There is an old line that goes, “Once is happenstance. Twice is coincidence. Three times is enemy action.” It’s usually ascribed to Ian Fleming’s Goldfinger, but it was probably around before that.
The phrase captures the question of when do you consider a pattern to be set? In Bond’s case, it was pretty clear; he was after Goldfinger, pretty obviously. But still, the phrase does suggest it’s a bad idea to believe that a pattern is established after only two incidents.
The reason for concern is that two South African companies have recently decided to exit their African investments. Shoprite, South Africa’s largest grocery retailer, has announced plans to exit the Ghana and Malawi markets. In Malawi, it signed an agreement in early June to sell five stores (awaiting regulatory approval), while in Ghana it received a binding offer for seven stores and a distribution warehouse. Both moves mark part of a strategic shift towards focusing on its domestic operations.
This was quickly followed up by Nedbank’s decision to divest its 21.2% stake in Ecobank, a major pan-African regional bank. This constitutes a big decision for Nedbank; it’s a long-term investment – the South African bank first invested in Ecobank in 2008. It’s also a substantial retreat. Over the years, Nedbank is estimated to have invested about $500m in the bank.
So the question obviously is whether South African business is retreating from Africa in general? The short answer is that we are somewhere between happenstance and a pattern.
Special circumstances or a trend?
The argument that South African business is not pulling back is underlined by the special circumstances in both these cases. It’s not that Ecobank is doing badly. It operates in 35 countries across West, Central, East and Southern Africa, has a wide footprint of branches, and is one of Africa’s most recognisable financial institutions. It reported a 23% year-on-year increase in profit before tax to $398m for the first six months of this year.
The problem for Nedbank is that the dividend flow has been extremely small over the years. In addition, a 21.2% stake is really too small to make a difference, but large enough to be meaningful if things go wrong. It’s worth noting that the buyer, Alain Nkontchou, is a prominent figure at Ecobank, having served on its board since 2014 and as chair from 2020 to 2024. He already owns a small slice of the bank. It probably makes more sense for the bank to have a hands-on, knowledgeable investor than a distant minority stakeholder.
For Nedbank, there will always be concerns over regulatory uncertainty and exposure to volatile Central and West African economies. It’s a sad retreat, but probably from Nedbank’s point of view, a sensible one.
What about Shoprite? The story is similar; its Malawian and Ghanaian businesses are extremely small in relation to its very large Southern African businesses, and the currency risks are very high. Being a small player in a distant market is tough going, and from an investor point of view, it’s hard to criticise Shoprite for this decision. It operates only five stores in Malawi and seven in Ghana; that does not constitute a substantial footprint.
But it is a pity. Once, Shoprite managers were enthusiastic about African expansion, based on the narrative that Africa’s rising middle class, urbanisation and formalisation of retail would unlock decades of growth. There was also the notion of logistical efficiency by building distribution centres across regions, lowering costs and ensuring benefits of scale.
In some African countries, this has been achieved. In Zambia for example, Shoprite has 51 stores. By store count, its businesses outside South Africa are significant; about a quarter of its total stores. But currency volatility is always a headache, and five stores do not equal logistical efficiency.
But there is also something to the argument that this is the beginning of a trend – and the fault here is not Africa’s but South Africa’s. After a decade and a half of low GDP growth in South Africa, local managers are having to look a lot harder at their investment book. It’s not like Nedbank and Shoprite haven’t grown, but without expansive growth back home, expansive growth outside of their home base is just a little bit harder to justify.
South Africa’s business climate will have to improve for managers to get back on the investment trail on the continent.
Top image: Rawpixel/Currency collage.
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