Kenyan supermarkets reject offer to buy from South African game stores


Kenyan supermarkets reject offer to buy from South African game stores

Customers at the game store in the Garden City mall. FILE PHOTO | NMG

South African retail giant Massmart, which operates the Game Stores, plans to close its three outlets in Kenya, after rival supermarkets snubbed sale offers, adding a new dimension to the problems faced supermarkets in the area.

The company began talks with its staff ahead of the official store closures, marking the end of its seven-year struggle in the market and adding to a growing list of local and overseas retailers that have closed shop in recent years.

The Johannesburg Stock Exchange-listed retail giant said on Wednesday it had failed to find domestic buyers for its 14 Game stores in Kenya, Uganda, Tanzania, Ghana and Nigeria after released last year.

The retailer said in March last year that it would also explore the possibility of engaging potential buyers to improve the performance of some of its stores under the guidance of investors and entrepreneurs with a better understanding of market conditions. local market.

“Massmart has initiated a process over a 12 month period to investigate… the opportunity to sell our East and West African stores to local investors. Unfortunately, this initiative did not yield any significant results,” the company said.

Kenya has become a tough market for retailers following the collapse of Nakumatt and Tusky’s, which had dominated for decades.

Uchumi has also struggled to survive stiff competition as deep-pocketed newcomers such as French retailer Carrefour and Quickmart battle for a place in the market.

Anton Wagenaar, director of the South African retailer, said the decision to leave Kenya was made in March 2020 and the supermarket had entered into negotiations with various landlords to waive their leases in advance.

Vice President of Game Merchandise Neville Hatfield said the review had sought to “investigate, as a preferred option, whether to sell our store to local investors”, but the initiative did not had “unfortunately … not yielded significant results”.

“We have therefore initiated consultations on potential store closures with members of our staff at potentially affected stores,” Mr Hatfield said.

The planned exit from retailer Massmart will add to the growing list of Southern African businesses that will close shop in Kenya.

It comes months after Shoprite, another southern African retailer, closed just two years after launching operations in Kenya. Shoprite cited the underperformance of its supermarkets for the closure.

The firm said the underperformance was compounded by impacts associated with Covid-19.

But fierce competition from cash-rich retailers such as Naivas, Quickmart and Carrefour in one sector, could also have contributed to the exit.

Investment analyst George Bodo said most South African companies enter the country without a good understanding of Kenyan market demographics.

Mr Bodo said unlike South Africa, Nairobi does not have a large and prosperous middle class.

“Retail penetration in Kenya does not appear to be increasing,” he said, adding that informal channels such as kiosks, open-air markets and local shops still dominate.

“They don’t seem to get it right because they come in thinking the retail penetration here is huge. The South African and Kenyan markets are very different,” he said.

Prior to this, the South African owners of Nairobi’s Fairview Hotel, Town Lodge and City Lodge Two Rivers had also exited the Kenyan market due to mounting debt.

City Lodge has revealed that it has sold three hotels in Kenya and one in Tanzania to property investor Actis for a total of 1.0 billion shillings.

The company said the East African units were in deficit to the tune of 2 billion shillings at the end of 2020.

Earlier in 2017, Tiger Brands, also of South Africa, exited the Kenyan market after selling its 51% stake in the local unit, Haco Tiger Brands, to the late billionaire businessman Chris Kirubi, which then held the remaining 49%.

The company also said Kenya was a difficult business environment, which led to its exit.

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