# COVID can’t break South Africa’s love affair with shopping malls
Author:  Pal Sinha, Barnali 
Author URL: https://financedigest.com/author/pal-sinha-barnali
Published: 2022-06-29
Category: NEWS
Category URL: https://financedigest.com/category/news
Meta Title: South Africa Mall Boom Defies Global Retail Trends
Meta Description: Learn how South Africans' love for malls is shaping the retail landscape despite global challenges. Explore the exciting new developments at Kwena Square
URL: https://financedigest.com/covid-cant-break-south-africas-love-affair-with-shopping-mallshtml

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By Nqobile Dludla

JOHANNESBURG (Reuters) – With two days to go until opening to the public, workers rush to put the finishing touches on the Kwena Square shopping complex, a shiny $13 million sign that South Africans are defying the global “retail apocalypse”.

Not even COVID-19 could separate them from their beloved malls.

“I love going to the mall with my daughter and my grandkids,” said 54-year-old Kowie Erasmus, who’s eagerly awaiting Friday’s grand opening of Johannesburg’s Kwena Square, which broke ground at the height of the pandemic.

“Malls are a social place.”

The South African market has evolved differently from many other places in the world; high crime rates and a scarcity of safe public spaces have long driven both [retailers and shoppers into commercial](https://www.financedigest.com/iveco-to-transfer-nordic-retail-and-commercial-operations-to-hedin.html "Iveco to transfer Nordic retail and commercial operations to Hedin") complexes. Armed guards and parking with restricted access ensured carefree consumer consumption.

The attachment to malls has confounded the expectations of many industry players and experts who saw lockdowns in South Africa – initially among the world’s strictest – as an opportunity for e-commerce to finally take hold and take significant [bites into traditional sales](https://www.financedigest.com/logitech-quarterly-sales-fall-22-as-slowdown-fears-bite.html "Logitech quarterly sales fall 22% as slowdown fears bite").

Some [leading players](https://www.financedigest.com/date-palm-market-detailed-survey-on-key-trends-leading-players-business-opportunities-2026.html "Date Palm Market – Detailed Survey On Key Trends, Leading Players & Business Opportunities 2026") are now actually doubling down on brick-and-mortar expansion plans in Africa’s most developed economy, a 1 trillion rand ($62 billion) retail market.

Investments in physical [stores](https://www.financedigest.com/sainsburys-pays-524-million-for-full-ownership-of-store-investment-vehicles.html "Sainsbury’s pays 4 million for full ownership of store investment vehicles") will still be significantly greater than investment in online,” said David North, chief transformation officer at grocery and clothing group Pick n Pay, one of several retailers that said they would invest more in physical operations than online in this financial year.

[Commercial property](https://www.financedigest.com/certainty-in-an-uncertain-world-post-brexit-investors-turn-to-commercial-property-and-fixed-returns.html "Certainty in an uncertain world – post-Brexit investors turn to commercial property and fixed returns") developers are following the money.

More than 300,000 square metres of new leasable [retail space are set to be completed across the country this year](https://www.financedigest.com/spains-november-retail-sales-fall-0-6-on-year.html "Spain’s November retail sales fall 0.6% on year"), compared with about 367,000 square metres over the previous two years combined, according to data from property consultants Rode & Associates.

The new spaces include a string of malls that are due to open in 2022, [including Oceans Mall in the coastal city](https://www.financedigest.com/citi-pledges-to-cut-emissions-for-more-sectors-including-coal.html "Citi pledges to cut emissions for more sectors including coal") 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](https://www.financedigest.com/how-a-garden-can-boost-your-property-value.html "How a garden can boost your property value") Fund, a real estate investment trust.

AMERICA’S MALL DECLINE

The pandemic gave e-commerce a huge [global boost](https://www.financedigest.com/optical-satellite-communication-market-emerging-trends-to-boost-the-global-revenue-growth-discussed-in-a-new-market-research-report-by-tmr.html "Optical Satellite Communication Market – Emerging Trends to Boost the Global Revenue Growth Discussed in a New Market Research Report by TMR").

In seven leading [economies accounting](https://www.financedigest.com/the-sharing-economy-whats-in-it-for-accountants.html "THE SHARING ECONOMY: WHAT’S IN IT FOR ACCOUNTANTS?") for roughly half of the world’s economic output, online retail sales increased from $2 trillion in 2019 to around $2.9 trillion last year, according to U.N. trade agency UNCTAD.

Traditional retail players in those markets have taken a pounding with over 17,500 [chain store](https://www.financedigest.com/uk-budget-fashion-chain-primark-to-invest-140-million-stg-in-stores.html "UK budget fashion chain Primark to invest 140 million stg in stores") outlets vanishing across Britain alone in the first year of the pandemic. In the United States, the number of malls – already in a years-long decline – could drop to around 600 from just over 1,000 in 2020.

While e-commerce’s [share of South Africa’s total retail sales](https://www.financedigest.com/monte-dei-paschi-to-have-underwriting-consortium-for-share-sale-by-tuesday-source.html "Monte dei Paschi to have underwriting consortium for share sale by Tuesday – source") more than tripled to around 5% from 2019 to 2021, according to Euromonitor International, it lags far behind many nations. South Africa has almost half as many people as Mexico, for instance, yet its $2.9 billion e-commerce [market](https://www.financedigest.com/stellantis-makes-30-billion-euro-wager-on-electric-vehicle-market.html "Stellantis makes 30 billion euro wager on electric vehicle market") is a sliver of Mexico’s $19 billion.

E-commerce [accounts for 28% of retail sales in Britain](https://www.financedigest.com/what-can-accountants-learn-from-great-britains-olympic-team.html "What can accountants learn from Great Britain’s Olympic team?"), 25% in China and 14% in the United States, according to UNCTAD estimates.

