“COMPELLING OPPORTUNITY”
When prices raced out of control in 2011, the then prime minister, Marxist-influenced Meles Zenawi, held talks with Wal-Mart, initially raising speculation it might open up.
Walmart’s South African subsidiary Massmart Holdings said Ethiopia was a “compelling growth opportunity” but one it could not yet exploit. “Legally we just can’t do it. But I’d love to trade in Ethiopia,” Mark Turner, Massmart’s Africa director told Reuters. “They’d welcome wholesale operations and that’s just not an option for us.”
In Addis Ababa, Turner’s loss is regarded as a temporary reprieve for the local supermarkets in new city centre malls, without the logistic networks of a big chain.
“We would suffer,” said one supermarket manager, barricaded in a pokey office behind piles of imported Chinese furniture in the upmarket Bole district, when asked what it would mean if foreign retailers were allowed in.
Yet in the teeming alleys of Mercato, a hillside maze of ramshackle stores and kiosks, small-time vendors already suffer as the new middle class with more cash turn to mini-markets.
“We used to turn over 60,000 birr (about $3,000) on a good day. Now it’s more like 20,000 birr,” said Feysel Kidr, 21, sitting under a mountain of deodorants, shampoos and toothpastes.
The fate of his 30-year-old family business would be sealed if foreign firms opened shop, he said: “That would finish us.”
BRAND CONSCIOUS
But even if foreign firms could open stores, other problems remain. The use of electronic payment systems remains limited. Visa entered Ethiopia a decade ago and is seeking to persuade the authorities to ease regulations.
Ethiopia’s massive public spending means private credit is in short supply as the government drains liquidity from the economy. Even so, wider use of cards would help to increase lending, Visa says.
“Electronic payments (mean) more money stays in the banks and banks are able to lend that money back to retailers to do more business,” Jabu Basopo, Visa’s country manager for Southern and East Africa, told Reuters.
Despite hurdles, Ethiopia remains an enticing market. Experience from emerging markets around the world shows retailing starts to expand significantly when a country’s per capital national income reaches $750 and really takes off at $3000, according to McKinsey Global International.
In 2012, Ethiopia’s per capita income was $410 and it aims to reach middle income status – defined as $1,430 by the World Bank – in just over a decade.
Ethiopia’s middle class is already increasingly brand conscious, even if available cash remains limited, said U.S.-educated Nega Asfaha who manages the Zefmesh Grand Mall, Ethiopia’s largest shopping centre.
“The middle class is demanding more convenience, more choice, more brands,” said Nega. “But it doesn’t have that disposable income to really go out there and shop like you would at Macy’s at the weekend.” (Additional reporting by Aaron Maasho in Addis Ababa and Tiisetso Motsoeneng in Johannesburg; Writing by Richard Lough; Editing by Edmund Blair and David Stamp)
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