Shoprite has signaled plans to leave Nigeria after 15 years of operating there. South Africa’s supermarket giant has signaled it might sell all or its majority stake to Nigerian investors – a move it claims would give local investors the chance to capitalise on.
But there’s growing speculation Shoprite’s plans to divest from its Nigerian subsidiary are in fact to do with the faltering economy.
According to Shoprite Holdings’ public relations company Chastex Consult, the retail giant is considering divesting from its Nigerian retail entity, known as Retail Supermarkets Nigeria- and therefore clearing the way for local investors.
Shoprite’s Nigerian director says the company is in fact looking to expand its operations through Nigerian investors.
The equity of the Nigerian Shoprite brand which is currently managed by its parent company in South Africa is valued at an estimated $67.7 million or R1.164 billion.
Although Shoprite Holdings did not include Nigeria’s performance in its latest revenue postings, experts say the poor economic realities in Nigeria may have influenced this development.
Economic Analyst Andrew Echono says, “So the sales revenue from Retail Supermarket Nigeria limited must have been impacted by different happenings from around the country. I am sure they have come to realise that Nigeria is the largest Africa but that does not translate to large volumes of sales for them, and that is partly because over the last 4-5years the purchasing power of a typical Nigerian has declined so a lot more people are not buying the way they used to buy before.”
Worst recession in 40 years
The World Bank forecasts that Nigeria may be heading into its worst recession in 40 years by the end of 2020 and that the COVID-19 shock alone is projected to push about 5 million more Nigerians into poverty this year.
A series of foreign brands have left the country in recent times including Woolworths, an Australian chain of supermarkets and grocery stores which exited the Nigerian market in 2014, while clothing firm Mr Price did the same in June this year.
Experts say until the government improves in its efforts to create an enabling environment for businesses including foreign multinationals, the impact of companies like Shoprite leaving the country could be huge.
“So the impact will be both immediate and long term. So for immediate, there will be a lot of uncertainties in that business line,… and so a lot more people that may be willing to invest will want to look closely before they put in their investment… it might impact on a number of jobs both direct and indirect because the strategy of the new management might be different from what the current management is having so definitely that might impact on jobs and in some way revenue to the government because all of those people that were paying taxes because they had some jobs, will be unable to pay any more,” Echono explains.
There are at least 14 Shoprite stores scattered across 14 states and the Federal Capital Territory with more than 2 000 employees, mainly Nigerians.
However, Shoprite says it has started receiving bids from interested investors and that there’s no need for panic as further updates will be provided at an appropriate time. -Reporting by Phil Ihaza