In South Africa, even with growing internet access through increasing mobile phone penetration, high data costs still prevent many lower-income people from [shopping online](https://www.financedigest.com/the-high-street-is-dead-long-live-online-shopping.html "The high street is dead – long live online shopping! ").

Furthermore, home deliveries are complicated by the fact some [consumers lack recognizable street](https://www.financedigest.com/weary-wall-street-cheers-improved-consumer-confidence.html "Weary Wall Street cheers improved consumer confidence") addresses, such as in townships which can lack proper signage.

‘NOT JUST ABOUT SHOPPING’

The resilience of South African malls isn’t simply down to e-commerce’s difficult path, though. The security they [offer is still a big attraction at a time when the country’s historically high crime rates show little](https://www.financedigest.com/big-fall-in-euro-zone-inflation-offers-little-help-for-ecb.html "Big fall in euro zone inflation offers little help for ECB") sign of abating.

National police reported a 15% increase in so-called contact crimes – including assault, murder, robbery and sexual offences – in the quarter [ended March](https://www.financedigest.com/tennis-panic-attack-ends-tsurenkos-indian-wells-as-raducanu-marches-on.html "Tennis-Panic attack ends Tsurenko’s Indian wells, as Raducanu marches on") 2022, when they rose to their highest level in the past five years over that period. Carjackings rose 19.7%.

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

It’s important for malls to provide security and a safe place,” said the 35-year-old, adding that it gave her peace of mind to know her car was parked in a [secure place](https://www.financedigest.com/is-the-next-big-cyber-threat-mis-placed-security-spending.html "Is the next big cyber threat mis-placed security spending?").

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

Motswatswe is among the many South Africans who are [returning in force to malls following the easing](https://www.financedigest.com/uks-j-d-wetherspoon-returns-to-profit-as-supply-issues-ease.html "UK’s J D Wetherspoon returns to profit as supply issues ease") of COVID-19 restrictions. Foot [traffic has not yet recovered – still 18% below pre-pandemic levels](https://www.financedigest.com/fraport-sees-2023-passenger-traffic-at-80-90-of-pre-pandemic-levels.html "Fraport sees 2023 passenger traffic at 80-90% of pre-pandemic levels") at the end of the most recent quarter – yet shoppers are spending more per visit, according to data compiled by MSCI Research.

Business at [South Africa’s shopping centres is now beating](https://www.financedigest.com/inmobi-and-coca-cola-win-mma-smarties-south-africa-award-for-beat-can-campaign.html "InMobi and Coca-Cola Win MMA SMARTIES South Africa Award for Beat Can Campaign") pre-pandemic levels on average, in terms of trading density, which measures turnover per square metre, according to the data.

In the first quarter of 2022, the MSCI quarterly trading density index [recorded](https://www.financedigest.com/euro-zone-posts-record-trade-deficit-in-august-amid-soaring-energy-prices.html "Euro zone posts record trade deficit in August amid soaring energy prices") 21.1% year-on-year growth in annualised trading density.

THREE HOURS TO THE MALL

Retail executives are betting on both traditional and online operations.

Pick n Pay is opening 200 discount Boxer stores and revamping Pick n Pay stores, though it is also targeting an eight-fold increase in online sales. The bulk of its 3.5 [billion rand capital investment](https://www.financedigest.com/shell-to-evaluate-25-billion-pound-british-investments-after-windfall-tax.html "Shell to ‘evaluate’ 25 billion pound British investments after windfall tax") in the current financial year is earmarked for new stores and revamps.

Value fashion and homeware retailer Mr Price [says 66.5% of its capital expenditure for the current financial year](https://www.financedigest.com/uk-to-avoid-recession-this-year-but-outlook-still-weak-bcc-says.html "UK to avoid recession this year but outlook still weak, BCC says") will be allocated to stores, with a plan to open 180-200.

Massmart, which is majority-owned by Walmart, [says 57% of its capex will go towards new stores](https://www.financedigest.com/ikea-stores-owner-ingka-says-campaigns-help-boost-store-visits-and-sales.html "IKEA stores owner Ingka says campaigns help boost store visits and sales") and remodels this year, while 15% is allocated for e-commerce expansion. Over the next five years, it wants to expand its e-commerce [business to 15% of total sales](https://www.financedigest.com/the-ultimate-excel-sales-tracking-templates-for-businesses.html "The Ultimate Excel Sales Tracking Templates For Businesses"), from 2.2% now.

Upmarket fashion and homeware [retailer TFG is spending](https://www.financedigest.com/automobile-shortages-spending-shift-to-services-hurt-u-s-retail-sales.html "Automobile shortages, spending shift to services hurt U.S. retail sales") 75% of its capex on new stores and e-commerce.

There may be room to grow, in terms of brick-and-mortar stores, by meeting the needs of South Africans living in rural and downmarket communities who have long been underserved by retail parks and complexes.

Much of the country’s new retail [property development is now happening outside of major cities](https://www.financedigest.com/uks-most-liveable-city-manchester-sets-its-sights-on-the-world-from-tourists-to-property-investors.html "UK’s most liveable city, Manchester sets its sights on the world, from tourists to property investors"), Niel Harmse, vice president of MSCI Inc told Reuters.

South Africans like Phindile Nkosi, who lives in Pongola, a small town in rural eastern South Africa and [drives three hours with her children to spend](https://www.financedigest.com/spending-drive-knocks-spotify-shares-after-q1-beat.html "Spending drive knocks Spotify shares after Q1 beat") the day at a mall on the coast, demonstrate there’s still unmet demand.

“I do wish that Pongola would have a mall. Because, as much as it’s a small town, it’s developing.”

($1 = 15.9966 rand)

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


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