial Officer Guy Hayward told reporters at a presentation in Johannesburg today.

“We’re still getting cash out of these countries but just not as regularly or as easily as we used to,” Hayward said. “It won’t affect our African expansion plans because we’re still getting a lot of money out of Africa, including the countries we’re having trouble with.”

Hayward declined to name the countries, saying it may adversely affect “negotiations with the monetary authorities.”

Dion Wired

Nigeria’s central bank on Nov. 26 began limiting the supply of foreign exchange to commercial banks and money lenders after its foreign reserves fell more than 19 percent since October to an estimated $50 billion. Angola may impose similar limits to protect its $17 billion in reserves, Standard Bank Group Ltd., Africa’s biggest lender, said on Feb. 25.

Massmart also plans to increase the number of Dion Wired stores, which sell electronic goods such as laptops and digital cameras in South Africa, to 20 from six over the next five years, Pattison said. Apart from South Africa, Massmart has stores in Namibia, Botswana, Zambia, Uganda, Mozambique, Mauritius, Malawi, Tanzania, Nigeria, Ghana and Zimbabwe.