South African retail giant Massmart hopes to recover at least $ 1.5 million or 5.5 billion shillings from its one-stop store in Uganda, analysts familiar with the matter said.
Massmart, which operates a Game Store in Kampala, will be looking in the next six months to find a buyer 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 stock market and stock market analyst, told the Daily Monitor yesterday that Massmart would seek to recover at least $ 8 million from its five stores in East Africa, with the Ugandan unit costing approximately $ 1.5 million (Shs5.5b).
However, he said the figure would be a good buyback, noting that it would be difficult to find a buyer who will offer the real value of a particular store due to the Covid-19-related disruption that has affected a number of businesses. retail and attenuated potential of customers around the world.
Massmart is Africa’s third-largest consumer goods distributor and one of the largest retailers of general merchandise, liquor, home improvement equipment and supplies, and a wholesaler of staple foods.
In a notice to shareholders on Friday, Massmart CEO Mitch Slape said, among other negotiations, that the company was discussing reducing the exposure of the Game Store portfolio in East and West Africa.
“We are completing the staging of 64 game stores within six months of the start of the program in February 2021,” he said, noting that other releases would include the sale of grocery stores and 12 cash stores. and carry for an amount of $ 93.9 million. (R1.36b) within five months, which will generate an annual profit before interest and taxes of approximately 51.8 million Rand (750 million Rand) per year.
At least 14 stores in Uganda, Ghana, Nigeria, Kenya and Tanzania will be divested.
The release comes barely a week after another South African retail chain – Shoprite – announced its release from Uganda and Madagascar.
Retail businesses have faced challenges over the past five years with retail giants such as Kenya-based 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 companies, some were exacerbated by poor internal management and poor financial decision making. .
In 2014, Shoprite was forced to start a review of its operations in Uganda after a series of poor results.
However, the retailer had delayed its decision to pull out of markets such as Uganda which it had begun to see as a burden on its operations.
According to Aly Khan Satchu, a stock market analyst believes that 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, both supermarkets are coming out at a time when other strong brands such as Carrefour have entered the market while local capacity has also reached extreme levels.