SA retailers strain for profits at home

Forays into markets including Angola, Ghana, Kenya, Nigeria and Zimbabwe were marred by currency volatility, high import duties and US dollar-based rentals.

18 November 2020 | Business

… discretionary and credit retailers certainly will have quite a lot of headwinds. - Karl Gevers, Portfolio manager: Benguela Global Fund Managers

Nqobile Dludla - After a losing bet on the potential of economies across the African continent, South African retailers are in retreat to their home market – and their timing could hardly be worse.

In recession-hit South Africa, consumer spending is shrinking as unemployment has hit a record high.

At the same time, foreign rivals, possibly helped next year by the opening of the African Continental Free Trade Area (AfCTA), could find profits in the very markets South African players have had to abandon.

Food sellers are best placed to execute a homeward pivot.

Johannesburg-listed supermarket chains, including Shoprite Holdings and Woolworths, told Reuters they were seeking to win over South African consumers with new financial services offerings, product lines and store layouts.

"The food retailers at least still have a decent market but the discretionary and credit retailers certainly will have quite a lot of headwinds," said Karl Gevers, portfolio manager at Benguela Global Fund Managers.

For two decades, South Africa's economic stagnation has pushed major retailers to seek higher returns further afield.

But forays into markets including Angola, Ghana, Kenya, Nigeria and Zimbabwe were marred by currency volatility, high import duties and US dollar-based rentals. For a few companies, the Covid-19 pandemic dealt the final blow.

SOMBRE PICTURE

Parsing the impact of underperforming operations can be difficult.

Shoprite - one of the few companies that reports country-by-country details in their results - paints a sombre picture.

Struggling operations in Angola and Nigeria led to its first earnings decline in nearly two decades in 2018. And in first quarter results on Monday it reported its rest of Africa sales fell by 8.4%.

Shoprite announced its exit from Kenya in September after failing to secure the leases needed to fulfil its strategy there.

"We took the decision to cut our losses," Shoprite chief executive Pieter Engelbrecht told Reuters.

Delays in clearing goods from ports, oil price volatility and a shortage of foreign exchange have pushed it to consider reducing or selling its stake in its Nigerian subsidiary too.

Clothing and homeware retailer Mr Price Group is also leaving Nigeria, while fellow apparel and homeware retailer TFG has pulled the plug on Ghana and Kenya.

FUNERAL POLICIES, PET INSURANCE

Focusing on home territory could be equally challenging as South Africa's economy is expected to shrink by 8% this year, the International Monetary Fund says. Unemployment exceeds 30%.

The strategy of Shoprite, for example, is to branch out into mobile financial services via a new partnership with OUTsurance, offering funeral policies and even pet insurance, with plans to roll out more products, Engelbrecht said.

Woolworths, which withdrew from Ghana last year, intends to develop its own beauty brands and explore more convenience store formats, CEO Roy Bagattini told Reuters.

In addition, big retailers in relatively good financial health could grab market share from troubled rivals.

Woolworths sees opportunities in the collapse of Edcon - once a major South African clothing retailer that is being sold off in pieces to competitors - its CEO said.

Mr Price is also counting on market consolidation.

"[South Africa] is a market that we historically got excellent returns in," Mr Price CEO Mark Blair said during a results presentation earlier this year.

"We understand the market exceptionally well, the operating environment, the customer and that's critical."

CONTINENTAL TRADE PACT

The cruel irony is that the difficulties Mr Price and others faced elsewhere in Africa could lessen once the AfCFTA takes effect, possibly from the beginning of next year.

Its opening planned for1 July this year was delayed because of the pandemic.

At a bustling mall in the Kenyan capital Nairobi's affluent Karen neighbourhood, Shoprite's departure quickly made way for a brand new food mart run by Naivas, Kenya's biggest retailer.

Analysts also expect international groups may try to expand in Africa.

But in the short term, South Africa's bruised companies say the economic devastation wrought by Covid-19 means they may not be the only ones in retreat.

"You will see that globally a lot of retailers are turning back to their home markets," Shoprite's Engelbrecht said. – Nampa/Reuters

Similar News

 

COMPANY NEWS IN BRIEF

1 day - 27 November 2020 | Business

Exxon and Total in talks ExxonMobil and Total are in negotiations over their massive LNG projects in Mozambique, with each seeking to extract more gas...

