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Experts worry as Shoprite opens Nigerian stores to investors

Experts have reacted to the plan of Shoprite Holdings Limited to open up its retail supermarkets in Nigeria to potential investors.

They said the decision of the company was an indication of the difficult business environment in Nigeria and could discourage potential foreign investors.

The company, in its Operational and Voluntary Trading Update published on Monday, said the move might lead to the sale of majority or all its stake in the country.

Shoprite said the Nigerian unit might later be classified as “a discontinued operation” when it reports its results for the year.

The publication was dated 3 August 2020, complete with names of stakeholders given as: Pieter Engelbrecht (Chief Executive Officer); Anton de Bruyn (Chief Financial Officer); Adele Lambrechts (Corporate Affairs and Communications); and Natasha Moolman (Investor relations).

A Professor of capital market at Nasarawa State University, Keffi, Prof Uche Uwalaka, said the planned exit of Shoprite’s retail investment in Nigeria was a cause for alarm as the country was in dire need of Foreign Direct Investment.

He noted that the company had contributed significantly to the country’s economy through taxes and employment creation.

He said, “The exit of Shoprite, or any other foreign business for that matter, ordinarily should be a cause for concern especially for a country like Nigeria that is in dire need of foreign direct investment.

“The importance of Foreign Direct investment, especially in the area of job creation cannot be over emphasised.”

On the other hand, he said the South African company had contributed to the dwindling foreign reserve on the country through massive importation of foreign goods to satisfy the appetite of wealthy Nigerians.

Uwalaka added, “I think the type and quality of FDIs should matter for Nigeria. Where possible, the company should be bought over by Nigerians.

“As Shoprite is exiting, some other companies are waiting to berth. The right business environment post COVID-19 will bring this about.”

According to him, what the country needs are foreign direct investments in manufacturing, agriculture value chain, telecoms and Information Technology and not businesses that promote the consumption of foreign goods.

He pointed that Nigerian could not be ignored by foreign investors due to its economic potential and market size.

Also, the Director General, Lagos Chamber of Commerce and Industry, Dr Muda Yusuf, expressed surprise at the proposed sale of Shoprite’s stakes in Nigeria as it was one of the leading supermarket chains in the country.

According to him, the divestment plans of the company will affect investors interest in Nigeria.

Yusuf said the move was an indication of the challenging investment landscape in the country.

The LCCI DG said forex and trade policy issues could be key factors as well as international trade facilitation issues that were affecting growth of the retail sector.

In an email response to enquiries from the company’s media team in South Africa, the company referred our correspondent to the section of the operational and trading update stating its plans to discontinue operations in Nigeria.

Quoting the document, the media team said, “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.”

According to the full year sales report for the period ended June 28, 2020, the Nigerian subsidiary reported negative sales growth of -6.3 per cent.

Shoprite, which started operation in Nigeria in 2005, is a leading South African mass retail supermarket, with about 25 outlets in the country.

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