Financing Internationalisation: A Case Study of an African Retail Transnational Corporation

Economic geographers are directing increasing attention to international expansion by leading retail TNCs. However, there has been minimal examination of the financing methods of these firms and, while the major retail TNCs have supply relationships in subSahara Africa, so far none have opened stores on the continent. Therefore in this paper we analyse expansion into sub-Sahara Africa by a second tier retail TNC (Shoprite) and explore its financing strategy. We find that the food retail sector in sub-Sahara Africa is experiencing strong growth with high financial returns. We identify a pecking-order to financing the firm with a preference for internal funding through retained earnings preceding long-term debt, and limited issuance of equity as a last resort. Given the efficiencies of debt financing, this preference is interpreted as reluctance to dilute returns to shareholders and as a pragmatic approach to financing expansion in ‘particularistic’ business environments.