Terrorism and revolution have already chilled investment in North Africa

September 23, 2013
Developer's nightmare. (James Quest - FP/Getty images)
Developer's nightmare. (James Quest - FP/Getty images)

Over the weekend, images of a terrorist attack on Nairobi's Westgate Mall were beamed out to the world, horrifying viewers hour by hour as the Somali Islamist group al-Shabab picked off some shoppers and took others hostage. It was shocking and brutal, a sign that no one is safe.

But it also wasn't that surprising. American officials had warned of the risk of attacks on luxury malls like Westgate, which are a symbol of new wealth and foreign influence, especially in the midst of elevated conflict around the Middle East and North Africa in recent years.

"The reason we targeted Westgate is that we know it's a place where they feel the most pain," an al-Shabab leader told a British television station. "It's because it brings in a lot of money and is in the centre of the city." (Ironic, considering Westgate's self-portrayal as a "serene and safe environment away from the city centre hubbub.")

That environment of risk has already taken its toll on more high-end retail and foreign investment.

North and East African countries like Morocco, Kenya and Egypt used to feature in the consulting firm A.T. Kearney's global retail development index -- they're attractive tourist destinations, with plenty of wealthy people concentrated in well-developed cities. In recent years, though, the turmoil of the Arab Spring has dulled the region's sheen. Also, North Africa's elites can just hop up to Dubai or Milan for their luxe shopping needs, if high-end malls in their areas don't materialize.

"Poverty will continue to be an issue, but with Africa’s growth, the important thing holding back global organized retail will be political and business risk," says A.T. Kearney's senior partner Mike Moriarty. "And the shootings in Nairobi certainly do not diminish the concern of luxury brands and global mass retailers making the significant human and asset investment requirement to be a successful retailer." Of course, there's a terrible feedback loop here: Weak economies lead to political instability, which repels investment, which puts prosperity even further out of reach.

Which countries are doing well on A.T. Kearney's index? Predictably, big pulsing economies like Brazil and Chile are still popular destinations. But so are some smaller countries, like Botswana and Namibia, which are relatively tranquil and possess enough of an upper crust to support luxury retail in their biggest cities. Sub-Saharan Africa is anybody's game at this point, and mega-retailers like Wal-Mart are moving up from South Africa.

At this point, from a foreign investment standpoint, it seems wealth is no substitute for peace.


Kenya and Egypt don't even factor in this year. (A.T. Kearney)
Lydia DePillis is a reporter focusing on business policy, including lobbying, government contracting, and international trade, with a bit of urban affairs and infrastructure on the side.
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