As Walmart establishes stores in Angola, retail industry watchers say larger trends are taking place in a country once defined by civil strife. One company that has taken off is Eaglestone Advisory. The New Economy speaks to its CEO and Founding Partner to find out more.

The New Economy: Now Pedro, we know that Walmart’s presence in Angola is a signal of larger trends relating to demographic shifts; can you tell me a little about them?
Pedro Neto: It’s good for everybody to know that last month came out the first census of the population of Angola since independence. So, last month we came to know that the population of Angola is now around 24 million, with a large concentration around Luanda, the capital, with around seven million. And with the young population, probably close to 50 percent.

We have now a growing consumer segment. The importance of the middle class is increasing. We’ve come to the conclusion after a recent study from one of the large South African banks that the middle class represents around 25 percent of households. That was a surprise.

The importance of the middle class is increasing

So there really is a demand for an organised retail sector. And as we have seen in the last two years, after the first retail distribution chains came from Portugal, which were the first players in the market, we have seen Shoprite – the first South African chain – and now more recently we have seen Walmart.

And so there is a trend really to increase the size of the retail sector.

The New Economy: Now according to your company’s own retail and growth assessments, there are a lot of other large chains that are poised to enter into the Angola retail market. Do you think that locals have the purchasing power to be able to really embrace this change?
Pedro Neto: The end of the civil war in 2002, we have seen an enormous growth in the middle class. And also the need for lower prices on the products that people need to consume.

And you have a country, like many others in Africa, where the informal market represents 70 to 80 percent of the business that is done. And really, entering into the market of the large players represents lowering prices.

People have more things available, people have more access to products. And that has a huge impact on the population. You can buy things today much cheaper than two years ago.

The New Economy: So we’ve heard about the growth and enthusiasm among some of the big players; but then, what happens to the smaller players? Do they still have a place in the local market?
Pedro Neto: The informal market exists, and will continue to exist and have a strong presence. And also, in terms of the large chains, the reality is that today the largest player and the most important competitor is a local brand. It has established itself over the last two years, has gained all the best positions in the market, the best places to open. So Walmart really has a lot to do in order to be the first on the market. It’ll be very tough to be the leading player.

The New Economy: So, your keen insight has told me that there is an emerging middle class. And what happens with any emerging middle class is that they become increasingly demanding of the government in terms of reforms. Tell me: what sort of demands are being made, in terms of infrastructure development, and other sectors as well?
Pedro Neto: For the government, the education and health sectors have always been a high priority. But in recent years, what we’ve seen is a demand for better transport infrastructure. We’ve seen in the capital, Luanda, some initial steps in order to improve the transportation system. You now have a kind of ferry boat scheme to move people around the city – because you don’t yet have a rail system. You have a small rail network, but you don’t have an underground system. So moving people around is difficult.

But I think, in terms of the retail sector, the most critical point is that you have a national programme by the government, from 2013 to 2017, which really has inside a plan to develop a platform of the logistical stations, freezing stations, because that is very important for the development of the retail sector.

Because one of the things that you’re now viewing on the market, is the players want to verticalise the chain. So the largest retailers don’t want just to sell: they want to produce also, in the country. Because in Angola, as in many other countries, almost everything is imported. And that is the main thing that the government wants to change.

So the key now is to produce locally. And to produce locally you need logistic platforms. And you need to have freezing facilities across the country; in order to produce, and then accommodate the process, and transport to the main cities.

The New Economy: Now, with such intimate insight into the local market, can you tell me about what sectors still need to be tapped into?
Pedro Neto: The local expertise on the retail sector, if you have the chance to visit Luanda, it’s already at a very top level.

If you see, the largest retail chain at the moment, Kero, which is a local brand. They are using the best consultants that you can access worldwide. They have their own local brands, they are doing everything as you would in any other market. They are really trying to train people, have the best human resources, really transferring know-how to the country.

We have a long experience in Angola

Of course, it’s not an immediate process. But they have started a couple of years ago, and they are really betting on that.

The New Economy: With your intimate insight of what is happening in the emerging trends in the country, what role does your company play in future development?
Pedro Neto: We have a long experience in Angola. We have been going there almost every month since 2000. And really what we want to do, and what we are doing, is being a bridge platform hub between the local players, the local investors, and the international community.

If we have an international chain that wants to set up in Angola, we can support them in coming to the market, and understanding who are the best players. Trying to advice on the mistakes that we should not make, or the things that are most appropriate to do. And at the same time, we want to be recognised. And we are achieving that from the local players: as an entity that can support them in getting investors from abroad, and supporting them on their expansion plans, and supporting them in their internationalisation activities.

It’s a challenge.

The New Economy: Well, an exciting challenge that you’ve taken on. Pedro, thank you so much for joining me today.
Pedro Neto: Thanks a lot.