South African retail giant Shoprite mulls pulling out of Nigeria

Shoprite outlet in Kano, northern Nigeria

What you need to know:

  • Shoprite announced its departure in a statement curiously titled ‘Operational and Voluntary Trading Update (52 Weeks Ended June 28, 2020)’.    
  • It announced a 6.4 per cent increase in total sales of merchandise - to $9.08 billion (R156.9 billion) - for the outgoing year despite the challenges posed by the Covid -19 pandemic. 
  • But while the company’s total sales of merchandise may be on the rise at home, it is struggling outside South Africa. 

Abuja,

South African retail giant, Shoprite, says it is relinquishing stakes in Nigeria to local investors, ending 15 years of operations in Africa’s most populous country.

Shoprite announced its possible departure from Nigeria in a statement curiously titled ‘Operational and Voluntary Trading Update (52 Weeks Ended June 28, 2020)’.   

“Following approaches from various potential investors and in line with our re-evaluation of the group’s operating model in Nigeria, the board has decided to initiate a formal process to consider the potential sale of all, or a majority stake, in Retail Supermarkets Nigeria Limited, a subsidiary of Shoprite International Limited.

“As such, Retail Supermarkets Nigeria Limited may be classified as discontinued operation when Shoprite reports its results for the year. Any further updates will be provided to the market at the appropriate time,” the company explained.

VIRUS EFFECTS

Shoprite announced a 6.4 per cent increase in total sales of merchandise - to $9.08 billion (R156.9 billion) - for the outgoing year despite the challenges posed by the Covid -19 pandemic.

But while the company’s total sales of merchandise may be on the rise at home, it is struggling outside South Africa.

According to the report, the non-South Africa supermarket operation of the company, excluding Nigeria, contributed a paltry 11.6 per cent to the group sales. 

The sales recorded by the company outside South Africa dipped by 1.4 per cent in the year under review, due to lockdowns by many countries in Africa in efforts to curb the virus.

“The second half constant currency sales growth of 6.3 per cent was significantly impacted by lockdown regulations across the 14 African countries in which we trade. 

“Lockdown restrictions pertaining to store closures, social distancing, transport restrictions, the movement of people, trading hours, workforce limitations and trade in alcohol impacted various regions to differing degrees at different times.” 

Shoprite ventured into Nigeria in December 2005 and had a total of 26 stores in eight out of 36 states, including Federal Capital Territory, Abuja. Ninety nine per cent of its 2,000 employees were Nigerians.

Nigeria investors are reported to have been angling to buy into Africa's biggest retailer.

REACTIONS

Shoprite’s decision has attracted many public reactions on Twitter, with Senator Shehu Sani, saying: ``If Shoprite wants to stay, they can stay: if they want to go, they can go. It will help local supermarkets to grow.’’

Mr Wale Adetona, said: “Shoprite's mall-only strategy in Nigeria is faulted and with growing competition from SuperSaver, Ebeano, D'prince, Hubmart and the rest, their market share will definitely decrease. When last did you buy anything from Shoprite?’’

Mr Samuel Otigba said, “Besides the political bottlenecks and  chaotic business strains associated with doing business in Nigeria, one other silent contributing factor to why Shoprite is closing down is staff theft. “In 2017 alone, a sales girl stole N553 million, one month after securing the job. There are many cases.”

Mr Onye Nkuzi said Shoprite’s exit from Nigeria “should tell you what you need to know about the size of the Nigerian consumer market and the economic incompetence of the present administration”.

He added, “Anyway, Leventis and  Kingsway Stores suffered the same fate under a previous Buhari Administration.’’

Mr Koshiek Karan said Shoprite’s decision is a testimony that South African-listed companies have found it challenging to do business in Nigeria.

There was no official reaction on the matter by press time.