THOUSANDS of shoppers queued this week at the opening of one of the largest malls in South Africa, set in middle-class suburbia between Johannesburg and Pretoria.
The Mall of Africa will house more than 300 shops, including global brands such as Inditex’s Zara, Hennes & Mauritz (H&M), Cotton On and Starbucks. They want to attract the rising number of young consumers in Africa’s most developed economy which has thrived on demand for commodities.
The mall, spanning 130 000m2, registered 68 000 visitors by 1pm, said a spokesman for the mall’s owners.
“We did expect a high number but this has exceeded our expectations,” said Michael Clampett of the Attacq group the majority owner of the mall. “It’s the kind of number you get on December 23”.
But the opening comes as the economy’s outlook worsens with rising interest rates and prices putting a squeeze on spending while demand for exports such as gold and other metals is depressed.
Retail sales have stayed robust, however, comfortably beating expectations in February and retailers at the mall were in an optimistic mood.
“We see a lot of potential in South Africa and in Africa… this is our third flagship store that we have opened in a matter of six or seven months,” said Amelia-May Woudstra, the public relations country manager for H&M South Africa.
“We will be opening three more stores towards the end of the year.”
Shiny malls have sprung up throughout the country, creating thousands of jobs. But they come amid a backdrop of rising debt levels.
Nearly half of all credit- active South Africans, or 9.9 million people are overindebted, according to debt counselling firm Debt Rescue, and the number will swell as interest rates and inflation rise while the economy slows.
Retail sales grew by 4.1 percent year-on-year in February, but are expected to slow.
The Treasury expects the economy to grow by 0.9 percent this year, down from 1.3 percent last year and the central bank is expected to raise interest rates further to rein in inflation that has been driven higher by wage hikes, a depreciating rand and surging food prices after the worst drought in decades.
Shoppers during the opening of the Mall of Africa in Midrand. The mall will house more than 300 shops, including global brands.
The bank has raised benchmark lending rates by 200 basis points in the last two years and analysts see rates rising even further by year-end from 7 percent now.
“Interest rate hikes and slower salary increases will limit the employee’s ability to spend. This is bad news for large item sales like cars and furniture. It is likely that retailers will struggle for real growth n the next few months,” said Mike Schiissler, chief economist at Economists.co.za.
This could be bad news for malls such as Mall of Africa, set in the sprawling Midrand suburb housing many of South Africa’s new middle-class black consumers around 20km away from its nearest upmarket rival.
“The good malls will do well but there is a risk that there has been a little bit of over building… There is a lot of property retail space in South Africa. Is there really another mall that size required in South Africa? I am not sure,” Portfolio manager at Gryphon Asset Management Reuben Beelders.
But with more mature marets slowing, retailers are on the hunt for anywhere offering a faster return. Zara opened its first store in South Africa in 2011, followed by Australian no- frills chain Cotton On, Britain’s Top Shop and Forever 21 and more recently H&M.
Cotton On said South Africa was the group’s fastest growing market globally and aimed to double its business in the country over the next three years to 350 stores.
“Our South African operations have reported double- digit growth every month since opening our first store here in 2011,” said Cotton On Group South Africa country manager Johan van Wyk. – Reuters