Day: October 11, 2010

Delta Air Lines Responds to Increased U.S.-Africa Demand

With air traffic between the United States and Africa growing at more than 5% annually, the United States air carrier Delta Air Lines is steadily increasing its flights to the continent in response to strong customer demand.

In an October 4 interview, Landers attributed that growth to three key factors: strong economic growth across the African continent, the large number of African-born American citizens who are now traveling back and forth to Africa on personal and business travel, and increased investment in the continent’s oil and natural resource industries. “All of those together are driving growth,” he said.

Although Africa is growing from a fairly small base in comparison to Europe, Asia or other developed markets, Landers said, “in percentage terms, Africa is probably one of the fastest-growing markets in the world.”

“There has been an underserved U.S.-Africa demand for many years that historically has not had many options for service other than circuitous routings through Europe,” Landers said. “We began to fill that void in 2006” by beginning service to Johannesburg from Atlanta via Dakar. “Now that flight operates nonstop and has been very successful.”

Delta announced September 29 that it will add an eighth destination to its Africa route network with direct service between the United States and Luanda, Angola. Delta has grown from 22 weekly departures to and from Africa in the summer of 2007 to nearly 80 for the same time this year.

With its winter 2010–2011 schedule, Delta will operate flights to eight African destinations: Accra, Ghana; Abuja, Nigeria; Cairo, Egypt; Dakar, Senegal; Johannesburg, South Africa; Lagos, Nigeria; Luanda, Angola; and Monrovia, Liberia. Delta also intends to serve Malabo, Equatorial Guinea, and Nairobi, Kenya, once additional U.S. government approvals are received.

“With our entrance to Angola via Dakar, we once again will serve Senegal from both Atlanta and New York, creating another double gateway to Africa with service from two hubs in the United States,” Landers said. Delta also serves Accra from New York and Atlanta. Monrovia is an emerging destination, currently visited one day a week via Ghana. Landers said the Monrovia flight is playing an important role in helping Liberia to rebuild and he voiced hope that its frequency will be expanded in the near future.

Africa is critical to Delta Air Lines because “having a diverse flight network is important,” Landers said. “When there are economic downturns in other regions of the world, our business goal is to be diversified across all the continents to protect ourselves from regional downturns.”

“One of the great things about airlines is that our assets are mobile, so if situations require the adjustment of our network it is very easy to do so. But, by and large, we have been very pleased with Africa over the last four years.

“When we first entered the market, we immediately saw load factors, or the percentage of our seats filled, at 80 percent or greater, and that led us to continue to expand across the continent.

“In July 2007, Delta had 97 departures to Africa from the U.S. In July 2010, we had 320, so we tripled in size in three years,” Lander said. “We believe our hubs give us the right strength. New York has a very large local market [of people wanting to travel to Africa] and Atlanta, being the world’s largest passenger hub, gives us the ability to connect pretty much every community in America to Africa with one stop.”

Americans traveling to Africa, he said, choose Delta for time savings. “If you look at the Atlanta-Johannesburg nonstop rather than connecting in Europe, you save an average of six hours in each direction. So on a roundtrip we are giving 12 hours back” to the traveler, he said. “There is great benefit to more direct routings to Africa.”

Helping to pave Delta’s expansion into Africa have been many of its employees, some of whom were formerly with Pan American World Airways, Landers said. Delta acquired Pan Am’s trans-Atlantic routes in 1991 when the airline ceased worldwide operations.

(On May 20, 1939, Pan Am launched the first U.S. passenger air service to Europe. As the United States entered into World War II, Pan Am began providing military transport of U.S. troops into Europe, Africa and Asia. As the war ended, Pan Am went on to establish passenger and cargo routes throughout the continents of Africa, Europe, Asia and Latin America and became one of the world’s premier international airlines before its demise.)

“We have a lot of people with many years of experience in developing African markets and who are very familiar with the business environment and how to be successful in Africa, and that has paid off for us. … Pan Am really paved the way to Africa.”

Landers said Delta is expanding its partnerships with African airlines. Kenya Airways is now a full-fledged member of the Sky Team Alliance and Landers said Delta is working with other African carriers such as Air Nigeria and TAAG Angola to explore and expand code sharing (allowing single bookings across multiple airlines).

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More bang for your buck if you invest in Africa

You are more likely to return a substantial investment if you invest in Africa. It’s a low risk, high reward place to return a good profit, especially since there isn’t a lot of competition.

