By Emeka Okoroanyanwu
Nigerians were taken aback on Monday when report came out that Retail Supermarkets Nigeria Limited, a subsidiary of Shoprite International Limited is planning to divest its majority stake in the Nigerian outfit.
The supermarket chain which is the biggest in Africa with about 25 outlets in Nigeria, said it has begun a process for the sale of its majority stake in its Nigerian business. Already, the company has started looking for Nigerian investors to buy off its shareholding.
The reasons given by Shoprite South African management were challenging trading conditions, effect of the COVID-19 pandemic on sales, stores closure, load shedding, currency devaluation and strict restrictions on stocks imports.
The plan to sale off its Nigerian stake, according to the Johannesburg based company, came after it re-evaluated its operating mode not just in Nigeria, but across Africa. In a trading update filed at the Johannesburg Stock Exchange (JSE), the retail giant said it has begun formal process of liquidating its majority share.
A statement from the company said: “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.”
But while Nigerians were still pondering on the implications of the planned divestment, Shoprite Nigeria issued another statement denying the divestment story. Country Director for Chastex Consult, apparently a PR agency to Shoprite Nigeria, Ini Archibong in a telephone interview with a local newspaper denied the sale plan, adding specifically that, “Shoprite is not leaving Nigeria,” noting, “we have only just opened to Nigerian investors which we have also been talking to just before now.”
“We are not leaving, who leaves over a $30 billion investment and close shop? It doesn’t sound right,” he said. “We are only just giving this opportunity to Nigerian investors to come in and also help drive our expansion plan in Nigeria. So we are not leaving. I have tried to say this to as many people as I can. There should be no panic at all and all of that. There is no truth in the report, “he concluded.
But investigations by The Nigerian Xpress revealed that management of the company was being frustrated out of the country by a combination of factor which in clued government policies and perceived hostile environment.
The company is reported not happy about the Nigerian operations, reeling out a plethora of issues plaguing their operations in the country. They include asphyxiating business environment, high cost of doing business, Xenphobia reprisal attacks, strict restrictions on stock imports by the Nigerian government and declining profits.
According to the management of Shoprite; “The regulations were making it extraordinarily difficult to get stock into the stores. We can’t get money out, so there was no point any longer.”
Reports said the company was losing business and profit not impressive. For instance, international markets of the group, excluding the Nigerian business contributed 11.6 per cent to sales and reported 1.49 per cent decline in sales from 2018.
South Africa’s operations contributed 78 per cent of the overall sales and recorded an 8.7 per cent rise for the year. The report said as a result of the lockdown, customers’ visits to the shop declined by 7.4 per cent even though average basket spends increased by 18.4 per cent.
The outfits South Africa’s sales growth (inclusive of liquor) of 8.7 per cent for the year was said to be underpinned by a strong second half, in which sales grew 7.5 per cent, notwithstanding a high second half base in the prior year during which fourth quarter sales grew by 9.4 per cent.
As a result of lockdown, customer visits for the year declined by 7.4 per cent, however, average basket spend increased by 18.4%. Superb execution across the business coupled with considerable efforts from our suppliers resulted in volume growth of 2.3per cent for the year. Market share figures reflect consecutive monthly market share gains for the past 15 months.
However, following the recent development in the Nigerian outlet, Retail Supermarkets Nigeria Limited may be classified as a discontinued operation when Shoprite reports its results for the year. The company will surely leave Nigeria, a dependable source told The Nigerian Xpress.
While the South Africans are concluding plans to pullout of Nigeria, reports indicate that about three entities have signaled interest to buy the majority shares of Shoprite Nigeria from the parent company.
One of them is Persianas Nigeria Limited, a property development company owned by Tayo Amusan which is reported to be in the lead for Shoprite stake. The company was founded in 1990 and in 2004, Amusan launched The Palms. He is reported to own three other superstores located in Enugu, Ota, and Ibadan.
The deal is said to involve Shoprite retaining management of its chain of operations, its brand name, trademark and supply chain.
Confirming the divestment plan, General Manager, Shoprite, Carl Erickson informed employees that the plan of the company is to make the Nigerian outlet “truly Nigerian.” In a memo to the workers, Erickson said the expansion of the retail business in Nigeria to a greater consumer market should remain everybody’s shared vision.
It has, therefore, become apparent that the best manner in which to do this is by engaging Nigerian investors who shared in this vision. In so doing, we will be creating a truly Nigerian business run and owned by Nigerians for the Nigerian market.”
But some Nigerians have welcomed the development saying that there are capable hands in Nigeria that can provide the same services Shoprite is providing.
Reno Omokiri, a former aide to former President Goodluck Jonathan said; “Shoprite leaving Nigeria will be a very good advantage to the Nigerian economy.” He said there are capable entrepreneurs in Nigeria that can offer what Shoprite is offering at a pick.
He said: “The exit of Shoprite from Nigeria is not a bad thing. There are capable Nigerian firms that can do what Shoprite is doing without repatriating their profits back to South Africa,.” He said that Nigerians should realize that it was because of firms like Shoprite, MTN, DSTV that the Naira is shedding value.
Speaking in the same vein, Senator Shehu Sani said “if Shoprite wants to stay, it can stay, but if it wishes to go, it can still go, it will help local supermarkets to grow.”
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But the Organised Private Sector (OPS) has, however, described the plan by South Africa’s supermarket retailer, Shoprite to divest from the country as a reflection of the Nigerian business environment.
The Nigeria Employers’ Consultative Association (NECA) and the Lagos Chamber of Commerce and Industry (LCCI) said the decision by the multinational retail outfit was a reflection of the state of the business environment in the country.
Reacting to the announcement, the Director-General of NECA, Mr. Timothy Olawale said that he had spoken to the managing director of Shoprite in Nigeria and was told that the multinational retail outfit was not pulling out its investment in the country completely.
The move, he said, was to encourage local investment and partnership in Nigeria.
However, he added that for the company to make this move “is an indication of the state of the operating business environment in the country.”
According to Olawale, if the operating environment were right, the company would not think of divestment.
The Director-General of the LCCI, Dr. Muda Yusuf, said: “This should be of concern because of the signaling effect on investors.
“We need to interrogate this development in more details in order to gain deeper insights into the factors that led to the decision to exit the Nigerian market.”
An official of the Manufacturers Association of Nigeria (MAN), who did not want his name in the print said: “It could not really be because of harsh business environment, but because of the influx of shopping malls with cheaper and better products.
“Shoprite has been in the country since 2005 and you recall there was a time that its malls were experiencing long queues. It is no longer so today,” he said.
