South African retail giant Massmart hopes to recoup at least $1.5 million or 5.5 billion shillings from its sole store in Uganda, according to analysts familiar with the matter.
Massmart, which operates a Game Store in Kampala, will be looking to find a buyer in the next six months to focus on its operations in South Africa.
The move will be part of a larger plan in which Game Stores will divest its stake in three stores in Kenya and one in Tanzania, as part of an exit from East and West Africa.
Mr Aly Khan Satchu, a Kenya-based equity and stock market analyst, told the Daily Monitor yesterday that Massmart would seek to recoup at least $8 million from its five stores in East Africa, with the Ugandan unit costing around $1.5 million (Shs5.5b) .
However, he said the figure would be a good buy, noting that it will be difficult to find a buyer who will offer the true value of any particular store due to the Covid-19 related disruptions which have affected a number of retail businesses and mitigated customer potential across the globe.
Massmart is Africa’s third largest consumer goods retailer and one of the largest retailers of general merchandise, alcohol, DIY equipment and supplies and wholesaler of basic foods.
In a notice to shareholders on Friday, Massmart CEO Mitch Slape said, among other negotiations, that the company was discussing reducing Game Store’s portfolio exposure to East and West Africa.
“We are completing the relay of 64 game stores within six months of the program’s launch in February 2021,” he said, noting that further exits would include the sale of grocery stores and 12 game stores. cash and carry for a consideration of $93.9 million. (R1.36b) within five months, which will generate an annual profit before interest and tax improvement of approximately $51.8 million (R750 million) per annum.
At least 14 stores in Uganda, Ghana, Nigeria, Kenya and Tanzania will be divested.
The exit comes barely a week after another South African retail chain – Shoprite – announced its exit from Uganda and Madagascar.
Retail businesses have faced challenges over the past five years, with Kenya-based retail giants such as Nakumatt, Uchumi and Tuskys all exiting operations outside Kenya.
However, the new exit announcements come at a time when businesses around the world are struggling to shake off the effects of Covid-19 which have devastated cash positions and customer potential.
Mr John Walugembe, a Ugandan businessman and chairman of the Federation of Small and Medium Enterprises, said earlier this week that while Covid-19 had compromised the financial results of a number of businesses, some have were compounded by poor internal management and poor financial decision-making. .
In 2014, Shoprite was forced to begin a review of its operations in Uganda after a series of poor results.
However, the retailer had delayed its decision to exit markets such as Uganda which it had begun to see as a burden on its operations.
According to Mr. Aly Khan Satchu, an equity and stock market analyst, South African companies have underestimated the challenges of finding a model that works at home.
He says they may have just exported their operating model from South Africa and imposed it on other markets in Africa.
However, he notes, the closure of the two supermarkets at a time when other strong brands such as Carrefour have entered the market, while local capacity has also reached extreme levels.