The SPAR Group in Southern Africa prioritises expanding its network of independent retailers rather than pursuing a corporate store strategy, the writer says. Picture Leon Lestrade / Independent Newspapers.
By Max Oliva, CEO: SPAR Southern Africa
Entrepreneurship is at the heart of Africa’s development. It creates economic freedom, sustainable growth, generational wealth, ownership, pride, and jobs.
It will be the spark that sets Africa’s economic boom into motion, and the retail sector will play a pivotal role in this development. It can operate at scale and nurture the current generation of entrepreneurs while creating opportunities for others to thrive.
In Africa, SMEs provide an estimated 80 percent of jobs across the continent, representing an important driver of economic growth, says the Centre for Strategic and International Studies. Sub-Saharan Africa alone has 44 million micro, small, and medium enterprises, almost all of which are micro. For these businesses to grow, create more jobs, and generate economic growth, they need access to capital, but also the necessary volumes to succeed. Ultimately, they must be “enabled to thrive”, as Brookings so eloquently put in a recent paper.
Understanding this, The SPAR Group in Southern Africa prioritises expanding its network of independent retailers rather than pursuing a corporate store strategy.
We saw 104 new stores open in 2023, bringing the total number of stores in the region to 2,519 and adding more than 2,765 jobs to communities across the country.
This has continued into the new year, with 85 new stores added already, but our approach has been further refined to deepen our role in communities.
We believe the key to entrenching growth more broadly will be to offer a home for more independents. True independence is about giving owners the freedom to ply their trade, be creative and unique in their store offering, whilst being part of an international retail brand. By leveraging international SPAR best practices, coupled with local innovation and expertise, long-term success is achievable in the communities they serve.
Then they must also be supported in their journey to success by being part of a network of retail peers and like-minded entrepreneurs. The geography and design of the stores must also focus on convenience and meeting the needs of shoppers. Strategies would include adding new omni-channel and online services.
Amazing solutions are emerging with many more on the horizon, which will be crucial for economic growth and prosperity. Brookings says SME’s have the capacity to provide stable, wage employment for millions of young people, serving as anchors that create and sustain jobs. An example is a 150-tons-per-day milk processing factory in northern Nigeria, owned by a 30-year-old entrepreneur. To meet the needs of the factory, this entrepreneur developed an effective “outgrower” model with milk collection centres where rural pastoralists, the majority of whom are youths and women, deposit their milk daily in return for an income. Today, 18,000 farmers are part of this network, after only one year of operation. That’s 18,000 new, stable jobs, with the potential for thousands more as the factory expands production.
However, it is clear the opportunity is not being fully grasped by everyone. South Africa has more than 2 million micro, small and medium-sized enterprises, representing over 98% of formal businesses, according to UNCTAD’s entrepreneurship strategy review for the country. Despite their sheer prevalence, these small businesses create less than a third of all formal jobs, leaving job creation highly concentrated in a few large corporations and government entities.
The survival rate of the businesses is also low, with two thirds failing within the first five years and about 20% in the first two years. Combined with a high level of youth unemployment and around 70% of entrepreneurs operating in the informal sector, South Africa’s entrepreneurial potential remains well below international trends.
While the government’s national entrepreneurship strategy to create an enabling environment for entrepreneurs is a step in the right direction, the private sector must also do what it can.
It is concerning that the latest GEM South Africa report noted that fewer people than ever before are considering starting new businesses. The highest motive among South Africans to become entrepreneurs is out of necessity and to earn a living as jobs are scarce, particularly among men. Established business ownership (more than 3.5 years) almost halved, from 3.5% in 2019 to 1.8% in 2022/23, after an encouraging peak of 5.2% in the pandemic years.
The SPAR Group’s work at building its network of entrepreneurs and ensuring their success therefore paints a far more positive picture and shows what can be done if this is approached with strategic intent. The SPAR banner in Southern Africa already includes access to entrepreneurial brands such as SUPERSPAR, SPAR, KWIKSPAR, SPAR Express, SaveMor stores, SPAR’s emerging market grocery brand, TOPS at SPAR liquor offering, Pharmacy at SPAR, and Build it, our building materials brand. So, there are plenty of opportunities for potential store owners.
As the only true home for entrepreneurs our target for 50% retail growth by 2028 is very achievable, coming in tune with a strategic reset that focuses on employee and retail partnerships, and sustainability.
A major focus will be on driving scale growth within communities and expanding SaveMor is going to be a key to our plans. A simplified model with low operating costs will be crucial to scaling these solutions and creating volume.
We believe we have a responsibility to empower previously disadvantaged people in their communities and that no one can do it like we can. The future should not be about big corporates going into remote areas to extract value, but about being value creators for as many communities as possible across the country.
In the case of The SPAR Group, 90% of our private label business is from local suppliers rather than big corporates. We love using local products, so we are extremely pleased that there are now over 900 suppliers in our SPAR Supplier Development Programme with 95 being fully compliant, and more to follow. Hundreds of suppliers continue to sign up. Our private label range is being tiered to align to customer segmentation following the acquisition of private label business Encore. We are busy with a highly successful strategic alignment to cement a leading position. Notably, our private label business is growing in double digits.
We will continue to roll out fit-for-purpose retailer development programmes to strengthen and expand our Southern African footprint. Our focus on entrepreneurship sets us apart and we remain steadfast on this journey, which is good for SA, good for Africa, the broad supply chain, and the communities we serve.
BUSINESS REPORT