Industry news

Why SA is such a promising emerging market

SA is one of the most promising emerging markets, says Osman Ayaz, MD for adidas Emerging Markets. "With black empowerment the purchasing power is becoming more decisive. You have a streamlined and well-developed retail base with world class players," he says.

"There are national chains who operate efficiently with high quality contents and good square meter performance and a very strong sporting goods industry."

Since the late 1990s South African townships have emerged as the new market for national retailers, with the result that shopping mall developers have been moving into the townships.

During the past year, for instance, five shopping malls have been erected in Soweto alone, says prof. André Ligthelm of the Bureau of Market Research of Unisa, who has compiled a research report titled The Impact Of Shopping Mall Development In Township Areas On Small Township Retailers.

Pre-1994 township shopping was limited to small convenience stores selling basic goods to relatively low income consumers, with most people shopping closer to work outside the township. A study commissioned by the City of Johannesburg in 2004 found that Soweto households spent only 25 % of their retail expenditure at outlets located within Soweto.

Since the middle of the 1990s many township consumers have progressed to a middle-income group resulting in a substantial increase in consumer spending, says prof. Lighthelm.

A recent survey by Glue Metric shows that almost three quarters of these middle-income earners in townships either plan to live there for some time (29%) or regard the township areas as their home without any intention of moving (43%).

With the growth in township malls, those that move up the social and income ladder will to a large extent start redirecting their expenditure to township malls, says prof. Ligthelm. "The mall development also holds substantial benefits to the less affluent township consumers who will have access to a greater variety of lower priced goods."

While there is a highly developed sporting infrastructure in SA, there is a lot of room for development in the rest of Africa — since 2010 is punted as an African World Cup, this should result in a strong momentum for the whole continent, especially in Egypt and Senegal, says Ayaz.

He believes there will be a major European trade expansion into Africa after the significant reductions in world trade barriers in 2008.

In future, the most significant brand growth will come from emerging markets — although the US will remain a significant growth market for adidas.

"The growth in the emerging markets will be driven by China and maybe India," Ayaz continues, "but over the last two years the fastest growth in terms of sport participation and economics have been in Russia, Turkey and Brazil."