Wal-Mart Goes African: Will Trend Toward Emerging Markets Continue?

As demonstrated in this November 29th, 2010 Bloomberg article written by Margaret Brennan and Cotten Timberlake, Wal-Mart has decided to expand its presence to South Africa.  This will be their first expansion in Africa, while they already have a presence in South America, Central America, and Asia.  Rather than purchase a full stake in Massmart, they opted to buy majority share at 51%.  As shown by South Africa's Economic Freedom index score from the Heritage Foundation, one can see that they rank below the world average at 45 which suggests that governmental regulation looks unkindly to total foreign control of a firm.  Despite this barrier, this is an indication that Wal-Mart is becoming bullish toward emerging markets.

One reason for this is that emerging markets have actually outperformed advanced economies recently.  A review of Real GDP growth from World Bank's Global Economic Outlook shows that developing countries will almost double the growth rate for high income countries.  As stated in the article, Wal-Mart is also interested in expanding China and Brazil where both areas are expanding at explosive rates that are near double digits.  Even when looking at forecasted rates in South Africa, you can see that their growth over the next two years rate comparatively to the U.S. at 3.1% and 3.4% in 2010 and 2011, respectively.