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Business News

Shoprite’s sales drop by 8.1% in Nigeria in H2 2019 over Xenophobic attacks

The supermarket arm of Shoprite Holdings in Nigeria lost 8.1% of its sales in constant currency terms at the end of the second half (H2) of 2019

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Shoprite’s sales drop by 8.1% in Nigeria in H2 2019 over Xenophobic attacks

The supermarket arm of Shoprite Holdings in Nigeria lost 8.1% of its sales in constant currency terms at the end of the second half (H2) of 2019 due to the September Xenophobic attacks.

This was disclosed in the H2 financial result issued by the company and seen by Nairametrics. In the report, the parent company stated that the impact of the store closures and drop in customer count resulted in a difficult half for the company

What it means: store closures, the subsequent reduction in customer count during and after The drop was as a result of store closures and subsequent reduction in customer count during and after the attacks. This implies that some customers of the supermarkets in Nigeria stopped patronizing the brand, probably due to patriotism on the part of the Nigerians.

But the difficult half development is not limited to Nigeria alone, as activities in some African nations also created holes in the revenue of Shoprite Holdings, especially the supermarkets out of the shores of South Africa (Non-RSA).

The supermarkets Non-RSA segment experienced on-going currency devaluations in certain key markets, as challenging trading conditions persisted across the markets.

READ MORE: Oil price plunge brings bears to party at the Nigerian stock market, investors lose N151 billion

For instance, in Angola, the nation’s currency devaluations of 40.6% in H2’ 2019 hampered the growth of the company. But the management insisted that it is optimistic that the improved in-stock position due to improved foreign currency availability would yield a better result.

Also, the challenging trading conditions, store closures, load shedding and currency devaluations in these regions resulted in the company’s furniture division, which includes its Non-RSA business. Due to this, Shoprite’s sale of merchandise dropped by 2.7%, while credit participation increased to 13.7% (2018: 12.5%) of the business’ R3.3 billion sales for the interim period.

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In 2019 alone, the division closed 31 stores in RSA (26 OK Furniture and 5 House & Home) and 1 OK Furniture in Non-RSA. The division ended December 2019 with 364 stores in RSA and 88 stores in Non-RSA.

READ ALSO: The three months that rattled global financial markets

Impact on Group’s profit

This development pulled the Group’s trading margin from 5.5% in the corresponding period to 5.0%. While the supermarkets RSA’s R3.7 billion trading profit grew 9.5% to report a 6.1% trading margin (2018: 6.1%), their counterparts outside South Africa recorded R58 million trading profit, a decline of 62.3% on the back of an R68 million reduction in interest income earned on government bonds and bills, The development, the company claimed was due to the Angola Treasury Bills that reached maturity during the reporting period.

What Shoprite believes future holds?

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It has assured the stakeholders that it is currently managing the risks associated with the Coronavirus and does not foresee a material impact on the business.

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The report added that the Supermarkets Non-RSA’s operating environment is expected to remain challenging until such time as currencies stabilise and consumer affordability catches up.

READ MORE: 10 fantastic things Aliko Dangote has done in the last 10 years

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In terms of future strategy,  Chief Executive Officer, Shoprite, Pieter Engelbrecht, said “we remain committed to operating on the continent but are limiting future expansion whilst we review our options with regards to alternate operating models. Notwithstanding this, we have taken a number of immediate operational actions, all of which are ongoing and include rent reductions, store closures, productivity improvements and de-dollarising costs.

“We are confident in the absence of further currency devaluations and any unforeseen circumstances that these operational measures will positively impact profitability. Looking ahead, the Group enters the second half with ongoing determination. Our investment in technology affords us greater visibility and results in better decision making across the business. This, together with the launch of our Xtra Savings Rewards Programme, is significant for the Group and bodes well for a future-fit Shoprite.”

 

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Abiola has spent about 14 years in journalism. His career has covered some top local print media like TELL Magazine, Broad Street Journal, The Point Newspaper.The Bloomberg MEI alumni has interviewed some of the most influential figures of the IMF, G-20 Summit, Pre-G20 Central Bank Governors and Finance Ministers, Critical Communication World Conference.The multiple award winner is variously trained in business and markets journalism at Lagos Business School, and Pan-Atlantic University. You may contact him via email - [email protected]

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Columnists

PIB and the commercialisation of NNPC

A commercialized NNPC with more committed employees would mean better accountability and transparency in its operations.

