Retail investors are presently focused on Ghana, making the country one of the modern retail hubs in Africa as both local and international retail brands and developers continue to penetrate the market.
The economy may be sluggish though, but a stable business environment along with a rapidly growing population and expanding middle-income class is attracting a growing interest from investors-especially retailers.
According the 2016 CIA World Fact book, Ghana’s population growth stands at 2.19% annually with 57.7% of the populace being under 25 years.
This rising middle-class means that convenience has become important for modern consumers with significantly different taste, preferences and aspirations. “This would be reflected in their demand for different products”, a KPMG report claimed.
Africa sales is predicted to increase hugely as the continent spending power is estimated to rise to US$1.4 trillion by 2020, according to a McKinsey report.
Undoubtedly, retail sales in Ghana have seen a boost for the past years. By the Central Bank’s report, during the first ten months in 2011, retail sales scaled-up by an impressive 31.37 percent to GH¢77.76 million from GH¢59.19 million during the corresponding period of 2010.
In fact, domestic, regional and international retail Investors have taken note of these trends and have reacted quickly by rushing in to capitalize on the market’s potential.
A tour to West Hills Mall, presently the biggest shopping mall in the country measuring 27,300 m2 in size gives a clear picture of the massive response of retail players.
South African food retail giant Shoprite and our own hypermarket, Palace anchor this mall. In addition to these two occupants, are 63 shopping lines of both local and international brands, including Nallem clothing, Woodin, New York Sizzlers, Exotic Trends and Mrp.
American Swiss, Foschini, Mango and Woolworths are also occupying space under the same roof.
In fact, West Hills Mall recorded an impressive 100% occupancy rate in no time, prompting Delico Investments, to draw up plans for retail space extension.
Accra mall, A&C mall and Junction Mall also host brands like Game, Spur, Truworths, Kiki, Springfield, Jets, Identity and Payless Shoe Source. International brands such as Swatch, Puma, TM Lewin and Woolworth have also penetrated Ghana retail market.
When Woolworths entered the Ghanaian market in 2014, the group director of retail operations, Paula Disberry expressed their joy for being in an economy that fuels retail business and pointed-out that “Ghana remains a compelling growth opportunity for Woolworths. The economy has shown successive year-on-year economic growth, coupled with rising household incomes, increasing urbanization and a significant emerging middle-class.”
This “compelling growth opportunity” in the country is compelling more retail investors to expand their footprint in the economy.
In 2014, Pick n Pay, the second largest supermarket chain store in South Africa announced that they intend to open two stores in Ghana by 2016
Richard Brasher, the group CEO noted, “Ghana has a lot of the similarities to the business we’re developing in Zambia. I think Pick n Pay can add value to that marketplace. We have signed leases. The developers are building during the course of the year. We will get there as quick as we can.”
Moreover, Hugo boss, Guess, Tommy Hilfiger, Zara, and French multinational retail giant, Carrefour among others are gearing up to compete for their fair share in the promising economy.
This rapid penetration of investors is putting huge pressure on scarce formal retail space in the country, thus pushing up rent rate between US$60-US$65 per m2 with an escalation of 4-5% per annum according Broll Ghana.
Broll Property Group projected in its 2014/2015 annual report that more than 87,500 m2 of formal retail space will come into operation by the end of 2017 to serve this growing demand.
Ghanaians should expect space addition to the existing malls and new ultra-modern retail facilities by the close of 2017.
These are: The Exchange (10,000m2) to be located in Accra, Meridian Mall (20,000m2) in Tema and Kumasi Mall (27,000m2) in Kumasi.
Just recently, retail space addition of 16,000/m2 has been added to Accra mall to make room for a number of retailers including Edgars, one of South Africa’s retail giant.
On the other hand, while the demographics remain promising for retailers, the sector continues to face headwinds, including erratic electricity supply, a depreciating cedi, the government’s killer taxes and high inflation.
Moreover, high interest rates and higher utility and fuel prices have put consumers in a tight corner in terms of spending.
The Ghana cedi has progressively depreciated against some of the major trading currencies in the past years, substantially pushing up cost of imports for retailers.
An inflation rate of 18.5% recorded in February 2016, in addition to recent hikes of utilities (averagely 60%) subjects many Ghanaian’s real incomes to erosion, limiting their purchasing power.
Consumers’ confidence index dipped from 90.9 in October 2015 to 87.5 in December 2015, in line with waning consumer sentiments according to Bank of Ghana
Though some of these issues are however being addressed: most notably, the recent Power Purchasing Agreement (PPA) to generate 450 mw to boost Ghana’s electricity-generating ability and the IMF programme to help reduce the budget deficit over medium term, continuous and timely interventions to ease the economy will heavily help sustain all the incoming investment in the country.