COVID can’t break South Africa’s love affair with malls

JOHANNESBURG, June 29 (Reuters) – Two days before it opens to the public, workers rush to put the finishing touches on the Kwena Square shopping complex, a gleaming $13million sign that South Africans are defying “the ‘global retail apocalypse’.

Even COVID-19 couldn’t separate them from their beloved malls.

“I love going to the mall with my daughter and my grandchildren,” said Kowie Erasmus, 54, who looks forward to Friday’s grand opening of Johannesburg’s Kwena Square, which kicked off at the height of the pandemic. .

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“Shopping malls are a social place.”

The South African market has evolved differently from many other places in the world; high crime rates and scarcity of safe public spaces have long driven retailers and shoppers to shopping complexes. Armed guards and restricted parking ensured carefree drinking.

The mall attachment has baffled the expectations of many industry players and experts who saw South Africa’s lockdowns – initially among the strictest in the world – as an opportunity for e-commerce to finally take hold and grow. take an important part in traditional sales.

Some big-name players are doubling down on physical expansion plans in Africa’s most developed economy, a 1 trillion rand ($62 billion) retail market.

“Investment in physical stores will always be significantly higher than online investment,” said David North, chief transformation officer of grocery and clothing group Pick n Pay (PIKJ.J), one of several retailers that said they would invest more in physical operations. only online during this exercise.

Commercial real estate developers follow the money.

More than 300,000 square meters of new commercial rental space is expected to be completed across the country this year, up from around 367,000 square meters in the previous two years combined, according to data from real estate consultants Rode & Associates.

The new spaces include a series of malls due to open in 2022, including Oceans Mall in the coastal city of Durban, kwaBhaca Mall in the Eastern Cape and Mamelodi Square in Pretoria.

“The experience economy – being in a physical space and enjoying that space – is what South Africans crave and value the most,” said Ulana van Biljon of Emira Property Fund (EMIJ.J), a real estate investment trust.


The pandemic has given e-commerce a huge global boost.

In seven major economies accounting for around half of global economic output, online retail sales rose from $2 trillion in 2019 to around $2.9 trillion last year, according to the UN trade agency. UNCTAD.

Traditional retail players in these markets have suffered a severe blow with more than 17,500 chain store outlets disappearing in Britain alone in the first year of the pandemic. In the United States, the number of shopping centers – already in decline for years – could drop to around 600 from just over 1,000 in 2020.

While e-commerce’s share of South Africa’s total retail sales more than tripled to around 5% from 2019 to 2021, according to Euromonitor International, it lags far behind many countries. South Africa has nearly half the population of Mexico, for example, but its $2.9 billion e-commerce market is only a fraction of Mexico’s $19 billion.

E-commerce accounts for 28% of retail sales in Britain, 25% in China and 14% in the United States, according to UNCTAD estimates.

In South Africa, even with increasing internet access thanks to growing mobile phone penetration, high data costs still prevent many low-income people from shopping online.

Additionally, home deliveries are complicated by the fact that some consumers do not have recognizable street addresses, such as in townships which may lack proper signage.


The resilience of South African malls, however, is not simply due to the difficult path of e-commerce. The security they provide is still a big draw at a time when the country’s historically high crime rates show little sign of abating.

The National Police reported a 15% increase in so-called contact crimes – including assault, murder, robbery and sex offenses – in the quarter ending March 2022, when they peaked over the past five years during this period. Carjackings increased by 19.7%.

Public relations manager Gomotsegang Motswatswe said she spent a lot of time with her family at the mall.

“It’s important that malls provide security and a safe place,” the 35-year-old said, adding that it gave her peace of mind knowing her car was parked in a safe place.

“It’s not just about shopping,” she explained. “We still want to be out there as people and socialize.”

Motswatswe is one of many South Africans returning to malls in force following the easing of COVID-19 restrictions. Foot traffic has yet to recover — still 18% below pre-pandemic levels at the end of last quarter — but shoppers are spending more per visit, according to data compiled by MSCI Research.

South African shopping center activity is now on average above pre-pandemic levels, in terms of retail density, which measures turnover per square metre, the data shows.

In the first quarter of 2022, the MSCI Quarterly Trading Density Index recorded a 21.1% year-on-year growth in annualized trading density.


Retail executives are betting on both traditional and online operations.

Pick n Pay opens 200 discount Boxer stores and revamps Pick n Pay stores, although it also targets an eight-fold increase in online sales. Most of its R3.5 billion capital investment in the current financial year is for new stores and renovations. Read more

Fashion and value homewares retailer Mr Price (MRPJ.J) says 66.5% of its capital spending for the current financial year will be allocated to stores, with a plan to open 180 to 200.

Massmart (MSMJ.J), majority-owned by Walmart (WMT.N), says 57% of its investment will go to new stores and renovations this year, while 15% is allocated to e-commerce expansion. Over the next five years, he wants to expand his e-commerce business to 15% of his total sales, up from 2.2% currently.

High-end fashion and homewares retailer TFG (TFGJ.J) spends 75% of its capital spending on new stores and e-commerce.

There could be room to expand, in terms of physical stores, by serving the needs of South Africans living in rural and disadvantaged communities that have long been underserved by parks and shopping complexes.

Much of the country’s new commercial real estate development is now taking place outside major cities, Niel Harmse, vice chairman of MSCI Inc.

South Africans like Phindile Nkosi, who lives in Pongola, a small rural town in eastern South Africa and drives three hours with her children to spend the day at a shopping center on the coast, demonstrate that there is still unmet demand.

“I wish Pongola had a mall. Because even though it’s a small town, it’s growing.”

($1 = R15.9966)

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Reporting by Nqobile Dludla; Editing by Joe Bavier and Pravin Char

Our standards: The Thomson Reuters Trust Principles.

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