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Botswana’s improved infrastructure: a relative opportune for retail space-Analysts

By Kitso Dickson
Staff Writer

Rail Park mall (Picture: www.khumopam.co.bw)

Rail Park mall (Picture: www.khumopam.co.bw)

Botswana’s stable economy, coupled with a high GDP per capita enabling a rise in consumer spending, good infrastructure: evidenced by some of the best shopping malls in the region, excites giant retail outfits’ expansions plans into the country, analysts have observed.

The assertions, borne by the 2015 African Retail Development Index (ARDI), also hinges on the stable political and economic environment. ARDI, compiled by AT Kearney Global Institute, has pegged Botswana as the second most attractive retail development market behind Gabon, across Africa, edging from 8th place the prior year.

Based on four dimensions: market size, market saturation, country risk, and time pressure, the report discusses the growth in the middle class in Africa, increased consumerism, the spread of malls, land being taken up for retail development and Sub-Saharan Africa’s young and connected middle class that is growing fast.

Head of research at Motswedi Securities, Garry Juma, says new Malls, mostly in Gaborone (Sebele, Rail Park and Airport Junction, etc.) within a short space of time offers relative opportunities for the retail space. He holds, the market is considered to have some opportunities for expansion as compared to other countries such as South Africa. “The presence of new malls has improved accessibility and convenience to shoppers. With more shopping malls around, consumers have been afforded more variety as more and different shops open up,” he says.

In recent years, Botswana’s infrastructure has improved, implied by the advent of a number of shopping malls which experts say create a one stop avenue to purchase diverse range of goods and services, cultivating retailers’ profitability opportunities. Which is obviously why, Ngodya Chimbwete a professional counterpart of Juma serving at Imara Capital Securities, insists dominant retailers would assume occupancy to protect market share, as well as offering consumers with diversity as the different retailers generally cater for different consumers and income brackets.

His words strike a familiar chord with the Motswedi Security Head of Research. He also holds that, Botswana’s attractiveness, underpinned by its track record of economic and political stability as well as conducive business environment has given retailers (mostly South African) confidence in the diamond rich economy. “The country has experienced relatively high GDP per capita levels and middle income status, and has a reasonably healthier income distribution in comparison to most African countries,” pronounced Chimbwete. Botswana’s retail market has attracted international players from South Africa: Shoprite, Woolworths, Pick and Pay, Spar etc.

On one hand, a combination of, its proximity, similar consumer demographics and consumer preferences to South Africa has made it less of a challenge for South African retailers to succeed in the country, according to the Imara Capital Security Analyst. Whereas on another hand, he says “in most African countries, a number of barriers to entry such as ; political & economic instability, different (or particular) consumer demographics & preference and low disposable incomes, to name a few, challenge those markets resulting in informal trade to dominant in most cases.”

Also, local outlets like Choppies and Sefalana Shoppers (local retailer) have been expanding rapidly, in most cases, according to Chimbwete to “areas that were dominated by informal trade, independent retailers or wholesale trade”. Through this, he says, we have witnessed improved service and product offering to areas that were previously underserviced. If anything is to go by, he foresees a further improvement due to existing underserviced areas where service and product offering can be improved by formal retail trade. His sentiments bode well with Choppies expansion plans within Botswana.

According to the leading local retailor by market share, as of 31 December 2014, Botswana’s split between wholesale versus retail trade was about 50%:50%. The retail implied expansion intentions until retail attends 75% of the sales mix which Chimbwete maintains testifies further growth opportunities.

Furthermore, he says, the Bank of Botswana’s (the central) accommodative monetary policy of cutting interest rates to record lows on the back of reduced inflationary pressures assisted by declining oil prices, should help relieve consumer disposable income. Nevertheless, wary that “at a point of saturation, we might see weaker retailers shutting down or being acquired by dominate retailers with stronger cash flows”. “Retailers with widespread store presence might cannibalise profits and footfall in some of their other stores,” he says.
Garry Juma also shares the same wavelength. He fears that “growth is now limited especially in Gaborone with the market nearing maturity”. He adds that “product differentiation and proper market segmenting will remain key for survival”.

Interestingly, local retail outfits downplay fears over possibilities of a domino effect, an influx of retail firms drawn home by market attractiveness. Sefalana Group Finance Director, Mahomed Osman says abound existing Retail stores in the industry will not result in this becoming a more significant matter. “Competition will always be there but it’s about how we offer the customer something better. We are proud to be a wholly owned Botswana business and we have been in business for over 40 years.” He said in response to Boidus Focus inquiry.

He notes that they are a trusted brand and the recent rebranding initiative already facilitates consolidation of loyalty of customers who are now getting more – Sa Rona – your family value store. “Our Group strategy is focused on growing our core business and this we believe will help us mitigate against potential risk resulting from foreign players,” he concludes.

© 2015, Boidus. All rights reserved.


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