The Sebele Shopping Centre in Botswana's capital Gaborone.

Botswana, which did not even make the top 30 last year, is positioned 20th on the index, making it the leading African country and the only sub-Saharan African country on the inventory.

A.T. Kearney’s index is a inventory of developing nations that have the majority potential and opportunities for multinational retailers to expand to.

The top 30 are scored and ranked according to variables. The first is country risk which measures political and economic factors that could affect business. The second variable is market attractiveness and looks at factors such as retail sales per capita and urban people sizes. Next is market saturation which includes factors such as the share of modern retail, the number of international retailers operating in the country, and the market share of leading retailers. The final variable is time pressure, which indicates whether the country holds a short-term opportunity or whether retailers would have to wait longer to see the potential returns.

Botswana leads Africa

A.T. Kearney gives a number of reasons why Botswana ranks highest in Africa. “The country has become a middle-income country over the past three decades and is projected to have 7% GDP increase for 2012 – well above sub-Saharan Africa’s expected increase rate,” states the statement.

“Botswana’s government is dedicated to shifting away from a dependence on diamonds to increasing investment in the private retail sector. Most retail expansion has been from regional players, primarily based in neighbouring South Africa.”

With a small people of slightly over 2 million and a relatively developed retail sector compared to the rest of the continent, some stakeholders would be hard-pressed to agree with A.T. Kearney’s findings.

Brett Abrahamse, director at Johannesburg-based real estate consultancy Terrace Africa, reckons that although Botswana still holds some potential for retailers, the sector has seen strong increase over the past three to years, and that a lot of of the opportunities have already been exploited.

In its 2011 annual statement, PrimeTime, a Botswana Stock Exchange (BSE) listed property investment company and developer of shopping malls, pointed to a “looming oversupply” of retail space, especially in the capital Gaborone.

PrimeTime is, however, confident that a recovery in the diamond industry will spill over to the rest of the economy. “Our country’s economy is showing very strong signs of recovery and with diamond sales producing close to 2008 levels coupled with fiscal discipline, a close to balanced budget could be achieved. The move of the Diamond Trading Company (DTC) to Botswana and the diamond sales process being centred here will bring significant activity to the economy.”

Rest of Africa

“In coming years, we expect world retailers to evaluate a lot of other African nations as Nigeria, Ethiopia, and the Democratic Republic of Congo (DRC) are expected to be part the majority populous nations in the world by 2050,” says A.T. Kearney.

The statement as well points out that expansion into Africa can be challenging for retailers because their competition is a “long-established, active, and informal trading sector that African consumers are accustomed to”.

Morocco is the next African country on the inventory, positioned in 27th place, making it the second top African country for international retailers to expand to. However, it fell from 20th place in last year’s GRDI due to political instability that increased the risk for retailers.

Tunisia, in 30th position, is the final African country to make the inventory, but has as well fallen since the 2011 GRDI. The 12 place fall is said to have followed the Arab Spring protests. “Before the Arab Spring, per capita income was on the rise, and a growing middle class was forming additional sophisticated purchasing patterns,” says the statement. “The political unrest of the early 2011 led to GDP increase of only 1.1%. While the government still supports a favourable environment for foreign investment, international retailers are hesitant to enter this recovering market.”