Nigeria has the potential to become as big a retail market for South Africa’s Shoprite as its home base, the head of the supermarket chain said on Tuesday, playing down concerns of rising poverty in Africa’s most populous country.
“Several cities in Nigeria have populations of more than 8 million people. I can’t say all of them have the same spending power, but Nigeria can support the same number of supermarkets as South Africa,” Shoprite chief executive Whitey Basson told Reuters in an interview.
“Even if you have 60 percent of the population living in poverty, 40 percent of the Nigerian population is still bigger than the South African population.”
Shoprite, which reported a 19 percent rise in first-half earnings on Tuesday, runs about 950 supermarkets with 729 of those in South Africa and two stores in Nigeria.
It plans to open 12 more stores outside of South Africa by the end of June, including in the Nigerian cities of Illorin and Abuja. It also plans to enter the Democratic Republic of Congo.
Retailers are increasingly targeting Nigeria, given its population and potential for growth. The country is home to nearly 160 million people, compared to South Africa’s 50 million, according to World Bank estimates.
But Nigeria still has plenty of hurdles to overcome. Poverty is still rising despite strong economic growth, data showed this month. Nearly 61 percent of the population, or about 100 million people, live on less than $1 a day.
U.S. retailer Wal-Mart Stores Inc last year bought a majority stake in South African retailer Massmart, citing growth prospects on the continent.
Cape Town-based Shoprite reported an 18.6 percent rise in first-half headline earnings per share to 280.8 cents, helped by higher prices, a favourable exchange rate and above-inflation wage increases for consumers in its main South African market.
Headline EPS, the primary profit measure in South Africa, strips out certain one-off items.
Consumer spending is improving in Africa’s biggest economy due to decades-low interest rates and above-inflation wage hikes, but the outlook is uncertain due to high debt levels and unemployment.
South African retail sales jumped 8.7 percent year-on-year in December, beating the 6.5 percent growth economists had expected.
Shoprite, a domestic merchant seen likely to lose the most from discounter Wal-Mart’s entry into the country, has been on an aggressive expansion drive in Africa.
Wal-Mart unit Massmart is due to report its first-half results on Wednesday.
Shoprite said sales increased 13.2 percent to 41 billion rand after increasing prices by an average of 4.6 percent and gaining nearly 30 million rand from favourable currency swings.
Shares in Shoprite were up 0.9 at 133.8 rand by 1420 GMT, largely in line with the JSE Top-40 index. Shares of the company have surged more than 40 percent in the last 12 months, lifted by optimism about its Africa growth strategy.