Wal-Mart Africa Trip Takes Well-Trod Path
Wal-Mart Stores Inc. is just one of several global companies targeting South Africa for expansion opportunities this year. But the retailer's purchase of Massmart Holdings Inc. would be among the first big deals by an American company in Africa in years.
HSBC Holdings PLC recently proposed spending $8 billion to buy a 70% stake in South Africa's NedBank Group Ltd. And this summer, Japan's Nippon Telegraph and Telephone Corp. announced the purchase of South African information-technology company Dimension Data PLC for $3.2 billion.
Similar deals have been struck across the continent, where steady growth, fast-growing urban populations and steady infrastructure improvement have attracted investors to long-overlooked countries and beyond the well-trod oil and mining sectors. Africa's collective gross domestic product will reach an estimated $2.
6 trillion in 2020, according to consulting firm McKinsey & Co. The continent's GDP was $1.6 billion in 2008, about the same as Brazil's. McKinsey forecast the continent's combined consumer spending will hit $1.4 trillion to top Mexico's in 2020. Foreign direct investment in Africa is above $60 billion, roughly equal to Russia's, and expected to rise.
Several consumer-goods companies, including Coca-Cola Co., Nestl SA, and Unilever PLC, have understood this potential and have been operating in Africa for decades.
Others, particularly from India and China, have arrived more recently. Indian cellphone company Bharti Airtel Ltd. in June bought Kuwait's Mobile Telecommunications Co., which operates mostly in Africa, for more than $9 billion. Earlier this year, China Unicom Ltd. announced a plan to buy Nigeria's state telecom for $2.5 billion.
Growth is evident from coast to coast. Nigeria and Ethiopia have the continent's largest populations, an estimated 150 million and 80 million people, respectively, and some of the fastest-growing cities. Kenya and Rwanda, meanwhile, have burgeoning IT hubs.
Politically stable Zambia and Botswana have seen a host of investor interest. As has Ghana, which last week signed $15 billion in loans and deals from China. North Africa has first-world infrastructure and established manufacturing bases. While GDP in the Democratic Republic of Congo and Mali has grown steadily at 7% a year since 2000 amid strong investment inflows and agricultural development programs.This momentum is expected to continue for years, especially in countries with politically stable if not always democratic governments.
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