East African retail swims in a mix of economic realities and internal mismanagement. Players on that side of the continent have their noses to the grindstone. The sub-region plays host to one of Africa’s most formalized retail markets—Kenya—but a series of events suggest that business in the sector remains hassling. ShopRite’s Backtrack
ShopRite Holdings, one of the biggest retail players in Africa appears to have found its going to East Africa tougher than expected. The South Africa-headquartered consumer goods retailer is reevaluating its operations in the region. This, however, is part of the company’s wider plan to abandon the markets that have not brought it profits.
Late April 2020, ShopRite decided to call it quits on the Kenyan market, thanks to the reduction of shoppers due to the novel coronavirus. It shut its Waterfront branch in Karen, resulting in job cuts that will affect 104 workers. Interestingly, the retailer entered Kenya only in 2018 with plans to expand.
Nonetheless, ShopRite’s plight in East African countries transcends the coronavirus. 6 years ago, it exited Tanzania through the sale of its two branches in Dar es Salaam and one in Arusha. The then retail giant Nakumatt— which has since fallen —bought the assets for an estimated USD 45 Mn.
It would appear that since it left Tanzania, ShopRite has been reviewing its operations in East Africa. The JSE-listed firm’s operations outside South Africa account for only 20 percent of its profits. As such, it wants to preserve its investors’ capital by optimizing its existing investments. More Of The Same
ShopRite pumping the brakes on East Africa isn’t a first. In September 2019, Botswana-headquartered supermarket chain Choppies exited Kenya. The firm found it hard to gain a substantial share of the retail market, save the shake-up caused by other internal problems.
In 2015, one of the oldest retailers in Kenya decided to throw in the towel after years of recording losses. Uchumi, which was founded in 1975 and listed on the Nairobi Stock Exchange, left Uganda and Tanzania amidst owing millions of dollars to suppliers. East African retail has been presented as promising by some analysts in the past. But, some, like this AfDB report, shows that the 44.9 percent floating middle class in the region does not form a reliable market. In reality, most of them sit on the edge and mostly never buy.
Long queues in malls and retail chains are not scarce. […]