On the sparkling tiles of Johannesburg’s newest luxury retail destination, one of two customers in the Burberry shop is trying on jackets.
“I see these brands advertised in magazines and know what I want, so I like to be able to walk into a shop and get it,” said Lunga Tshabalala, a 25-year-old manager at a water company in Bloemfontein, 400 kilometers (249 miles) away.
From Burberry to Ermenegildo Zegna, Prada and Jimmy Choo, the purveyors of the world’s most expensive consumer goods are counting on wealthy Africans to spend their rising disposable income on 40,000 rand ($3,162) handbags or a 25,000 rand bottle of bubbly at the Arque champagne bar, which guards the entrance of the Diamond Walk in the heart of Johannesburg’s financial district.
While they hope Africa will become a meaningful market in the image of Asian centers such as Hong Kong, where sales are currently falling due to slumping demand from China, their patience may be tested. Three months after opening there are often more security guards than shoppers at the site.
The number of millionaires in Africa rose 145 percent between 2000 and 2014, compared with a global average of 73 percent, according to research company New World Wealth. Yet in South Africa consumer confidence dropped to a 14-year low in the second quarter of this year, hit by frequent power cuts and rising fuel prices that weighed on the economy.
Building a Base
Further afield, a halving of crude oil prices in the past year is hitting growth in Nigeria and Angola.
“The decision to open shop in South Africa would have been taken when the African economies were booming, so if these companies are seeking newly rich customers, they may have to wait a while,” said Wayne McCurrie, a money manager at Momentum Wealth in Johannesburg. “My guess is that they can take losses for 10 years even and see it as building a base now for when Africa really takes off.”
Shopper numbers at Sandton City mall, where the Diamond Walk is located, have been about 24 million in each of the past two years, Julie Hillary, the mall’s general manager, said by e- mail. After investment of 185 million rand, the Diamond Walk is attracting locals and “a large amount” of spending by visitors from Nigeria, Kenya, Ghana and Angola, she said.