Cautious entry into Australia a smart move by Mr Price

07 June 2015 - 02:00 By Bruce Whitfield

Strewth Bruce! Forgive the Aussie oath, but South Africans do have an obsession with Australia. It's a sporting nemesis, and is home also to a growing number of our most industrious white-collar fugitives, and every time the lights go out, which is pretty often, you can hear the rustle of the well-heeled from Constantia to Bryanston reaching for the smartphones to google "Emigrate: Sydney".It has been a powerful magnet for skilled migrants since Sharpeville, but in recent years has also become a popular destination for a host of South African businesses looking to grow outside their home turf.While there are a growing number of success stories, many top local companies have found it to be a Bermuda Triangle for corporate aspiration.While tens of thousands of South Africans have acclimatised to their new environment, that cosy familiarity is one of the reasons so many of our companies have come a cropper (there's the Aussie again) in Oz.story_article_left1It's fair dinkum to suggest that the place is chokka with dinky-di opportunities. Bloody oath! The place is ace! You don't need your kangaroos loose at the top of the paddock to consider investing there. (Translation: It's true to suggest that Australia is full of great opportunities. The place is remarkable. You don't have to be mad to consider investing there.)If you needed the translation, it will make the point as to just how different Australia is to the environment South Africans are used to.Mr Price this week announced plans to tentatively test the Australian market. It will open a single store and see whether its model is appropriate for that country. It's wise to be cautious.It's arguably South Africa's most successful clothing and homeware retailer, but Australia has chewed up and spat out the expansionist dreams of a host of South African CEOs in recent decades.Retailers Truworths, Woolworths and Pepkor all tried to enter the market in Australia at different times, with varying degrees of success.While Truworths sold out, Pepkor is making a go of it.story_article_right2The recent acquisition by Woolworths of David Jones, the country's second-largest department store group, for more than R20-billion shows far greater promise than its previous effort to crack that market.This time, investors hope it may be different thanks to its Scottish-born CEO, Ian Moir, who is credited with the turnaround in that country of local brand Country Road a decade ago and has a sterling reputation in that market.Some still call Australia "the lucky country". On balance, for South African companies it has been anything but.Pick n Pay entered and withdrew, twice. In the '80s, it fell foul of trade unions hostile to the idea that a South African company wanted to do business in Australia. More recently, it was obliged to sell cash-hungry retailer Franklins as its domestic and regional rivals grew rapidly on the African continent.WesBank beat a hasty retreat from Australia in 2008 when it realised that it would not be able to rely on securitisation to fund expansion at the rate it needed to.No sooner did it get home than stablemate Outsurance was quick to enter a tightly contested direct insurance market down under in a move that has seen the company carve a neat niche there.Since the post-World Cup construction slump in South Africa and the collapse in infrastructure investment, most listed construction companies have tried their luck in Australia. But that country's slowing economy, which is heavily dependent on Chinese demand for its raw material, means it has not been easy for it, either.story_article_left3Just because it's hard does not mean investors are dissuaded. It has not prevented chemicals and explosives giant AECI from casting its net on the water. SABMiller's acquisition of Foster's in 2011 has had teething troubles.Aspen Pharmacare's A$1.23-billion (about R11.6-billion) Sigma Pharmaceutical deal in 2010 has been far more lucrative, but it had paid its school fees, having been in the country since 2001 before leapfrogging into the big league.Recruitment business Advtech continues to invest and grow outside South Africa with recent acquisitions in Australia, and it has also become fertile ground for property companies. Growthpoint became a trailblazer for investment in the property sector, and others such as Fairvest and Redefine International have followed.Mr Price is being careful - it's run by smart operators. Australia is an opportunity. South African clothing retailers as a group are simply too exposed to an overindebted consumer market and need to find new sources of growth.So Mr Price can't afford to have this opportunity go down the dunny. You know what that is, right? It's the source of the stuff that clogs up the river up which you get without a paddle if you don't keep your wits about you.Whitfield is an award-winning financial writer and broadcaster whose parents were unaware of the Aussie association when they named him.

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