Manufacturers and retailers globally desperately need to rethink their growth strategies, as recovery plans, particularly in the Western world, are merely chugging along at present. The European debt crisis has once again put a halt on growth prospects, pushing consumers to knuckle down, wary of what may lie ahead. Africa is a shining gem with a massive and extremely fast growing middle class population that is demanding all sorts of previously unaffordable consumer goods. This market has caught the eye of
Just a couple of weeks ago, Wal-Mart got the go-ahead from the South African Competition Commission to proceed with its majority-stake purchase of Massmart, a leading South African retailer of household goods, furniture, and appliances. Less than 24 hours later, one-page advertisements in top newspapers across South Africa displayed substantial discounts at Massmart stores in celebration of the new partnership. Buying a stake in a large South African retailer with presence in 15 Southern African countries and a strong brand image makes perfect sense for Wal-Mart given the growth prospects these fast developing nations offer.
Many large global corporations are moving inexorably into Africa, with many successful local South Africa companies ripe for the picking due to their strong sales, presence across the continent, established production facilities, and strong process and management culture, meaning few, if any, management changes would be required. To put all this into perspective, we need to take into consideration the history of South African entrepreneurship.
During apartheid, many global brands left South Africa due to consumer influence elsewhere in the world, with brands associated with the country being boycotted. A gaping hole was left in the South Africa market – particularly in the manufacturing, retail and insurance sectors. This led to the foundation of many local companies keen to take advantage of the market vacuum by meeting local needs, not to mention establishing presence in many other African countries. Given the dynamics that have played out, leading South Africa to where it is today, I certainly don’t believe this is the last such buyout we will see. In fact, I envisage many more, as countless South African-born organizations and brands are well placed to serve the growing numbers of African consumers.
For Arcelik Group, Defy Appliances is the perfect opportunity to launch its growth plans in Africa. The deal, which cost Arcelik Group $327 million, is actually small compared with the group's consolidated annual turnover of $4.2 billion. The buyout will add an additional 2,600 employees to the already 19,000 of Arcelik Group. Currently, the Arcelik Group has 11 production plants in 4 countries – Turkey, Romania, Russia, and China. With the purchase of Defy Appliances, it will add another 3 production plants, all situated in South Africa.
The acquisition certainly provides many exciting prospects for Defy Appliances, particularly around the further development of the company's manufacturing base and the expansion of its markets into sub-Saharan Africa. The deal is subject to the South African Competition Commission's approval, but, currently, no hurdles are evident. Whatever the outcome, this won't be the last such transaction in South Africa. With many global organizations' revenues relatively flat, manufacturers not investing in new lucrative markets such as Africa will almost certainly be left behind. The future for manufacturers in Africa looks interesting indeed, and the dynamism of this market will only increase in the years to come.
I would love to hear your thoughts on the Defy Appliances buyout and to read about your experiences of the manufacturing sector in Africa and in other high-growth regions of the world. Feel free to post online or to email me at email@example.com.