Presenter: Lindsay Williams Guest(s): Wayne van der Vent

Lindsay Williams gets Wayne van der Vent, head of development funds at Futuregrowth, to explain how their company is taking modern retail facilities to out of the way places - to enjoy the benefit of large untapped markets

LINDSAY WILLIAMS: New shopping centres are going up in Gauteng, the Western Cape and KwaZulu-Natal - with retail sales skyrocketing in the current low interest rate and low inflation environment. These new centres are obviously viable - because of strong consumer demand. Some analysts are concerned about the medium to long-term prospects, should there be a change in the economic environment. Does that mean that the retail sector, in general, should be treated with caution? Should we be looking elsewhere - somewhere slightly less obvious? Futuregrowth featured a few months ago - with their focus on less fashionable, and previously ignored areas for retail developments.

WAYNE VAN DER VENT: We’ve been focusing on rural areas, and previously disadvantaged areas. There are still large parts of South Africa with large populations - because of the old system - were essentially left untouched, and are almost virgin areas for development. Areas like Phuthaditjhaba - out in the Eastern Free State - is an area which has close to 800,000 people living within a 10 to 15km radius, and yet is almost without retail developments. Another area is Thohoyandou in Limpopo. Scattered around South Africa are numerous areas like these. The previous system had seen developments happen in Johannesburg and Cape Town - certainly the big metropolitan areas - but lots of other areas were left out, particularly areas that had large concentrations of black people. Although there has been a bit of migration to the large cities, there hasn’t been an exodus out of these areas into the big cities. These are the areas that we have been investing in for the last eight years - we’ve developed just on 16 shopping centres in those areas, and they’ve traded well. Between 14% to 15% returns are what we’ve been seeing come through.

LINDSAY WILLIAMS: Very good returns, indeed. I just wonder if it’s a chicken and egg situation - obviously there were political barriers in the past to such developments. Now, is it a case that traditional developers - who look at places like Sandton and Cresta - look at areas like the Eastern Free State and say: "Well, there’s no money there - so we’re not going to put the shopping centre, or the retail centre up." But, in fact, the money is there - if only the shopping centre was there.

WAYNE VAN DER VENT: There is the concern that the money isn’t there, on the one hand, on the other there’s also traditional views. We understand Sandton, we understand Melrose, we understand Claremont. Often developers are finding that traditional funding institutions are not loaning them the money to go to Phuthaditjhaba - partly because nobody even knows how to spell Phuthaditjhaba, let alone being able to find it! So there are those barriers. On the other hand, developers want to do it the easy way - sometimes going into these areas sometimes takes slightly longer, it takes a little more work. One needs to deal with different communities, and those communities have different ways of doing things. In some of the areas one still needs to deal with tribal councils - there are different land acquisition problems that one has to deal with. Again, it is something that one learns to do quite quickly, and one starts to understand those communities. Yes, you’re not looking, necessarily, at the R1,000 spend per shopping trolley - but you’re looking at R100 spend. The difference is that instead of putting 100 people through the store you’re putting 10,000 people through the store.

LINDSAY WILLIAMS: Because of these different spending patterns, because of these different demographics, and because of the different type of person with different spending habits - how different does the actual development have to be? Architecturally, design-wise - is it very different?

WAYNE VAN DER VENT: One mustn’t forget that most shoppers are aspirational. Television is prevalent around the country - people want to shop at the stores they see on television, and they certainly want to shop at centres that set a standard. So yes, we need to move away from the old apartheid township shopping centres - which look second hand, which looked like they were third grade. Retailers need to learn that you cannot put stock in the stores out in the rural areas - out in Phuthaditjhaba - that doesn’t sell in the city, because it’s not going to sell out there as well. They need to understand that the stock they’re carrying - the trade they’re doing - is with a normal South African person, who just happens to be living differently. Let’s not forget that Lazarus Zim, now chief executive at Anglo, comes from Bethlehem, about 60km away from Phuthaditjhaba. His mom, I believe, still lives in the area - so you’re not talking about an unsophisticated market. You’re talking about a market that is just slightly differently placed in the scheme of things - that just lives differently.

LINDSAY WILLIAMS: It doesn’t sound unsophisticated to me, at all, it just sounds as though it’s been traditionally unserviced.