beyondbrics

What better evidence can there be of Africa’s burgeoning potential as a consumer market than Walmart’s desire for a foothold on the continent? The world’s largest retailer has made a preliminary offer of more than $4bn for the South African retailer Massmart as it seeks to expand into Africa.

Massmart is South Africa’s third largest retail group by value, and the two companies said on Monday that they were in talks over a proposed bid of R148 per share from Walmart, which would value Massmart at R28.9bn ($4.1bn).

Walmart is ramping up its international expansion as it attempts to make up for slowing growth in the US, where same-store sales have fallen for five consecutive quarters, according to Bloomberg. It already boasts big operations in Latin America and China.

The vast majority of Massmart’s stores – 232 – are in South Africa, but it also has 24 outside the country in Mozambique, Zimbabwe, Zambia, Malawi, Botswana, Namibia, Uganda, Tanzania, Ghana and Nigeria, according to its website.

Massmart said in a statement:

We are at the beginning of the process and it is difficult to say how long it will take or whether it will lead to an offer

Doug McMillon, president and chief executive of Walmart International, said in a statement:

Walmart’s mission is to save people money so that they can live better lives. We believe this proposed acquisition is a great opportunity to deliver on that mission for all the people in the regions of the African continent where Massmart currently operates.

Africa’s growth has long been driven by commodities, but Razia Khan, head of macroeconomics at Standard Chartered, told beyondbrics that consumer spending was set to play a bigger role in economic expansion.

She pointed to the expansion of the middle class in countries such as Nigeria and said that policy makers’ success in taming inflation and lowering interest rates had left people with more confidence to spend.

On unions, which have posed tricky challenges to both Walmart and South Africa, McMillon of Walmart said:

We respect and honor pre-existing union relationships and are committed to abiding by South African labor laws.