Africa is the place to go for the “frontier market investor” who is seeking a new investment venue with a high rate of return, says Donald Elefson, portfolio manager for the Harding Loevner Frontier Emerging Markets Fund, which invests the largest amount of its multi-billion dollar fund — about 33 percent — in Africa.

In a September 22 interview, Elefson said U.S. investment yields are at all-time lows, which can directly benefit emerging markets like Africa.

“I think you are seeing more and more people looking for return — be it yield or exciting equity-type opportunities — and that is where the frontier market [like Africa] is really coming to the forefront. … The frontier markets are going to be the biggest beneficiaries of the low interest rate environment that we have in the developed world,” he said.

Elefson recently told the U.S. investment weekly Barron’s that Africa offers “strong markets and huge potential.” Additionally, he said, people do not give Africa enough credit for confronting corruption — something that Elefson sees as a “generational” issue.

“When I go to Lagos, when I go to Nairobi, I see a lot of Africans who have been educated and have gained work experience overseas coming back home because of the potential that can be found there. They are a new breed. They are not like that older generation. They realize that you can get somewhere, you can accomplish things, without pursuing corruption. It is a new mindset. These are the new leaders. These are the Africans who will rise up and be the new leaders that will drive return on capital going forward.”

“I am speaking from the perspective of the investor, both what I do in terms of equity investments in companies listed on stock exchanges and companies that are not listed on stock exchanges but may in the future.” Elefson said that while his mutual fund only invests in listed companies, “I am a firm believer that the opportunity for both of those sectors is huge” Elefson told America.gov.

Elefson explained why as a portfolio manager he is so “bullish” (enthusiastic) about investing in Africa. “First of all, we have a historical precedent to argue our case in Africa, and that is seen in the markets of Brazil, Russia and China.”

“I have been investing in emerging markets for 20 years. When I started, China and Russia were not open. When they started to open in 1992 and 1993, we were pursuing investments there but people were laughing at us. They would say, ‘We would never do that. Russia is an ex-command economy, China is an ex-Communist economy.’ You have heard the story. But now, try to find one listed equity fund that does not have China or Russia in it. You would be hard-pressed to find one.”

A similar situation now exists in Africa, he said.

He pointed to the example of Brazil. “When I started investing in emerging markets, Brazil was the attractive emerging market but it was also the biggest economic and political basket case in the world: inflation was 1,000 percent, corruption was present; Telebras [the telecommunications company] was a state-owned company; Petrobras [petroleum] was a state company. In the past 15 or so years, Telebras broke up the telecommunications monopoly and hived off different individual operating companies; Petrobras is now owned by everybody” as a private-sector company. “So what I am saying is that if it worked in Brazil it can work in Nigeria.”

In Nigeria, he said, Nitel — the Nigerian Telephone carrier and its companion mobile phone company — are both state-owned. “They are in the process of being liberalized, privatized and sold off, just like Brazil. NPC, the Nigerian Petroleum Corporation, is a similar entity to what Petrobras once was, and that is in the process of being liberalized.”

“The difference is Nigeria does not have control of their offshore economics. Nigerian companies participate in a very low level of offshore exploration and production … so not only do we have an oil company that can be liberalized, but also one that has increased market and revenue potential when that offshore potential is realized. But that is just Nigeria.”

Looking elsewhere in Africa, Elefson compared Kenya to Mexico of an earlier time. He said Mexico “made its bones” (became an international investment opportunity) by becoming more closely integrated with the United States and its neighbors to the south.

“Kenya is a part of the East African Community, which is made up of five potentially high-growing economies [Kenya, Uganda, Tanzania, Rwanda and Burundi], and Kenya is the leader of the pack. So there are quality companies now in Africa that would pass anybody’s test on fundamental analysis. … I could go on and on with examples, but my argument is that emerging markets have allowed many countries that nobody ever thought would grow into investment destinations to grow, and the same thing, I believe, is under way in Africa right now.”

Elefson said all of the new African companies that are sprouting up across the continent realize one thing: “If we are going to grow, we need capital and we cannot depend on our government any more to give us that capital. … We need foreign investors,” who require the transparent reporting of numbers and results. “So it is foreign investors rising in status that is forcing the change or confirming the trend of change at the company level, and it is impressive,” he said.

Information is one of the biggest factors aiding the investment and development trend in Africa, he said.

