Deacons East Africa Plans Capital Raise for Regional Expansion

  • Plans reentry into Tanzania market after leaving in 2012
  • Retailer sees 6b shillings sales in 2020, double this year’s

Deacons East Africa plans to raise capital in the next year and a half to fund a regional expansion plan that includes reentry to Tanzania, Chief Executive Officer Muchiri Wahome said.

The retail chain, which is 14 percent owned by Swedfund International AB, will list on the Nairobi Securities Exchange’s alternative market segment on Tuesday after a three-year delay. The company raised 800 million shillings ($7.89 million) in a public offer in 2010 and 144.8 million shillings in a rights offer four years earlier.

“There is a need for capital in the short to medium term,” Wahome said in an interview in the capital, Nairobi. “I wouldn’t put it beyond 18 months.”

Deacons closed its outlets in Tanzania in 2012 after five year of losses. It now wants to return, saying its initial foray into East Africa’s biggest nation may have been “too early.”

Eying Opportunities

The retailer sees sales from the 33 stores it owns or manages in three other East African nations climbing to 6 billion shillings by 2020 from 2.38 billion in 2015. Deacons plans to open 27 more stores over five years through acquisitions.

“We are eying a number of players in various spaces within retail,” he said, adding that discussions are at advanced stages with successful local brands, most of which are family owned and run.

The retailer is looking at more “northern international brands” to diversify its products, Wahome said. Deacons sources 70 percent of its merchandise from South Africa.

The company plans to start an e-commerce platform in 16 to 18 months initially in the Kenyan market, which had 24.7 million internet subscriptions by the end of March, according to statistics from the Communications Authority. Deacons sees online trade generating 3 percent of sales in four years’ time, despite obstacles including lack of physical addresses.

“One would say we are bit late to the party, but there is a great opportunity there to create an additional solid revenue stream at fairly low overheads,” Wahome said.

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