Majid Al Futtaim picks Shoprite’s poisoned chalice in Uganda

In Summary

Majid Al Futtaim, the holder of French retail giant Carrefour in Uganda, has concluded an agreement […]

Majid Al Futtaim, the holder of French retail giant Carrefour in Uganda, has concluded an agreement under which it will inherit the assets of retreating South African retailer Shoprite Checkers, who is exiting the market after a 21 year run.

Under the agreement, Shoprite’s six Uganda store leases will be transferred to Majid Al Futtaim by end of the year, marking a rapid surge for the Dubai based franchisee. The Carrefour banner will now stand at 8 points in the greater Kampala area with one store at Entebbe’s Victoria Mall, one each at Clock Tower, Acacia Mall, Oasis Mall, Lugogo Mall, Village Mall, Metroplex Mall in Nalya and a yet to be opened outlet that will anchor the new Arena Mall in Nsambya.

“Majid Al Futtaim is fully committed to creating great moments for the communities we serve for the long-term.  This agreement represents our continued investment in East Africa,” Majid Al Futtaim Retail chief executive Hani Weiss said at the signing.

The statement gives hint at the strategy the Middle Eastern franchisee that entered the Ugandan market in 2019 will be pursuing. Majid Al Futtaim appears to be prepared for the long haul in a market disrupted by sluggish economic growth  the emergence of  aggressive indigenous retailers.

Shoprite is exiting 14 markets outside South Africa, under  the scorching breath of impatient shareholders who are demanding a better return on capital. The business has performed marginally outside South Africa with the external market contributing just 20pc of the company’s profits in recent years.

The market fundamentals are unlikely to change in the near future and Majid Al Futtaim will have to demonstrate patience and tack in stocking to draw Uganda shoppers, a majority of whom prefer to shop from the roadside kiosk or the store next door.

The Acquisition of Shoprite is however a relief for realtors who were facing the burden of finding placements for the thousands of square metres of floor space that Shoprite was leaving behind. It is also one headache less for policy makers whose decisions have increasingly come into focus amidst slumping employment and the failures of a number of foreign firms.

As part of the agreement, the Lugogo Mall and Clock Tower properties will also transfer to Majid Al Futtaim. No price has been put to the transaction but given the scale of the deal, it will be significantly higher than the USD45 million that defunct Kenyan retailer Nakummat paid Shoprite for its three stores in Tanzanian 2014.

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