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NNPC reports explosion at OML 40 facility

The Nigerian government is seeking efficient ways of positioning the country on its path to recovery and the petroleum industry which contributes about 90% of its exchange earnings would undoubtedly be critical on this journey.

The long-awaited Petroleum Industry Bill (PIB) which seeks to regulate the entire Nigerian Petroleum Industry and repeal a host of existing legislation is paramount in transforming the industry and introducing more efficiency particularly in its government-owned parastatals. The PIB has gained more traction in the current administration and is now awaiting deliberations by legislators.

A key highlight of the PIB is commercializing the State-run behemoth, Nigerian National Petroleum Corporation (NNPC). This move would see the NNPC incorporated as a Limited Liability Company and be known as NNPC Limited. This company would conduct its affairs on a commercial basis without resorting to using government funds.

While this might seem like a bold move by the government, it still should not come off as a surprise…

Owing to the fall in crude oil prices from over $100/barrel to below $50/barrel levels in 2020, Nigeria’s exciting story with crude oil slowed down but has picked up in recent months. The country’s heavy dependence on the volatile crude oil market and its ineptitude in diversifying during its “oil-rich” days have now thrown its growth story in jeopardy. The once 3rd-fastest growing economy with foreign reserves in excess of $40bn now wallows in rising inflation complemented and a weakened currency.

Why do we need to commercialize NNPC?

A core theme with a number of government-owned parastatals is the plague of inefficiency and obscurity in the way they are run. To give an idea of the NNPC’s lack of transparency, the corporation only published the group’s audited financial statements for the first time in its 43 years of operation in 2020. It’ll be right to commend this administration is pushing for transparency but you can go on to imagine what went on during those opaque years of operation.

As expected, the results were not impressive. The corporation reported a recurring loss, albeit 70% lower in 2019. The significant reduction in losses may prove the government’s will in improving the operations of the NNPC, however, comments on the report noted that “material uncertainty exists that may cast significant doubt on the Group and Corporation’s ability to continue as a going concern.”

Moving down to the State-owned refineries with a combined capacity of 445,000 bpd, capacity utilization well below 20%, and recurring annual losses in excess of ₦150bn, we can agree that the condition of these refineries is utterly worrisome. Despite the government’s annual budget for Turn Around Maintenance of these refineries, they have now been shut down with plans to undergo a Build, Operate, and Transfer (BOT) model.

Chief among the NNPC’s problems is corruption. A number of investigative reports have explained how subsidy payments, domestic crude allocation, revenue retention practices, and oil-for-product swap agreements are smeared with corruption. The Senate has initiated countless probes and new management seeking transparency has been introduced by the President, however, it just seems like the rot has eaten too deep into the system.

What does commercializing NNPC mean for the country?

The government-managed NNPC has proved to be inefficient and riddled with corruption. A commercialized NNPC with more committed employees would mean better accountability and transparency in its operations. The possible introduction of more shareholders would strengthen the amount of funding available to the NNPC and further shift the burden of being the sole-financier away from the government.

Exploring an NNPC IPO

An Initial Public Offering (IPO) would see the NNPC’s shares traded on Stock Exchanges and position the corporation to raise much more funding, build trust and endear to the international community. While this might seem like a daunting task, Nigeria can perhaps take a cue from Saudi Arabia whose National Oil corporation; Saudi Aramco began raising capital for its IPO in December 2019.

The Saudi Crown Prince; Muhammad bin Salman (MBS) announced a valuation of $2trn enticing the world’s largest investment banks, appointed a new set of leaders on the board of the corporation, and executed a highly engaging local marketing strategy. Although the valuation figure was brought down to $1.5 – $1.7 trillion by financial advisors, Saudi Aramco successfully achieved its IPO raising nearly $26 billion for 1.5% of Aramco’s value.

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NNPC’s fundamentals might not support an IPO currently as investors might be wary of the high level of risks involved but we can’t deny the immense opportunities an IPO would present not just for NNPC’s transparency and performance but Nigeria’s economic reform.

