Superstores caught in precarious situation
Lewis Njoka @LewisNjoka
Kenya’s retail sector is in a tight spot with some investors threatening to exit the market over viability concerns as others line up capital for a slice of the pie.
This as a downward spiral that began with the fall of Nakumatt and shows no signs of abating with Tuskys, Choppies and now Shoprite Supermarkets announcing plans to declare employees redundant citing Covid-19 shocks.
Amid this onslaught, though, Naivas Supermarkets has managed to raise Sh6 billion from selling a 30 per cent stake, coming shortly after Quickmart bagged a Mauritius investor late last year.
Now, Tuskys is eyeing an equity investor to avoid collapse, which goes to show that the appetite for the vibrant sector is still high.
Already, French Carrefour franchisee Majid al Futtaim has settled in the market and grown into Kenya’s third biggest retailer in just four years.
Developed retail sector
According to London-based consultancy Oxford Business Group, Kenya is second to South Africa and doubles Nigeria, Africa’s largest economy, in development of its formal retail shopping system.
But concerns abound as cash strapped Choppies Supermarkets plan to exit not only Kenya, but also Tanzania, Mozambique and South Africa, claiming the four markets are not profitable.
This comes even as the troubled retailer revealed it owes Kenyan banks Sh850 million in loans in an annual report published last week.
In a phone interview, Choppies Chief executive Officer, Ramachandran Ottapathu, told China Global Television Network (CGTN) that the retailer will now focus on growing its business in Botswana where it plans to set up new stores.
“Zambia is self-sustaining and growing slowly and in Zimbabwe we’ll look at the market and how it goes,” said Ottapathu. “Namibia, we need to grow.”
In total, Choppies estimates its dues in Kenya to be Sh1.2 billion.
However, Choppies exit from the Kenyan market was expected with the retailer having announced in 2019 it would exit the country barely four years after setting up shop saying its business in the country was performing poorly.
Last year, the company declared over 580 employees redundant with Shoprite Supermarkets making public it’s intention to lay off 115 employees working at the Nyali branch which is set to be closed permanently as it’s no longer viable.
This is the second time the retailer is laying off employees after sending home over 100 employees when it closed its Karen branch three months ago.
“The company is of the intention to permanently close the Shoprite Nyali branch,” said Shoprite in a letter dated July 30.
The South African retailer follows in the footsteps of Nakumatt, Tuskys, and Choppies which have sent home hundreds employees in the last two years.
Another South African outfit, Game has struggled to make an impact with just a few stores.
Smaller retail shops domiciled in malls are faring no better with reports indicating that eight shops at the Garden City Mall located on Thika Road were auctioned last week for defaulting on rent.
Earlier the defaulters had been notified of the pending eviction and urged to collect their goods failure to which they would be auctioned.
