September 27, 2007, was a big day in Soweto, a township of more than a million people just outside the South African city of Johannesburg. Former president and Nobel Peace Prize laureate Nelson Mandela and other dignitaries gathered with a local choir and a crowd of thousands to mark a very special occasion. It was not a holiday or anniversary, but the ribbon-cutting ceremony to open Maponya Mall.
Such pomp and circumstance might seem excessive for a new shopping center, but Maponya is not just any mall. With more than 200 stores, it’s the biggest in all of southern Africa, though even that doesn’t fully explain its significance. For a nation long plagued by the apartheid racial segregation system and its legacy, Maponya serves as a symbol of the changes taking place there—changes that are also turning it into a burgeoning market for quick-service restaurants.
Emerging Market
Established as a township for black South Africans expelled from Johannesburg during apartheid rule, Soweto previously stood as a reminder of inequality in the country. Since the first fully inclusive democratic elections in 1994, however, its fortune has started to look up. The rush of retailers to move in is no coincidence.
“There is huge potential for development in that market,” says Bernard Drum, a South Africa-based private sector development specialist with World Bank.
With its mostly black population, Soweto is at the forefront of the emergence of South Africa’s new middle class. The country’s economy is growing at a healthy rate of 5 percent, inflation is under control, and—most importantly—prosperity is reaching more than just the white elites. “Changes to the political environment and a focus on black empowerment has resulted in a greater number of black South Africans entering the middle class,” says Shereen Tuff, an analyst with global market research firm Euromonitor International. “This consumer group has a high disposable income, and there is a great focus on increased spending on items that would reflect status and power.”
Consumption spending in the country rose more than 7 percent in the first quarter of 2007, according to the South African Department of Trade and Industry. That bodes well for the restaurants, especially quick-serves. In March 2007, total income at takeaway/fast-food restaurants was up more than 18 percent over the previous year, according to national statistics board Statistics South Africa.
“Quick-service restaurants, in particular, are seen as great value for money, offering quality food at affordable prices,” Tuff says.
A September 2007 study by Euromonitor found that while South Africans are becoming increasingly “cash rich,” they’re also becoming “time short.” Trends such as a growing number of women entering the work place and a breakdown of the nuclear family mean it’s becoming harder for South Africans to find the time to prepare meals at home. As a result, there’s an increased opportunity for fast-food restaurants to serve time-strapped families.
Quick-serves looking to attract this demographic should focus on serving “good, wholesome meals, at a price that is affordable for their target market,” the Euromonitor study suggests. It cites the weekly “kids eat free” day at Panarotti’s Pizza, a sit-down pizza and pasta chain in South Africa, as a good example of how to attract single, working parents and their children.