Shoprite Holdings Ltd. is in talks to open its first stores in Kenya by filling retail space left empty by the struggling Nakumatt Holdings Ltd. chain.
“We are currently in talks with some of the property owners but nothing has been signed,” Shoprite director Gerhard Fritz said in an emailed response to questions. Africa’s biggest food retailer is awaiting the outcome of merger talks between Nakumatt and local rival Tusker Mattresses Ltd. before deciding whether to proceed, he said.
Taking over vacated outlets would be the preferred way for the Cape Town-based company to enter East Africa’s largest economy as the retail market there is “too well established” to build new stores, said Fritz, who runs Shoprite’s African operations outside its home market.
The move would represent a major step in the expansion of Shoprite as it seeks to strengthen its position outside South Africa, where consumer confidence has been weak because of sluggish economic growth. The grocer had 2,689 stores in 15 countries across the continent at the end of its last fiscal year, according to its annual report.
Shoprite faces competition in Kenya from retailers including Game -- owned by South African retailer Massmart Holdings Ltd., which in turn is controlled by Wal-Mart Stores Inc. -- Carrefour SA of France, run by franchise holder Majid Al Futtaim Holding LLC, and Choppies Enterprises Ltd. of Botswana. Local grocers include Chandarana Foodplus Supermarkets and Naivas Supermarkets Ltd.
For its part, Nakumatt has shut more than a dozen branches in Kenya, Uganda and Tanzania as East Africa’s biggest retailer struggles to pay suppliers and owes more than 30 billion Kenyan shillings ($289 million) to creditors. Chief Executive Officer Atul Shah, whose family controls the Nairobi-based company, said last month he was in talks with Tusker, which trades under the Tuskys brand.
Shoprite also plans to buy two Nakumatt sites in Uganda, Fritz said. The South African company’s shares closed 0.9 percent higher at 207.49 rand on Friday in Johannesburg, valuing the grocer at 123 billion rand ($8.7 billion).