Answer to Question #243022 in Management for Dolly

Question

Identify three countries that you would advise Massmart not to invest in n motivate your answer for 30 marks

And which country in Africa would you advice Massmart to invest in and why 15 marks

Answer 1

Massmart Holdings Limited (JSE: MSM) is a South African firm that owns local brands such as Game, Makro, Builder's Warehouse and CBW. It is the second-largest distributor of consumer goods in Africa, the largest retailer of general merchandise, liquor and home improvement equipment and wholesaler of basic foods. I would advise Massmart not to invest in the following countries; Kenya, Colombia and Nigeria. This is because these are backward-looking returns, so they may not be indicative of future performance. In addition, these countries are nonstarters, given the relatively nature of their economies and the lack of any fund focusing on these nations. Investing in such countries would therefore make one to be pressed hard to find any ETF with more than few percentage points allocated to these nations.

On the other hand I would advise Massmart to invest in a country like South Africa.  This is because the country has well-developed infrastructures with efficient financial, legal, energy, telecommunication and transport systems. All these make South Africa a very good country to do business in. In addition, South Africa has an copious supply of natural resources; well-developed financial, legal communications, energy, and transport sectors; and a stock exchange that is Africa’s largest and among the top 20 in the world. Agriculture, mining and manufacturing are the main drivers of the of the country’s economy, while its tourism potentials are not to be neglected as South African tourism sector is equally healthy.