In the past 10 months, South African retailers and investors have spent over £1.85 billion on the acquisition of retail chains within Europe. Brait SE, a South African owned investment company started the trend when they acquired British fashion retailer New Look for £780 million in May last year. Truworths International followed when they agreed to buy a majority stake in U.K. shoe chain Office for £256 million in December 2015, and this year Steinhoff retail hold-co acquired Darty Plc for £670 million. Foschini, who have also made two acquisitions so far this year, bought U.K. retail chain Phase Eight for £140 million in January and agreed to buy U.K. clothing chain Whistles for an undisclosed amount in March.

Among the factors driving these acquisitions, diversification away from a depreciating Rand and falling commodity prices affecting would-be target African countries are the most prominent.

Hedge Against Depreciating Rand

When growth started to slump in 2012 and the Rand began weakening against the Dollar, South African retailers began to explore investment opportunities away from home.

For many of the South African retailers, diversification away from the weakening rand, which has fallen 25% against the dollar in the past 12 months remains their most prominent concern. Earlier this month, BDLive S.A. quoted Kyle Rollinson, an equity analyst at Avior Capital Markets, who explained that having 100% exposure to South Africa “weakens your investment case in this sort of market…getting foreign earnings and hard currency earnings is attractive in those markets.”

Falling Commodity Prices

On the other hand, the slump in commodity prices has affected African countries such as Nigeria and Angola that were previously seen as target markets for aggressive expansion plans. Such markets are even more difficult to crack because of the large barriers to expansion including supply chain logistics, capital controls as well as scarce and expensive locations/sites suitable for modern retail. Just last month, Truworths closed its two remaining Nigerian Stores, citing tough restrictions on stock imports and rising cost of rent.

Although countries in Africa had been the main focus, with S.A’s domestic retail market maturing, Europe seems firmly in the cross-hairs at the moment as fast growth markets such as Nigeria have also begun to slow.