Election campaigns boost business

2 days ago - 26 November 2020 | Business

Ndalimpinga Iita - At his business premises in the northern part of Namibia, entrepreneur John David handles various branded promotional items including T-shirts, caps and...

Construction takes plight to MPs

4 days ago - 24 November 2020 | Business

The Construction Industries Federation of Namibia (CIF) recently hosted a series of five business breakfast briefings for members of parliament (MPs). In total, 45 members...

Medical aid shows Covid symptoms

4 days ago - 24 November 2020 | Business

The average claims per medical aid fund beneficiary in Namibia in the first three months of this year was nearly 28% more than in the...

Oshikuku entrepreneur launches biogas production

4 days ago - 24 November 2020 | Business

Parliamentarian, Modestus Amutse launched the Thikamapo Biogas Farming, a small-scale renewable energy entrepreneurial project that aims at driving Namibia to self-reliance in energy production at...

Black Friday madness continues

4 days ago - 24 November 2020 | Business

Julienne van Rooyen - Black Friday is just a few days away, and this year we can probably predict that there will be stricter measures...

COMPANY NEWS IN BRIEF

4 days ago - 24 November 2020 | Business

Prosus' HY earnings surge 29%Technology investment company Prosus NV said yesterday core earnings for the six months ended Sept. 30 surged 29% to US$2.2 billion,...

Company news in brief

4 days ago - 24 November 2020 | Business

Prosus' HY earnings surge 29%Technology investment company Prosus NV said yesterday core earnings for the six months ended Sept. 30 surged 29% to US$2.2 billion,...

Half-a-billion SME loan scheme launched

5 days ago - 23 November 2020 | Business

PHILLEPUS UUSIKU – Government, in partnership with four participating commercial banking institutions and with the financial support of the Bank of Namibia (BoN), on Friday...

Namfisa silent on Covid-19 claims

5 days ago - 23 November 2020 | Business

Jo-Maré Duddy – The Namibia Financial Institutions Supervisory Authority (Namfisa) has for more than two months refused to provide any information on insurance claims of...

Latest News

Kenya's economic growth to rebound...

1 day - 27 November 2020 | Economics

Duncan MiririKenya's economic growth is expected to bounce back next year, the World Bank said on Wednesday, as it emerges from a projected decline in...

Man kills, buries his partner

1 day - 27 November 2020 | Crime

TUYEIMO HAIDULAOKATANAA 36-year-old man has been arrested in connection with a body discovered on Wednesday at Omayanga village in the Okatana Constituency, Oshana Region. The...

Swapo holds on by fingernails

1 day - 27 November 2020 | Politics

TOIVO NDJEBELAWINDHOEKSwapo continued from where it left off with its downward spiral in last year's election by having its hold onto key constituencies and local...

Iipinge taps out

1 day - 27 November 2020 | Politics

JEMIMA BEUKESWINDHOEKOutgoing Walvis Bay Urban constituency councillor Knowledge Iipinge, who has conceded to Independent Patriots for Change (IPC) candidate Florian Donatus Tegako, says his work...

Nigerians to slide into further...

1 day - 27 November 2020 | Economics

Camille Malplat and Louise Dewast More than 200 million Nigerians will slide further into poverty as the coronavirus pandemic has sent oil prices tumbling and...

Hit the ground running

1 day - 27 November 2020 | Opinion

At the time of penning this down yesterday, the tabulation of election results was still under way. It didn’t look like a good day at...

Auto Sueco gunning the future...

1 day - 27 November 2020 | Politics

OGONE TLHAGEwindhoekFrom its humble beginnings in 2004, Auto Sueco Namibia is now a reckoned force in the Extra heavy and heavy commercial vehicle market with...

Ivory Coast raises 1 billion...

1 day - 27 November 2020 | Economics

Ivory Coast's Eurobond sale this week, sub-Saharan Africa's first of the pandemic era, raised 1 billion euros (US$1.19 billion) and was five times oversubscribed, the...

Open defecation remains a problem

1 day - 27 November 2020 | Health

ELLANIE SMITWINDHOEKIt is estimated that 14% of Namibians living in urban areas practise open defecation, while 77% of people living in rural areas do the...

Load More