Walmart has decided to slow down its plans to expand into Africa, deciding to take a slow and deliberate approach due to some costly mistakes in other developing markets.
In 2011, Walmart bought a $2.4 billion majority stake in South African retailer Massmart Holdings due to the continent’s growing consumer class. Massmart is the second-largest distributor of consumer goods in Africa and the largest retailer of general merchandise. Forbes reported that Walmart believed that South Africa is a key market for growth, accounting for roughly 20 percent of consumer spending on the continent.
At the time, Massmart had 26 stores outside its home market, and in the five years since, it has added only 13 of its signature large destination-type outlets. Recent fluctuations in African currencies have affected many retailers in the area, while inflation has cut into middle-class spending.
The slow expansion leads some to believe that Walmart might be losing interest in the African venture. The company hasn’t mentioned Massmart in a quarterly earnings call since 2014. But Guy Hayward, who took over as Massmart’s chief executive in June 2014, told The Wall Street Journal that the slower pace is part of “a very deliberate strategy” and not a sign of disinterest.
“If being sort of Steady Eddie is described as a criticism, I’m happy to be criticized,” said Hayward.
In fact, some retailers who rushed into African markets have not had much luck. Woolworths closed its three Nigerian stores in late 2013, while, in 2011, Pick n Pay Stores closed its Mozambique and Mauritius stores a mere two years after opening the doors.
Walmart itself has had some difficulty expanding into foreign markets. Last year, it closed 115 outlets in Latin America, while it experienced slow store growth in China. In addition, the company has been the subject of a five-year U.S. investigation into possible foreign bribery in Mexico, with the investigation also pointing to possible misconduct in Brazil and in India.
Despite Walmart’s slow approach in Africa, Massmart’s overall sales for the six months to June 26 grew 8.7 percent from a year earlier, while sales outside South Africa jumped 23 percent.