South African retailer, Shoprite International Limited announced earlier today that it is considering a potential divestment from its Nigerian operation – Retail Supermarkets Nigeria Limited.
This was disclosed in the company’s latest operational and voluntary trading update which was published this morning.
Backstory: The South African retailer has been struggling in Nigeria in recent years owing largely to increased competition and government policies such as border closures and local production of consumables. Nairametrics reported in April that Shoprite Nigeria lost 8.1% of sales in the H2 of 2019, which was related to the September 2019 xenophobic attacks.
Meanwhile, Shoprite is not the only South African company that has recently announced exit from Nigeria. Nairametrics also reported that another South company, Mr. Price, would be exiting Nigeria to focus on the South African market. Already, the company has closed 4 out of its 5 retail outlets in Nigeria.
Unfortunately, Nigeria’s ‘difficult’ business environment has been blamed for these major divestments.
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Shoprite, which has spent 15 years in Nigeria stated that customer visits for the year declined by 7.4% due to the pandemic lockdowns. It also noted that outside South Africa, sales only increased by 0.1%, and an overall decline in sales of 1.4% for the year.
“Following approaches from various potential investors, and in line with our re-evaluation of the Group’s operating model in Nigeria, the Board has decided to initiate a formal process to consider the potential sale of all, or a majority stake, in Retail Supermarkets Nigeria Limited, a subsidiary of Shoprite International Limited.
“As such, Retail Supermarkets Nigeria Limited may be classified as a discontinued operation when Shoprite reports its results for the year. Any further updates will be provided to the market at the appropriate time,” the update read in part.
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Shoprite joins two other South African retailers, Mr. Price and Woolworths who have also announced exists from Nigeria due to a harsh operating environment.
What this means: Shoprite’s exit from Nigeria once again brings to the fore the challenges South African companies are facing in Africa’s largest economy as they try to replicate the successes of MTN.
Shoprite is a flagship retail outlet in Nigeria and has been the major anchor tenant for shopping mall developers in Nigeria.
With their exit, funding for the development of shopping malls in Nigeria could be in jeopardy as anchor tenants are the major drivers of mall constructions. However, the new owners, could sustain this drive and continue to expand beyond its current coverage locations.
The future for Shoprite and its employees will now depend on the ability of its South African parent company to find buyers.