Africa
Africa

NORTH American investors have seen the successful takeover of South African retailer Massmart by US giant Walmart as a signal that investing in Africa is a valuable proposition.

Africa is seen as a major investment frontier because of its young population, untapped resources and economic instability in other regions such as the European Union, African Venture Capital Association CEO Michelle Essomé said in an interview on Friday.

The North American interest in African businesses had only developed recently.

Ms Essomé said this did not mean that investors would be flocking to Africa. "It takes time, but African leaders are starting to communicate better with investors.

"We have noticed express interest from American companies since the Walmart purchase of Massmart."

The South African government had initially expressed reservations about the $2.4bn takeover, saying in 2011 that it would destroy jobs and lead to a decline in local manufacturing and production. But the deal went ahead with conditions.

One of the conditions was that the government and the merging companies should set up a study on how smaller companies could participate in Walmart’s supply chain.

Massmart corporate affairs executive Brian Leroni said he could not comment in detail on how Walmart had influenced Massmart’s performance as it was in a closed period.

But Mr Leroni did say there had been a positive effect. "There are numerous benefits associated with the merger with Walmart, which include benefiting from Walmart expertise as we develop our new retail food supply chain."

Further, Massmart had benefited from adopting Walmart’s supplier planning processes to improve merchandise availability and the local farmer development programme to improve fresh food supply chain efficiency.

Innovative product promotions were another benefit Massmart had enjoyed. An example of this was the ten-week extended price cut promotions that generated in excess of R300m savings for consumer savings.

Ms Essomé said various American companies were interested in developing infrastructure and working in various sectors in Africa, especially in oil and gas. But investors from developed countries still believed there could still be too much state interference in business affairs on the continent.