Business

Shoprite exits Tanzania, in talks to sell out in Kampala too

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By ISAAC KHISA The EastAfrican

Posted  Saturday, June 14   2014 at  12:42

In Summary

  • While Shoprite was cagey when asked about its impending exit from Uganda, the retailer is alleged to be involved in ongoing talks with Nakumatt about a takeover of its three outlets in Kampala.
  • Analysts are divided over the reasons for Shoprite’s sudden haste to leave East Africa. While some blame the retailer’s business model, which largely positioned it as a vendor for South African manufactures, others point to the aggressive emergence of homegrown competition.

The sale of Shoprite’s assets in Tanzania to regional retailer Nakumatt points to the likely exit of the South African retail giant from East Africa.

While Shoprite was cagey when asked about its impending exit from Uganda, the retailer is alleged to be involved in ongoing talks with Nakumatt about a takeover of its three outlets in Kampala.

This would see an end of its 15 years in operations in Uganda, during which time the firm set up three of five planned outlets in Kampala.

Last month, Shoprite completed the sale of two of its outlets in Dar es Salaam and one in Arusha to Nakumatt at an estimated cost of $45 million, following approval from Tanzania’s market regulator.

Shoprite’s manager for Uganda, Warren Trokis, denied reports that the firm was in talks with Nakumatt again, this time for the acquisition of the Uganda outlets. But Nakumatt Holdings managing director Atul Shah said information on the deal would be made public if and when an agreeable position was reached.

“At this point, we are not in a position to disclose specific details on the Shoprite expression of interest. We shall, however, provide such information in due course once we reach a suitable agreement,” said Mr Shah.

Analysts are divided over the reasons for Shoprite’s sudden haste to leave East Africa. While some blame the retailer’s business model, which largely positioned it as a vendor for South African manufactures, others point to the aggressive emergence of homegrown competition.

Despite coming earlier, Shoprite was slow to expand to major residential areas, confining its presence to the commercial districts of the city.

Over the past decade, new players from Uganda and East Africa have entered the sector, riding on consumer attachment to local and regional brands.

“Shoprite did not make fast expansions. In addition, consumers have a strong attachment to their local and regional supermarkets,” said Arthur Nsiko, a research analyst with brokerage firm African Alliance Uganda.

This, Mr Nsiko said, has been exploited by local and regional retail chains like Capital Shoppers, Quality, Nakumatt, Tuskys and Uchumi.

If the deal is closed, Nakumatt will widen its footprint in East Africa bringing its total number of outlets to 51, with plans to establish more operations in Burundi and South Sudan within the next three years.

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