“Right now, they just landed two undersea cables to the East African portion of the continent. Broadband prices could go down as much as 90 percent [below] what they were even two years ago. That makes broadband Internet, data over the cell phone, and data to the home much more affordable. That means a person with an idea, with an aspiration, can log on immediately and see what other people are doing,” he said. “They have Facebook, Twitter and all of this stuff. I don’t use them. I don’t like them. But they are wonderful conveyors of information. They are catalytic. So that is going to stimulate a whole new breed of entrepreneurs. It is going to change the gestation period of an entrepreneur from ‘This is an idea, let’s think about it for years’ to ‘I can see an example of this so maybe I can do it sooner.’”

The word is beginning to spread around about the great investing opportunity in Africa.

The continent already has seen a record $54 billion in mergers and acquisitions this year, including Wal-Mart Stores’ offer of more than $4 billion for South Africa’s Massmart Holdings last week. A raft of Africa-focused funds also have been launched. The Renaissance Group is seeking $1.5 billion, while 8 Miles, a fund fronted by Bob Geldof, aims to raise another $750 million. For once, this enthusiasm seems warranted.

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Growth is one reason. The continent’s gross domestic product should rise 4.6% this year, up from a recession-beating 2.5% in 2009. The industrialization of India and China should help underpin high commodity prices, still Africa’s principal resource, and both countries are investing heavily in the continent. Africa’s population could double to 1.8 billion by 2050. Poverty, and in some places crime, remains chronic. But the opportunities are huge: The consumer-goods, agriculture, resources and infrastructure sectors may generate $2.6 trillion in revenue by 2020 compared with $1 trillion today, according to McKinsey.

Africa also offers high returns on investment compared with other developing countries. Limited competition means margins are fat. For example, only four banks have a substantial presence across the continent: Barclays, Citigroup, South Africa’s Standard Bank and Standard Chartered. New competitors are being lured in. HSBC Holdings is in talks to buy South Africa’s Nedbank Group. Nigeria’s Guaranty Trust Bank and Zenith Bank may resume a crisis-interrupted push into neighboring markets. In the retail sector, Wal-Mart has stolen a march over Carrefour and Tesco, rivals largely absent from Africa.

Valuations are cheap. African consumer businesses are valued at less than 10 times forward earnings compared with more than 20 times in other emerging markets, according to Renaissance.

The improved economic outlook also could spur growth in often embryonic public markets as African-based companies seek more local equity and debt financing. That would provide more opportunities for investment funds to gain direct exposure to Africa’s development as well as easier exits for private-equity investors. As it is, Actis, a private-equity firm with $1.5 billion in funds under management in 17 African countries, managed to float 100% shares of Nigerian telecom company Starcomms locally in 2008.

Major constraints exist all the same: volatile exchange rates, corruption, poverty and political instability in key countries like Egypt, Nigeria and South Africa. Small economies—Massmart’s valuation is bigger than Zimbabwe’s GDP of $3.5 billion—could be swamped by capital inflows. Managing them and controlling inflation are big challenges for Africa’s young democracies.

Africa suffers from an acute skills shortage even in relatively developed countries like South Africa. But there is a real chance Afro-pessimism is finally giving way to Afro-optimism.

This is a great opportunity to make a good profit before the chances are reduced.  In the eyes of the investment world, Africa is widely viewed as a complete basket case. Comparisons with Asia, which also suffered the indignities of colonial exploitation, are particularly irksome, since certain people in Africa blame colonialism for the continent’s many economic failures.

The World Bank estimates that real income per head in the 48 countries of sub-Saharan Africa rose on average by only 25% between 1960 and 2005. In East Asia, real income rose 34 times faster. In the 1950s, high-technology South Korea was as poor as Ghana and Kenya. Now, South Korea is the world’s ninth-largest economy.

Africa today evokes images of grinding poverty, natural disasters and appalling infrastructure. More than 70% of Nigeria’s 140 million citizens live on less than $1 a day. Congo’s infamous child soldiers fight in a country wracked by violence. Somalia is a failed state whose civil war is spilling over to Chad. Zimbabwe’s Robert Mugabe has taken the mantle from Uganda’s Idi Amin as the new millennium’s poster child of an African dictatorship. Add to this reality the region’s world-beating political corruption — the most recent example is last week’s farcical elections in Nigeria — and it is clear why investors want to stay out of Africa. By all measures, Africa appears to be a colossal flop.

Investing in Africa: The Surprising Good News

“People love China and India, like Asia, are skeptical about Latin America and hate Africa” opined accurately the manager of one of the few African investment funds.

