South Africa’s Shoprite Holdings Ltd posted $10.27 million gain from the sale of its assets in Uganda, Madagascar and Nigeria as Africa’s largest fast-moving consumer goods retailer retreated from markets it has considered under-performing on the continent.
This comes as the group made a provision of $87.89 million on loss-making stores outside South Africa during the 53-week period ended July 4, 2021, while its net debt increased by four percent to $1.77 billion from $1.7 billion.
The retailer, which is listed on the Johannesburg Stock Exchange (JSE) and cross-listed on the Namibian and Zambian Stock exchanges, revealed through its financial statements for the 53 weeks ended July 4 that its operations in Uganda and Madagascar which it had classified as “assets held for sale” yielded a combined net gain of $8.85 million, but declined to disclose the value for each transaction.
On the other hand, the sale of the Nigerian subsidiary, which was completed in May 23 realised a net gain of $1.41 million after the business was sold at $35.89 million of which $29.81 million of the amount has already been received.
The retailer noted that its operations outside South Africa consisting of 14 countries only contributes 20 percent of the firm’s profitability with a huge 80 percent of the earnings coming from South Africa.
As a result it closed its Mauritius business in 2019 due to continued non-profitability. Uganda and Madagascar operations made net losses of $1.41 million and $540,865 respectively during the financial year ended July 4.
Its Kenyan subsidiary, whose last store was closed in January, made a net profit of $676,081 during the period under review.
According to the retailer Kenya had three stores, Madagascar 10, Nigeria 25 and Uganda had five.
Shoprite exited Tanzania in 2014 by selling two of its branches in Dar es Salaam and one in Arusha to the then regional retailing giant Nakumatt Holdings. It is argued that Shoprite’s business, particularly in Africa, has been disrupted by technology as some shoppers have now moved to online operations.
On the other hand Botswana-based retailer Choppies Enterprises Ltd (CEL) discontinued its operations in Tanzania and Kenya last year to curb financial losses amid stiff competition in the retail space.
Choppies, which is listed on the Botswana Stock Exchange (BSE) and cross-listed on Johannesburg Stock Exchange (JSE) discontinued operations in four countries — Kenya, Tanzania, Mozambique and South Africa.
The South African business was sold off at a loss of $8.2 million in April 2020, and a combined loss of $58,952 on disposal of plant and equipment of discontinued operations. The retailer’s operations in Mozambique were closed in September 2019, followed by the operations in Kenya and Tanzania in March 2020. In Kenya, retailing giants such as Uchumi, Nakumatt and Tuskys have collapsed leaving the market to upcoming players such as Quickmart and Naivas.
Early this month another South African retailer, Massmart, which operates the Game Stores revealed its plan to sell its three stores in Kenya, marking the latest of a string of retreats from East Africa by a Southern African firm.
The JSE-listed retailer has put up 14 Game stores in East and West Africa for sale, citing a need to focus on its “core strengths” as the group’s losses narrowed during the half year ended June 2021. The firm said it had begun a formal sales process to divest in five Game stores in Nigeria, four in Ghana, three in Kenya, one in Uganda, and one in Tanzania. Massmart made its debut in Kenya with Game Stores in 2015 with its first store at the Garden City Mall, to cash in on the growing demand for retail outlets in the country. It subsequently opened two other stores at the Waterfront in Karen and the Mega City Mall in Kisumu.
However, in March last year, the retailer said it would close non-performing Game stores, as consumers grapple with falling disposable incomes amid the Covid-19 pandemic.
French franchise Carrefour is set to take over the stores of Shoprite Checkers when the South African giant completes its exit from the Uganda market.
The Carrefour franchise in Uganda is operated by the United Arab Emirates based Majid Al Futtaim Group, which announced in a press statement that it had agreed the lease transfer of Shoprite Checkers Uganda Limited’s store locations.