Expect More International Brands, Franchises In South Africa 2016

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Written by Staff

From CNBCAfrica. Story by Tendai Dube.

Despite global and domestic markets putting pressure on consumer spending, the franchising industry is still making headway with continued investment from international brands into Africa as new players enter the emerging market.

According to Ethel Nyembe, Head of Small Enterprise at Standard Bank 2016 will show increased activity in the franchise sector.

“Particularly the fast food franchises, as international brands which announced their entry into the market this year look to establish operations around the country,” said Nyembe.

He adds: “One only has to look at major shopping centers to see that competition in the (fast food) restaurant subsector is gearing up. There is a concerted effort by new entrants to establish outlets close to those of existing competitors.”

This allows for more choice as competition increases.

“There is no doubt that 2016 will be a year in which consumers will be spoilt for choice in a market where competitors will be doing all they can to offer quality products and services, whilst keeping prices in check as much as they can,” said Nyembe.

Established American household names are penetrating the South African market at a fast pace — names such as Starbucks, Krispy Kreme, Burger King and other fast food products. Within the next 12 months these brands will be adopted just as well by locals.

“The fact that they may be new to South Africans will not deter franchisors moving aggressively to establish presence in local business centres,” he said.

The most positive aspect of this international investment in South Africa will be the economic multiplier effects that will result. New franchises featuring new products will attract a new breed of business people to the franchising sector.

“Sustained business interest in South Africa could be expected to continue despite present pressures on the local retail sector.”

Entering the market now makes sense considering the rand-to-dollar rate.

“Investing now means having a head start and being rewarded for being an ‘early initiator’ rather than a ‘late adopter’.”

The main challenge for franchisers entering the market this year will be pressures on disposable household income.

Read more at CNBCAfrica.