business

Shoprite Prepares Kenya Entry to Fill Gaps Left by Nakumatt

Updated on
  • Africa’s biggest food retailer in talks with property owners
  • Nakumatt has had to close stores amid mounting unpaid debts

Shoprite Holdings Ltd. is in talks to open its first stores in Kenya by filling retail space left empty by the struggling Nakumatt Holdings Ltd. chain.

“We are currently in talks with some of the property owners, but nothing has been signed,” Shoprite director Gerhard Fritz said in an emailed response to questions. Africa’s biggest food retailer is awaiting the outcome of merger talks between Nakumatt and local rival Tusker Mattresses Ltd. before deciding whether to proceed, he said.

Taking over vacated outlets would be the preferred way for the Cape Town-based company to enter East Africa’s largest economy as the retail market there is “too well established” to build new stores, said Fritz, who runs Shoprite’s African operations outside its home market. The talks relate to nine available outlets, Shoprite Chief Executive Officer Pieter Engelbrecht said at the retailer’s annual meeting on Monday.

The move would represent a major step in the expansion of Shoprite as it seeks to strengthen its position outside South Africa, where consumer confidence has been weak because of sluggish economic growth. The grocer had 2,689 stores in 15 countries across the continent at the end of its last fiscal year, according to its annual report.

Shoprite is already a registered company in Kenya, where it periodically buys from local manufacturers to export to its other stores on the continent, Fritz said.

Expansion into the country may also be aided by Steinhoff Africa Retail Ltd., which took a controlling stake in Shoprite in September. STAR, as the company is known, has operations in Kenya and Engelbrecht has said he sees expansion in countries where STAR already operates as potential “easy forays”.

Faces Competition

Shoprite faces competition in Kenya from retailers including Game -- owned by South African retailer Massmart Holdings Ltd., which in turn is controlled by Wal-Mart Stores Inc. -- Carrefour SA of France, run by franchise holder Majid Al Futtaim Holding LLC, and Choppies Enterprises Ltd. of Botswana. Local grocers include Chandarana Foodplus Supermarkets and Naivas Supermarkets Ltd.

For its part, Nakumatt has shut more than a dozen branches in Kenya, Uganda and Tanzania as East Africa’s biggest retailer struggles to pay suppliers and owes more than 30 billion Kenyan shillings ($289 million) to creditors. Chief Executive Officer Atul Shah, whose family controls the Nairobi-based company, said last month he was in talks with Tusker, which trades under the Tuskys brand.

Shoprite also plans to take over two Nakumatt sites in Uganda, Fritz said. The company has no plans to reenter Tanzania, where it sold three stores to Nakumatt in 2014, or set up in Rwanda, he said.

The South African company’s shares were down 2.2 percent at 202.88 rand by 4:31 p.m. in Johannesburg, valuing the grocer at 120 billion rand ($8.5 billion).

— With assistance by Paul Vecchiatto, and Janice Kew

(Updates with CEO comment in third paragraph.)
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