August 4, 2020
The announcement by Shoprite, a South African retail giant with branches in Nigeria, to gradually end its operations in the country has sent ripples among employees, customers and other stakeholders in the retail market sector.
Shoprite Holdings Limited, in its operational and voluntary trading update for the year ended on June 28, 2020, which it published yesterday, said the board decided to formally exit its operations in Nigeria over unfavourable market conditions.
“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, RSNL may be classified as a discontinued operation when Shoprite reports its results for the year,” the management said in the update.
The firm however declared a 6.4 percent rise of about R156.9 billion in total retail sales during the period despite the effects of the COVID-19 pandemic.
Shoprite also said it was struggling outside of South Africa in spite of maintaining presence in 14 African countries as its foreign operation, apart from Nigeria, was only 11.6 percent of sales with a 1.4 percent decline during the year.
Shoprite has operated in Nigeria for nearly 15 years since December 2005. It maintains presence in about seven states and in Abuja with 25 sales stores in these areas.
The company which prides itself as an outlet giving low but trusted prices, on its website for the RSNL, said it employed over 2,000 people, of which 99 percent were Nigerian citizens.
“In our commitment to supporting local enterprise, Shoprite has built relationships with over 300 leading Nigerian suppliers, small businesses and farmers, securing a wide assortment of local brands,” it posted.
Workers, affiliates jolted over move
Our reporters surveyed malls where it operated in Lagos and Abuja, and even spoke to some of its employees as well as other businesses that thrive around Shoprite stores, including suppliers.
The Branch Manager, Shoprite at Jabi Lake Mall in Abuja, Mr Godwin Ananyi, said he was not permitted to speak when our reporter visited. A staff who chose to be called Barnabas said he would not feel bad if the South African company left. “I won’t feel bad, but will Nigerians be able to manage it?”
Another staff who spoke on condition of anonymity said it will lead to job loss as the new management may relieve staff of their jobs and get new staff.
One of the patrons of Shoprite in Lagos, Mrs. Rasheedat Adeyemi, expressed worry over the move, saying, even though there are many other big malls in the state, Shoprite would be missed for its name, uniqueness, and popularity.
Business owners near Shoprite in Jabi – Abuja also reacted. Mayowa Adewumi, the Manager of Grab and Go Eatery said, “People don’t know this place as Jabi Lake Mall but Shoprite. They are well known and their services are good. It will affect businesses here because a lot of people come here because of them, and on their way out, they patronise us.”
Martins Umunna, the Marketing Manager for Sapphires Cents, said, “I feel bad because I think a lot of people are going to lose their jobs. From the business point of view, it’s going to be bad in Nigeria because some multinational companies are not doing well here and want to leave.”
The head of monitoring and evaluation at Agro-Pack Development Company in Lagos, Mr. Adetoro Olayomi, said Agro-Pack Development. Company’s contract with Shoprite started last month.
“We really don’t depend on sales from Shoprite alone since we have other off-takers of our products,” Olayomi said.
How Nigerians would buy stakes
In an internal memo dated July 31, 2020, Carl Erickson, General Manager of the retailer, informed employees that the revision in the business is to make the company “truly Nigerian”.
The memo seen by this paper read: “In so doing, we will be creating a truly Nigerian business run and owned by Nigerians for the Nigerian market.”
There are also reports that Persianas Nigeria Limited, a property development company, owned by Tayo Amusan, is the preferred bidder for the Shoprite stakes.
Some of Amusan’s property houses the stores of Shoprite. He had Persianas in 1990 and launched The Palms in Lagos, an outlet in 2004, spreading across Enugu, Kwara, Ota and Ibadan.
It was also learnt that there are other contenders for the acquisition of the stakes including a foreign firm.
A financial analyst who has followed the Shoprite transactions but preferred to be anonymous said: “Shoprite needs to tell us what percentage of the stakes the Nigerians are taking. If it is more then we can say they are divesting, and if less, then we can talk about them selling some few stakes.
“For those who know how Shoprite landed in Lagos, where they are situated today in Ikeja was a playground owned by the Lagos State government.
“Amusan brokered the deal that brought them to City Mall (in Lagos) with some funding from Atis. So in actual fact, Shoprite is a tenant of City Mall. They are just reflecting his stake in the business,” the analyst noted.
Experts, FG in mixed feelings
Some experts have told this paper that the exit of Shoprite was a bad sign for Nigeria’s business climate. A Financial Economist and Professor of Capital Market at Nasarawa State University – Keffi, Uche Uwaleke, said the exit of Shoprite or any other foreign business should be a cause for concern, as it affects Foreign Direct Investment (FDI).
However, the expert said aside from the crowding-out effect of Shoprite on local competitors, its operations in Nigeria have also contributed to dwindling foreign reserves through imports that serve to satisfy the appetite of wealthy Nigerians for foreign goods.
He said where possible, the company should be bought over by Nigerians. “As Shoprite is exiting, some other companies are waiting to berth. It the right business environment post-COVID-19 will bring this about. The country’s economic potential and market size are such that the World cannot ignore,” he said.
An economist, Edward Okoukoni Okojie, said new investors would have to “work extra to maintain the momentum and patronage” the popular brand Shoprite has established.
He also made the case for local supermarkets to merge, acquire Shoprite and then position themselves as the new market leaders.
A lecturer of Economics, Prince Abubakar Audu University, Anyigba, Kogi State, said the proposed sale of Shoprite could have implications on those employed by the outlet.
He said if sold to Nigerians, “One should expect that in the near future, particularly with proper leveraging on its goodwill and good management, Shoprite should be able to come up strong even after its sale to Nigerians.”
An Abuja based economist, Samson Simon Galadima, said the move was not good because some things must have been really in terrible shape for them to do that, noting that it will send the wrong signal to investors.
“Other investors would be wary of coming in or expanding. This would diminish investor confidence with a concomitant dampening of general enthusiasm within the economy,” he noted.
Equally, an Economics lecturer at Yobe State University, Dr Binta Yahaya, said that would be unfortunate. She was not hopeful on Nigerians managing the stakes, saying Nigerian business management is not effective due to favouritism (man-knows-man), which could lead to crumbling of the business.
An investor and Managing Director of Qeeva Advisory Limited, Matthew Ogagavworia, said: “They said they are closing because of profitability. The issue of a new core investor is secondary. The issue of profitability may not be a decision about last year and this year alone. A lot of companies are folding. It is nothing new. The COVID-19 has had a major impact on big brands across the world.
A legal practitioner, Barrister Moses Obetta, said: ‘This is how many multinational companies leave this country. The business and legal environment in the country is not favourable to businesses. Aside from inflation, forex problems coupled with the COVID-19 pandemic, there is multiple taxation of businesses.”
Shoprite Nigeria keeps mum
A response to Daily Trust enquiry by the Shoprite media team stated: “We are in a closed period and therefore not in a position to comment, other than to refer you to the relevant information as released publicly in the Shoprite Group’s Operational Update on SENS earlier today, 3 August, 2020.”
This period typically lasts for one month prior to quarterly or interim reports and two months prior to annual reports.
It’s a divestment – Insider
A management source who prefers anonymity said: “We are not closing the physical stores. There have been a lot of offers for the sake of expansions and the offers have been considered and accepted in principles.
“So it is merely a divestment. The management and everything will continue as normal because there will be a new majority stakeholder.”
