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Why Foreign Companies are Exiting Kenyan Market

A Shoprite Supermarket in Karen, Nairobi: Photo Courtesy

COVID-19 has posed negative impacts on businesses, both locally and internationally. Foreign businesses are the most hit; some have suspended production activities while others close indefinitely.

The focus has now turned to Shoprite, a South African retailer that has been operating in the country for two years through various stores across major towns in the country.

Operations of Shoprite are likely to end due to consistent underperformance registered by various affiliate supermarkets, especially during this period of the COVID-19 pandemic.

According to Shoprite CEO Pieter Engelbrecht, the South African company will be out of the Kenyan market by the end of 2020.

“Kenya, with three stores at year-end, has continued to underperform relative to our return requirements. Post-year-end, one store has been closed given the ensuing economic impact of Covid-19,” the retailer said in a notice to shareholders while releasing financial results for the year to June.

The supermarket had already closed its Karen branch in Nairobi and the City Mall branch in Nyali, Mombasa in April. The major cause of the shutdowns was the reduced flow of buyers.

“Supermarkets Non-RSA’s R28.2 million trading loss showed a marginal improvement on last year. However, this year was notably impacted by the loss in our Kenyan business, the negative impact of restrictions and store closures due to Covid-19 and a R106.2 million reduction in interest income earned on government bonds and bills,” said Shoprite in its financials.

The retailer’s exit plan from the Kenyan market comes amid increased competition from cash-rich retailers such as Naivas, Quick mart, and Carrefour.

Records about Shoprite show that 17% of Shoprite owned by tycoon Christo Wiese had grown from eight supermarkets in 1979 to a mass-market grocer with operations in 15 African countries.

The company opened its first supermarket in Kenya in 2018. It has been competing for the Kenyan market share alongside retailers such as Naivas and Carrefour. However, it is now time for it to exit the Kenyan market due to unsustainable growth, which has reduced significantly in 2020 due to tough economic challenges posed by COVID-19.

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Written by Hello News

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