This conventional view, however, is surprisingly inaccurate. Over the past decade, parts of Africa have taken baby steps towards greater prosperity, security and democracy. Snake oil “African socialism” from the 1960s has been supplanted by private enterprise and freer markets. Even Nigeria, arguably the most corrupt nation on earth, is — by conventional standards — a macroeconomic success. Nigeria’s annual GDP growth had more than doubled between 2003 and 2006 to an average of 7.3%. Inflation in Nigeria dropped to single-digit percentages last year. And thanks to a boom in oil exports, Nigeria’s foreign exchange reserves are approaching $50 billion.

Nor is Nigeria alone. For the third year in a row, sub-Saharan African countries grew by an average of 6% and are nudging toward 7% this year. At this rate, Africa’s poverty rate will halve by 2015. Take India and China out of the equation, and sub-Saharan Africa is actually growing faster than Asia.

High oil and other commodity prices have provided a much needed tailwind to African growth rates. But here’s the surprising news: non-oil producing African countries are recording similar rates of growth. Thanks to pragmatic government policies and an emphasis on tourism, Kenya is one of Africa’s fastest-growing economies — despite having no commodities. Zambia’s copper exports are complemented by agricultural exports. Africa is even beginning to boast an emerging middle class. In Nigeria, mobile-phone penetration is 8% and rising fast. Optimists hope that a combination of debt forgiveness, improving infrastructure, and accumulated financial reserves have combined to create a momentum that could keep going even after the commodity boom ends.

Investing in Africa: Making a Mint in African Stock Markets

Another surprise: the few investors who can access African stock markets are making a mint. Between 1995 and 2005, African stocks showed compound annual growth of 22%. Last year, the stock market in Kenya rallied 46%, while the local index rose nine times, in dollar terms, over the past 10 years. In 2006, equities jumped: 75% in Morocco; 69% in Uganda; and 55% in Botswana. Nigeria’s stock market capitalization has doubled during the past 12 months to about $45 billion.

How is this all possible? It turns out that African companies are some of the most profitable and fastest-growing in the world. The very reasons not to invest in African stock markets — political uncertainty, corruption, poor infrastructure — mean that the firms that do succeed are some of the savviest around. Yet thanks to the “Africa discount,” they trade at half the levels of Western counterparts.

Investing in Africa: China Yet Again

While much of the West ignores Africa, China has become a new, eager suitor of the Dark Continent. China’s President Hu Jintao recently set off on an eight-nation tour through Africa. He promised $3 billion in soft loans and a doubling of Chinese aid to the continent by 2009. In the last 12 months alone, China’s leaders have visited 48 African nations.

China’s efforts are not borne of feel good development policies, but of pure economic self-interest. China needs Zambian copper, Nigerian oil, Tanzanian timber and South African platinum to achieve superpower status. The Chinese strategy is built on largess — a savvy exercise of “soft power.” Chinese investment has paid for roads in Ethiopia; financed the building of 100 schools and 30 hospitals in Liberia; rebuilt Angola’s once-famous Benguela railway; and set up a road-building program in Mozambique. Chinese investment has already revitalized large parts of Africa and areas of Africa have much better infrastructure than they did just a few years ago.

And, China’s efforts are paying off. Trade between China and Africa soared 40% to a record $55.5 billion last year. Direct investment has reached a cumulative $6.5 billion. A whopping one-third of Chinese oil now comes from Africa.

Investing in Africa: The Last Great Opportunity

Africa is widely perceived as poor and corrupt. But the best investment opportunities lie where perception differs from reality — where things aren’t as bad as they seem. Africa fits that bill perfectly. It’s hated. It’s undervalued. It’s difficult to invest there. It reminds me of how former Communist Eastern Europe and Russia were viewed in the early 1990s. As Hermitage Capital founder and Russia’s largest investor Bill Browder observed: “Russia is sh*t. But as long as it gets a little less sh*tty, I make a lot of money.” That’s why his investors have made 25x on their investment money in the last 10 years — and Browder walked away with more than $160 million in 2006 alone. If that’s not an incentive to look at Africa, nothing is.

Here are some video highlights of the investment opportunities in Africa.

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Wal-Mart tries to set up shop in Africa and why this is huge

A few weeks back it was HSBC announcing news of its talks for South Africa’s Nedbank. Now it is the world’s biggest retailer, Wal-Mart, seeking a foothold on the continent with a plan to buy South Africa’s Massmart for more than $4 billion.

