Solwezi has a unique attraction for anyone looking to build shops there – the presence in the region of three major copper mines, whose 18 000-plus employees and contractors collectively release millions of dollars of disposable income into the local economy every month.
This money is spent on a variety of goods and services, ranging from rent, banking and insurance to food, fuel and clothing
It’s no accident that African Property Investments, a shopping-mall developer based in Mauritius, chose Solwezi for its most recent venture, the Solwezi City Mall. The $25 million complex has 10 000 m2 of commercial space. Its tenants include not only big-name brands such as Shoprite, Woolworths and Mr Price, but also at least a dozen Zambian-owned shops operating in areas ranging from books and catering to cosmetics and optometry.
“Without the presence of the mines, Solwezi would not be a viable investment destination,” says Richard Herring, a spokesman for the company, in an interview. “They provide the pool of disposable income that makes shopping malls viable.”
Without the mines, Solwezi would not be a viable investment destination
On Solwezi’s doorstep is First Quantum Minerals’ huge Kansanshi Mine, whose operations in the area employ some 10 000 people (employees and contractors); an hour up the road, in Lumwana, is Barrick Lumwana mine, with 3 700 people; and two hours away in Kalumbila is FQM’s Sentinel Mine, with some 4 800 people.
By virtue of its proximity to the town centre, Kansanshi has the biggest effect on local consumer spending. But employees of Barrick Lumwana and FQM Sentinel make regular shopping trips to Solwezi too – either in their own cars, or in the buses laid on every week by the mines.
The presence of Solwezi City Mall – and the town’s other two smaller malls – has made a huge difference to shopping habits in the region. Gone are the days when people had to travel to Kitwe to do their shopping, because of the mad month-end rush that invariably left the shelves of Solwezi’s only supermarket empty; now there are more stores that are better stocked throughout the month, allowing greater choice and convenience.
The malls are a great drawcard for Solwezi itself as a business destination, and is an additional motivating factor for people to relocate there from the Copperbelt, Lusaka and elsewhere. Solwezi City Mall even attracts regular shoppers from across the border in the Democratic Republic of the Congo (DRC), where consumer goods are in short supply.
African Property Investments is no stranger to shopping malls in Zambia. Before building the Solwezi City Mall, the company had also built Kafubu Mall in Ndola, Cosmopolitan Mall in Lusaka and Mukuba Mall in Kitwe. These malls represent an investment of close to $180 million. They created thousands of jobs during their respective construction phases, and today sustain several hundred jobs in the shops that are based in the malls; and these jobs are all held by Zambians.
The developer’s success in Zambia did not happen overnight, and is based on extensive prior experience both in big cities and in mining towns. “We’ve always liked mining towns, because of the disposable income,” says Herring.
And contrary to what one might expect, he says, mine employees prefer to spend their money in middle-to-high-end stores. “People are aspirational; we’ve found that cheaper products at the lower end of the market don’t necessarily work.”
A knowledge of mines and mining also explains why African Property Investments pressed ahead with the decision to build the Solwezi City Mall, despite the downward trend of the copper price at the time and the impending crisis in global mining.
“Yes, the copper price was going down,” says Herring. “But markets recover. African Property Investments takes a long-term view on its investments.”
Despite the welcome tax incentives offered by the Zambian government to facilitate the initial investments, the project had its fair share of challenges to overcome, particularly in areas such as travel, logistics, and building and construction. “It was a steep learning curve, and we learned as we went along,” he says.
“But it wasn’t all negative,” says Herring, pointing out the tax incentives, the absence of forex restrictions for foreign investors, and peaceful labour relations. “Zambians are an amazing people. They’re friendly, positive, and embrace opportunity. That’s why we’ve been able to train up so many locals to run our operations.”
If those are some of Zambia’s investor strengths, Herring points out a number of weaknesses. Timely repayment of VAT is one, as it hits a company’s cashflow and affects budgeting; legislative and policy uncertainty is another.
African Property Investments works constructively with government to address these and other challenges. Its investments in Zambia have continued, and the company is scheduled to open its fifth mall, in Kabwe, later this month. It is similar in size and design to Solwezi City Mall.
“Despite the challenges, we have had an amazing experience in Zambia and have been privileged to work with communities in order to bring a world-class shopping experience to their doorstep,” says Herring
Indeed, the valuable experience gained in Zambia has emboldened the company to expand into its next African market – the DRC. Herring acknowledges that the DRC is a far riskier proposition than Zambia, but he thinks the risk is overstated.
“In any event, risk means opportunity,” he says. “We’ve got a good model for our shopping malls. We know the major tenants. We believe that they will follow us into the DRC once they see that things are not as bad as they are made out to be.”
In the DRC, as in Zambia, the key investor attraction is mining.
See also: Veronica’s story