business news in context, analysis with attitude

The Wall Street Journal reports that while Walmart's investment in Africa largely has "tanked," the company is responding by "doubling down."

Some context from the story:

"More than a decade ago, Walmart spent $2.4 billion to buy a controlling stake in South African retailer Massmart, which also had operations in a dozen other sub-Saharan countries. At the time, executives in Bentonville, Ark., hailed the acquisition as Walmart’s entry into the world’s youngest continent and one of its fastest-growing consumer markets, which was booming amid record commodity prices.

"But Walmart hasn’t been able to cash in. First the 2014 commodities crash, then the pandemic and now the fallout from the war in Ukraine - including high inflation and plunging local currencies - have stopped African consumers from spending big. Massmart closed its stores in Nigeria, Ghana, Tanzania and Uganda last year and shuttered an underperforming electronics chain in March 2020."

But Walmart seems unbowed.  It has sold some assets and gotten out of the fresh food business in Africa, but it also has remade the executive team by installing its own executives.  The retailer also seems to be making a significant investment in e-commerce and technology there, which have been problematic segments in the past.

Again, some context:

"Analysts and retail executives say some of the challenges in Africa include the relatively high cost of mobile data when most people only access the internet via their phones, as well as constraints on last-mile delivery to much of the continent because of a lack of basic infrastructure. In addition, the South African retail market is quite competitive, with numerous established players, analysts say.

"Massmart now has nearly 300 full-time tech specialists - up from 28 in 2021 - who specialize in areas such as software development, product operations and analytics, at Walmart’s tech hub in Bangalore, India, to help build out the company’s e-commerce platform. In October, the company started using Walmart’s proprietary software, which digitizes and optimizes the picking, packing, staging and distribution of online orders, at its Makro chain of wholesale stores."

KC's View:

I have virtually no expertise about Africa. (Though I was lucky enough to visit South Africa several decades ago, where I did a piece about the legendary retailer Raymond Ackerman - one of the more remarkable people I've met in my career.  I have more about that in today's Eye-Opener.)

My casual reading, however, points to the fact that Africa is desperately in need of infrastructure.  What I'd love to understand is how Walmart and Massmart will contribute to building that infrastructure, because it sounds like their plans for growth depend on a foundation that may not exist to the degree that they require.

The Journal notes that "Walmart’s renewed bet on Africa comes after a string of disappointing forays into international markets. In 2020, Walmart threw in the towel on Japan after 18 years, agreeing to sell most of its stake in a local supermarket chain, resulting in a loss of about $2.1 billion. That same year, Walmart agreed to sell U.K. grocery-store chain Asda to a private investment group, resulting in a $5.7 billion loss. The company also sold its retail operations in Argentina, recording a $1 billion loss."

Walmart must see something in Africa that merits continued investment.  The question, I suppose, is for how long and to what extent.