Wal-Mart Stores Inc. made an aggressive but expensive bid to expand in Africa ahead of its international competitors, offering to buy South African retailer Massmart Holdings Inc. for 32 billion rand ($4.6 billion).

Wal-Mart’s proposed offer—the company’s biggest acquisition in more than a decade—would represent a relatively high premium for Massmart, a 290-store chain operating in 13 African nations.

Yet a deal would give the Bentonville, Ark., giant a critical foothold to expand in Africa and allow Wal-Mart to beat European multinational rivals Carrefour SA, Tesco PLC and Metro AG into the potentially lucrative sub-Saharan market.

Massmart would serve as “a fantastic entry point to a broader part of the continent,” said Andy Bond, a former chief executive of Wal-Mart’s U.K. subsidiary Asda, who is spearheading the purchase. Massmart already is expanding beyond its South Africa base, Mr. Bond said in an interview Monday.

Wal-Mart has learned the hard way that a first-mover advantage can be important in international retailing.

Carrefour, Wal-Mart’s global archrival, beat Wal-Mart to South America, opening stores in Brazil in 1975, nearly two decades before Wal-Mart. The France-based company also was the first major international chain to establish a presence in Asia, through a joint venture in Taiwan in 1989.

Despite investing billions of dollars building and buying stores, Wal-Mart still trails Carrefour in Brazil today. And Carrefour remains the largest international retailer in China, the most coveted retail market in the developing world. While Carrefour doesn’t have sub-Saharan operations, the chain has stores in northern Africa.

Wal-Mart’s African foray is risky, however. The offer is roughly 13 times Massmart’s pretax earnings and would place Wal-Mart into a politically combustible region.

South Africa is emerging slowly from the recession, is plagued by high crime and unemployment and marked with a heavily unionized work force known for long, sometimes violent, strikes. Other sub-Saharan nations carry even more political risks.

“Massmart is well positioned as a springboard for sub-Saharan Africa, but we believe that it will take a much longer time period for the company to earn its cost of capital in Africa,” said Janney Montgomery Scott analyst David Strasser. “For every relatively stable country like Botswana, there is a Zimbabwe.”

Nevertheless, Wal-Mart appears prepared to face those risks as it looks to extend its reach in emerging markets and expand its international business, which makes up a fourth of the company’s roughly $405 billion in annual revenue.

The international division clearly is Wal-Mart’s growth engine, now that sales at U.S. stores open at least a year have fallen for five consecutive quarters. The company is examining entering other emerging markets as well, including Russia and the Middle East. “Wal-Mart is a company that wants to aggressively expand world-wide,” Mr. Bond said.

But Wal-Mart hasn’t always managed to get its formula right abroad, in part because the retailer sometimes has failed to cater to local habits and markets. Wal-Mart in 2006 abandoned its Germany operation after spending eight years trying to crack the market, one of Europe’s most competitive discount-retailing environments. Wal-Mart pulled out of South Korea last decade.

South Africa, particularly Johannesburg and Cape Town, is an attractive prospect, drawing shoppers from Nigeria, Kenya and elsewhere on the continent because of its well developed roads and wide range of retailers, from discount stores to high-end, international brands.

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Like Wal-Mart, Massmart operates low-cost, high-volume stores with a strong general retail business and an emerging food operation. Founded in 1990, Massmart operates several chains, including Game general-merchandise stores, Makro warehouse-club stores and Builders Warehouse for construction and home improvement.

Massmart is one of several large chains, including Shoprite Holdings Ltd. and Woolworths Holdings Ltd., that dominate South Africa and have expanded into neighboring countries. Massmart reported sales of 47.55 billion rand in the fiscal year through June, up 10% from a year earlier.

Wal-Mart made a nonbinding proposal that could lead to a cash offer of 148 rand ($21.08) a share for Massmart. The companies said Monday that they are in exclusive negotiations to try to hammer out a deal, which would be subject to regulatory approval.

The idea of Wal-Mart bidding for one of South Africa’s retailers had been around for a while as it focuses on international growth.  South Africa presents a compelling growth opportunity for Wal-Mart and offers a platform for growth and expansion in other African countries.

The expansion in the rest of Africa is key. Massmart doesn’t only have a presence in South Africa, it also has stores in 13 other countries in sub-Saharan Africa.  It could be a hugely significant deal from an African perspective.

Why this signals a big change.

