Retail Shopping Rises in Ghana

On any holiday or weekends, you will be forgiven for thinking that gifts are been dashed at the capital’s swankiest shopping center-the popular Accra Mall at the Tetteh Quarshie roundabout. The sheer numbers of shoppers in the alleys and the difficulty motorists experience in entering and exiting the Accra Mall points to one thing. Formal, modern retail shopping has caught on.

In the past small retail shops, corner stores, neigbhourhood convenient stores and open markets defined retail habits. These outlets still occupy the largest share of retail sales volume but the trend is changing. Retail habits are now been formalized and becoming more Westernised and sophisticated. Modern, formal retail space now accounts for around 5-10% of the market. 

To be fair, modern retail did not begin with Accra Mall or even the A&C Square in the plush East Legon area of Accra. The space had been filled by the Melcom Group. Operating the Melcom department stores, the company has grown and now operates in nine out of the ten regions in Ghana. Melcom boasts of an impressive 23 stores nationwide.

What accounts for this gradual trend for formal retail shopping?

The country’s discovery and production of oil and gas has attracted huge investment capital and drawn in a lot of international brands. International brands Shoprite, Game, KFC, Pizza Hut, Numero Uno (a Zara fashion brand) and others have taken up space in the capital’s malls. The oil industry has also attracted a lot of expatriates and Ghanaians who used to live abroad. These groups have a taste for branded products and Western-style shopping.

There is high economic growth across the African continent, Ghana not an exception. The Ghanaian economy grew by a world record 14% in 2011, fueled by the production of oil and a boom in commodity prices. Although the growth reduced to 7.1% in 2012, it was still higher than the African average of around 6%, according to the IMF.  This year it is set to grow at 8%. This growth has led to rising incomes for many people and a new middle class of citizens. Ghana became a lower middle-income country in 2010. This middle class have seen their real incomes grow and they thus have purchasing power to spend. 

Urbanisation (many people moving to live in the cities) keeps growing. 52% of Ghanaians live in the urban centers, 2011 data from the World Bank reveal. This means many more people need new products and services to consume, making it attractive for retailers to tap into. 

The low-penetration rate of formal retail itself presented unique opportunities for modern retail space. All these factors have combined to see huge patronage and high profits for the few shopping malls in Accra and Kumasi especially.

The 21,000 square meters Accra Mall is still the most patronised in the country with a footfall of 7million visitors a year, according to Broll Ghana, managers of the Mall. The community-located A&C Mall, the first on the scene in 2005 is equally popular. Ghana’s two bona fide malls, Accra Mall and A&C Square boast occupancy rates near 100%, and a waiting list for retailers keen to open outlets. This has pushed rent space up to around $50 per square meter, up from around $25-35 in the past. The successes of these two have inspired many others to spring up to meet the demand.

 

The Rice & Sugar Shopping Center opposite the Military Academy at Teshie is currently the only shopping center in the country that is opened 24 hours a day. This unique selling point and its moderate prices have made them enjoy good patronage. Then there is the Palace Shopping Center on the Spintex Road, which is the largest shopping space in Ghana. The new Marina Mall in the Airport City has come to relieve some pressure on the Accra Mall and if all the office property under construction in the airport city is completed, it should be a force to reckon with in terms of footfall and revenues.

Is the trend set to continue? Jerome Eshun, the General Manager for Investment and Development of Ghana’s state pension fund SSNIT, said in an interview recently that “as the economy expands, the middle class population is expected to increase…demand for one-stop shopping centers to buy dresses, food, among other households items is going to rise.” Broll Ghana Limited, which manages both Accra Mall and the A& C Square, estimates that around 110,000 square meters of retail space will become available over the next 12 to 24 months; in Accra and in other regional capitals like Kumasi and Takoradi (the hub of the country’s oil and gas industry).

 There is currently a number of exciting retail property developments underway. There is the $93million West Hills Mall at Dunkonah near Weija, One Airport Square opposite the Airport City, The Octagon which will have the only Helipad in Ghana at the Central Business District of Accra, and the GLA Mall on the Osu Oxford Street (been built on the land occupying the former MTN location). Over in Kumasi the exciting $48million Garden City Mall is set to change the face of shopping in Ghana’s city of culture and tradition when it opens later this year. Adding to this is the Sun City Mall also under construction.

One downside for the growth in retail space is the unfortunate collapse of the Melcom department store in Achimota to the West of Accra. This tragic incident claimed the lives of 17 people and has moved city officials to scrutinise retail building permits thoroughly to unsure the tragic incident is not repeated.  

Some of these new shopping malls and those under construction have some trends not seen before. These new malls are offering one-stop-shop styles (meaning many services are available under one roof); better-designed with more packing space; possess their own back-up energy supply including generators to overcome one of Africa’s investment headaches, and some are community-oriented to serve those living outside the city center.

These retailers have their challenges too. Many of the retailers like Game import many of their supply from abroad and for them, currency fluctuations increases their cost. The Ghana Cedi depreciated by about 17% against the US Dollar earlier this year and this reduces margins for them and other Ghanaian shop owners who depend on imports. Inflation which has increased to 10% this year reduces the real income of consumers, forcing them to buy cheaper alternatives instead of branded products sold in formal retail malls. A lot of suppliers especially of local produce like food do not have the capacity to meet the demand from the big retailers. One reason that makes some of the retailers to import some supplies from abroad.

Infrastructure concerns such as regular supply of electricity leads to more expenditure on fuel costs. But the low retail penetration rate means that these problems pale in comparison to the benefits that retailers stand to gain from the market.

But will all these benefit Ghanaians? Will there be room for Ghanaian business owners in the malls in Accra and surrounding areas or will it mostly be filled with Western retailers?

In an earlier article I wrote titled ‘Accra Mall, Magnet for All ‘, I raised concerns about the absence of traditional, Ghanaian food retailers at the food court of the Accra Mall. All the food served is European. Being located in Ghana, one or two well-organised traditional food retialers would have spiced up the menu and patronage at the mall. After all, the menu served by McDonalds and other food restaurants in China has been ‘domesticated’ to include local dishes to cater for Chinese tastes.

Before the South African government approved the take-over of that country’s retailer MassMart by US giant Wal-Mart last year, one of the key conditions was that Wal-mart had to promise to source all their produce from South Africa. Wal-Mart agreed. This means local farmers and suppliers will make more profit and they will be helped to boost their capacity to produce and supply. That is one way local business champions are grown. I will love for similar initiatives to be introduced in Ghana too so that it becomes a win-win situation for all.

I hope Ghanaian trade and investment officials are not sleeping at the till.

Well for now, let the check-out machines roll on.