October 13, 2004

By Peter Apps

Soweto - South Africa's townships, for decades synonymous with poverty and violence, are emerging as the new market for supermarket chains hungry for more black shoppers.

Since apartheid ended in 1994, many township shoppers have more money. Analysts say that while crime remains a threat to retail outlets, investors are willing to jump into the market in the prevailing low interest rate environment.

"There's substantial money there," said retail analyst Evan Walker at investment company Andisa. "If you look at Soweto, that's about the size of the whole white population of South Africa in one area. There's a massive informal market, so there's obviously a potential for the larger chains."

Many township shoppers buy food from informal traders or from shops near their workplaces, which are often outside the townships where they live.

Now the country's top supermarket chains, such as Shoprite, Spar and Pick 'n Pay, are moving to muscle in on an informal food market valued at between R20 billion and R30 billion a year.

Retired Sowetan Edward Mashlanga says he now shops mainly at larger chains. "There's more choice than at the smaller shops," he says.

Supermarkets say what they sell is good value as informal traders usually buy their goods at large cash and carry stores on the outskirts of townships.

"The price is affordable, and everything we sell here is fresh and clean," says Freddy Mokyara, the manager of a Score supermarket in Protea North, southwest Soweto.

Other chains are moving in near the Score store, which is in a relatively affluent area but less than 1km from squatter camps where thousands live in shacks.

Peter Hughes, the chief executive of the Spar supermarket chain, says many township dwellers shop near their place of work, but the aim is to set up "destination centres" offering supermarkets and fashion andfast food retailers alongside banking facilities.

"We're trying to get some of the bigger chains - the clothing stores, the banks, the fast food outlets - to come in with us," he says.

The Protea North mall in Soweto, which opened seven years ago, may be an early version of this. As well as parking, it offers two cosmetic stores, a pharmacy, vido store, optician, pub and muti store.

With public transport relatively poor, Hughes says minibus taxis are key to attracting shoppers.

"The successful stores are invariably positioned around taxi ranks," he says. "It's a crucial ingredient."

Retail analysts say shoppers tend to spend more the nearer to home they shop, but for people returning late in the evening, shopping near work remains the only option, as most stores close early because of security fears.

"We close at 6pm, so those who knock off late have to shop in Johannesburg," says Mokyara. "You can't open later because of crime."

Walker says the risk in townships may not be much higher than stores in Sandton, which may face armed robberies or theft more than once a week.