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In Conclusion

The recurring performance of the corporation with several corruption allegations, inefficiency, and unclarity is indeed worrisome. It is time to have the NNPC turn over a new leaf and operate on a commercial basis. This would afford the government the ability to deploy funds into other segments of the economy and have the NNPC focus on being a commercially viable entity.

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Tech News

How partnerships with telcos, fintechs and banks can support Nigeria’s cashless economy

Partnerships by stakeholders will accelerate financial inclusion and drive economic growth across multiple sectors.

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Covid-19- Are Nigerians Ready to Go Cashless and Help Flatten The Curve?

The drive towards a cashless society has been a topic of debate in the global financial economy. Cashless societies have slowly gained recognition and application in most developing and underdeveloped countries in the world, largely due to their significant relevance in some advanced countries of the world.

COVID-19 brought a public health challenge to Nigeria, but it also resulted in an economic downturn on the back of a pandemic-induced recession.

The pandemic highlighted the need to diversify the economy to develop a wide range of growth industries and sectors in addition to the more traditional ones such as oil and gas.

The growth of the digital technology sector in Nigeria is an indication that the sector can serve as a catalyst for advancing the digital economy while enabling economic recovery and growth.

According to a report by NBS, the ICT sector played a major role as it was the leading driver in the non-oil sector that led to GDP growth and economic recovery in 2020.

The World Bank’s Nigeria Digital Economy Diagnostic Report highlights that Nigeria is uniquely positioned to reap the benefits of the digital economy as the country accounts for 47% of West Africa’s population, and half of the country’s 200 million people are under the age of 30.

This report goes on to acknowledge Nigeria as the largest mobile market in Sub-Saharan Africa, supported by a strong mobile broadband infrastructure.

At the same time, minimal fixed infrastructure and connectivity in rural areas can leave the most marginalized people behind.

Partnerships with government, fintech players, telecom companies, and other strategic partners to provide digital solutions and support the cashless economy, offer the greatest potential to overcome infrastructure barriers to accelerate financial inclusion and drive economic growth across multiple sectors.

Digital innovations are key to advancing financial inclusion. They are the big equalizers, enabling and spearheading financial inclusion for people and small businesses alike. The foundation to enable payment technologies for a robust digital economy is being laid one regulation at a time.

Recent frameworks issued by the Central Bank of Nigeria on Sandbox, QR, Open Banking and others, are expected to galvanize and accelerate the digital economy agenda by allowing more innovation. Creating certainty in other areas such as contactless payments can energize the industry even further.

Some companies have been providing digital payments to foster a cashless economy like Mastercard.

Mastercard, a leader in global payments is driving growth in digital financial services by making it easier for people to accept electronic payments, along with greater access to credit to grow and scale.

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This will be achieved through digital partnerships, solutions, and technology, aimed at connecting 1 billion people to the digital economy by 2025, including 50 million micro and small businesses, with a direct focus on 25 million women entrepreneurs.

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Mastercard has already started this process, an example of this is its recent partnership with MTN which enables millions of consumers in 16 countries across Africa to make global e-commerce payments safely and securely, with or without a bank account.

Last year, Mastercard launched a Pay-on-Demand mobile platform in Uganda with Samsung, Airtel, and Asante Financial Services Group which provides end consumers and MSMEs with asset financing to access smart handsets at a low upfront cost while making affordable payments over time.

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In addition, Mastercard and Airtel’s digital partnership will enable access for over 100 million mobile phone users in 14 African countries to virtual card numbers (VCN) and QR Payment capability – even though they don’t have a bank account.

Mastercard also aims to onboard over 40K SMEs as merchants on QR. The partnership has made Airtel one of the largest offline-to-online digital payment networks in Africa.

Why this matters

  • Mastercard solutions have assisted businesses and consumers to thrive in the digital economy by utilizing safe and secure digital payment channels, especially during the pandemic.
  • They have also assisted countries and stakeholders to digitize economies and develop successful, interoperable payment ecosystems that can support sustainable growth and wider financial inclusion.
  • Cashless policy will significantly improve the payment system in Nigeria by reducing the number of cash-based transactions in the economy

The growing reach of mobile technology creates a tremendous opportunity for the payments and technology industries to bring more people and businesses into the formal economy. Through partnerships, we can achieve a digital payments economy that includes everyone, mitigates the costs of cash, and achieves the sustainable economic growth and inclusive well-being that we want for Nigeria.

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