This is a significant move is for investors. This acquisition, if completed, will be the biggest acquisition undertaken by Wal-Mart in 10 years – and of all places, it’s in Africa. For markets, this could be a game changer, and I venture there are many computer screens in trading floors around the world tracking this transaction very closely.

For quite some time, I have felt that corporate America was missing the Africa story. Like tourists frightened off by rumors of lions prowling the city streets of Nairobi or Lagos, America’s corporate sector has been bamboozled and bogged down in an old African landscape where the only opportunities are to be found in digging up raw materials, and the greatest challenges are with intractable or corrupt government bureaucrats. To be sure, that African landscape still exists, both in mind and in reality.

Last year, India, Inc. completed its second biggest acquisition anywhere, via the purchase by Bharti Airtel of Zain’s mobile phone network. The deal added up to a staggering $10.5 billion. That was quite a statement. China is simply everywhere on the continent, buying up oil reserves and copper mines, and building dams, bridges and roads. But despite all the news of America’s growing military footprint, through the newly established Africa Command, there was not a sniff of America, Inc. It was as if America understood the security and resource games, but that those were the only games in town.

This has changed with Wal-Mart now wanting to put Massmart in its shopping cart. The African continent remains the last frontier of the 21st century. Africa’s resources are vast and still not properly quantified, but the far greater value may be in Africa’s human capital: its consumers.

There are 1 billion souls in Africa, 40 percent of whom live in urban areas, and according to a McKinsey report on Africa’s booming opportunities, Africa already has more middle-class households than India. It’s fitting that a company like Wal-Mart that has always understood the economies of scale is leading the way for America. Africa’s consumer market has scale, and plenty of it.

This will prove a valuable acquisition for Wal-Mart. The company is set to reap an advantage as an early mover. The critics say that it won’t be easy since South Africa is a quirky market; its labor force is unionized and combative when compared with the rest of the world. However, when viewed as a “Gateway to Africa,” South Africa is a winner.

When Wal-Mart first announced its intentions to launch a presence in India back in 2006, many onlookers said they were crazy. Yes, India has an estimated $250 billion retail market and is the second largest country by population, but the government is very protective of its domestic businesses and Wal-Mart at the time was fresh from humiliating defeats in both Germany and South Korea.

What the critics and pundits failed to understand about the India initiative was that Wal-Mart is one of the most gangsta companies in the history of the world. They are as ruthless as their customers are fat. Fine, some of them are fat but you get the idea. They will go to any lengths and twist themselves into whatever contortions they need to in order to build the beachhead. And once they get a foot in the door, everything changes and the takeover begins.

In the 1990’s when Wal-Mart began establishing their beachheads in China and Brazil, there was similar talk of how the company didn’t understand the lay of the land or the culture or whatever. Meanwhile, they’ve since opened hundreds of stores throughout both countries – there is a Wal-Mart directly facing the massive statue of Chairman Mao in the middle of Beijing, talk about a juxtaposition!

Their foray in India has not been quite as successful yet, and the qualifier “yet” is important when you consider the hoops the company is jumping through just to be there. For starters, there is a law that says foreign retailers are not allowed to sell goods directly to the public, so Wal-Mart built a wholesale distribution center instead of their typical retail outlet. They launched a joint venture with the big Indian wireless company Bharti and it is Bharti that owns and operates the retail stores with Wal-Mart acting as supplier and “consultant”. See what I mean about the ruthlessness?

Indian opponents of Wal-Mart are calling it “backdoor retailing” in violation of the country’s laws. And they are right of course, but again, Wal-Mart is straight gangster. Besides, they’ve bought the local farmers’ loyalty as they not only pay 7% more for wholesale crops, they actually arrange for trucks to pick up the goods right from the farms themselves. No one else in India has the scale or the logistical know-how to compete with that. Wal-Mart still has just one distribution center in India, but having laid the groundwork over the past 2 years and established themselves favorably with the farmers, you can bet that their expansion plan throughout the massive nation is about to accelerate.

And if the foreign retailer restriction ever gets eased or lifted? Forgetaboutit. I wouldn’t bet against Wal-Mart in Africa and I wouldn’t ignore the peripheral investment opportunities that may arise because of it.

With a good deal of its supply coming from China, Wal-Mart will surely be able to take a knife to Massmart’s costs by bringing its scale to bear.

I think this acquisition will be viewed as transformative. And, when the competition sees Wal-Mart’s success, they’ll wish they had been early movers too.

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