An engrained shopping culture, relatively high wealth and well-established infrastructure have seen Botswana ranked as the second most attractive destination for international retailers seeking to set up shop in Africa.
According to the authoritative 2015 AT Kearney Africa Retail Development Index (ARDI), which ranks the top 15 African countries according to market attractiveness for retail expansion, only Gabon is more attractive than Botswana.
“Botswana’s modern retail sector is well developed, led by a number of active local and South African players. Local chain, Choppies has more than 70 stores in Botswana — along with big African expansion ambitions. Shopping mall development also remains strong, with four malls opened in the last three years.
“Although the market is saturated in terms of players and market share, the market as a whole is still growing. Considering Botswana’s proximity to neighbouring attractive markets; Namibia and South Africa, this Southern African gem could be an interesting entry point, if you have something new to offer,” reads the report, released this week.
Botswana was in eighth position in the 2014 rankings. The annual ARDI ranks 15 sub-Saharan countries on a 0-to-100-point scale and four variables, which include country and business risk, market attractiveness, market saturation and time pressure.
For Botswana, the highest scores were recorded in the country risk category with a 25 percent point mark, which was higher than Gabon, largely due to attributes such as relatively easy access to financing, high credit ratings, low risk of economic terrorism, crime or violence.
Under the market attractiveness category, which considers factors such as business efficiency, urban population, and retail sales per capita, Botswana scored 22.3 points, coming second behind South Africa.
Botswana’s $16,000 GDP per capita, one of the highest in Africa, played a crucial part edging up the retail sales per capita.
The market saturation turned out to be Botswana’s Achilles’ heel with a low score of 0.2 points, with the market deemed to be in the mature stage due to the rapid expansion of sector in recent years.
“The mature markets come with more competition as well as more demanding consumers, so differentiation is key. Any differentiated offering will need to be part of a well-organised and well-defined format, and a value-for-money proposition would probably work well,” reads the report.
Due to market saturation in South Africa, retailers in that country have been aggressively eyeing the sub-Saharan market for expansion leading to the mushrooming of many malls in Gaborone in a short space of time.
In the past four years, four malls - Sebele, Rail Park and Airport Junction and Northgate - have opened shop in Gaborone with most tenants being South African retailers.
Reflecting the trend towards saturation, retail sector rentals have also softened in the past two years with International Property Database (IPD) estimating returns on the retail space to have declined from 20.1 percent to 16.6 percent last year largely on the back of tenants’ inability to negotiate better rates due to the massive supply mostly in the Gaborone area.
Mirko Warschun, AT Kearney partner and leader of the firm’s consumer industries and retail practice for Europe, Middle East, and Africa noted that South Africa, which was ranked sixth, moved up the index despite the market saturation and sluggish economic growth.
Said Warschun: “If scale is not your biggest worry, South Africa — and the other mature markets, Botswana and Namibia — remain solid points of entry with established shopping cultures, relatively high wealth levels, and well-established infrastructure. In these markets, it is important to bring a differentiated retail concept.”
Bart Van Dijk, AT Kearney partner and leader of the firm’s consumer industries and retail practice in Africa, said it was instructive to think of Africa as a set of opportunities that can be augmented and added onto one another, rather than just one singular opportunity.