…as local investors queue up
…the court judgement that nailed Shoprite’s impending exit from Nigeria
…’We are expanding and going fully Nigerian’
More information has emerged on why South African supermarket chain, Shoprite Holdings Limited maybe calling it quits in Nigeria after dominating the retail sector for 15 years.
Recall that the South African retailer (operating in Nigeria as Retail Supermarkets Nigeria Limited) had in a statement released on Monday, revealed it has started a formal process to consider the potential sale of all or a majority stake in its supermarkets in Nigeria.
In the statement, Shoprite said the results for the year do not reflect any of their operations in Nigeria as it will be classified as a discontinued operation.
“Following approaches from various potential investors, and in line with our re-evaluation of the Group’s operating model in Nigeria, the Board has decided to initiate a formal process to consider the potential sale of all, or a majority stake, in Retail Supermarkets Nigeria Limited, a subsidiary of Shoprite International Limited, the statement reads.
“As such, Retail Supermarkets Nigeria Limited may be classified as a discontinued operation when Shoprite reports its results for the year. Any further updates will be provided to the market at the appropriate time,” it added.
International supermarkets (excluding Nigeria) contributed 11.6% to group sales, and reported 1.4% decline in sales from 2018. South African operations contributed 78% of overall sales and saw 8.7% rise for the year.
As a result of lockdown, customer visits declined 7.4% but the average basket spend increased by 18.4%.
Court awards $10m damages against Shoprite
Meanwhile, investigations by TheNewsGuru.com TNG revealed that aside the surface excuse of low Return on Investments (ROI) as its major reason for wanting to exit Nigeria, one major (hidden) reason the South African conglomerate maybe divesting from its biggest African market (Nigeria) might be as a result of a recent Appeal Court ruling which affirmed the judgment of a Lagos High Court that awarded $10 million damages against Shoprite Checkers (PTY) Limited in a suit filed by AIC Limited that the retail giant breached an agreement to set up its Nigerian arm.
In an unanimous judgment delivered on May 21, the court’s three-man panel affirmed the award against Shoprite Group, thus upholding the decision of the lower court that Shoprite Group breached contract in its dealing with AIC.
Before the appeal was instituted, the trial court presided over by Justice Lateef Lawal-Akapo had awarded $10 million damages against the South African retail giant and its Nigerian subsidiary for a breach of contract
Apart from the $10million award, the court had directed the South African retail giant to pay 10 percent per annum on the damages with effect from the date of judgment until final liquidation of the entire sum.
Dissatisfied with the judgment of the trial court, Shoprite and its Nigerian subsidiary jointly filed a notice of appeal with several grounds, asking the appellate court to quash the decision of the lower court.
On its part, AIC filed a cross appeal, demanding 50 percent of $92.3million as loss of profit it suffered due to the incorporation of Retail Supermarkets Limited, which it contended amounted to the breach of the agreement for the period of 2005 to 2009.
In its decision, the three-man panel, comprising Justice Joseph Ikyegh, Justice Tijjani Abubakar and Justice Ugochukwu Ogakwu, threw out the appeal of Shoprite Group having established it breached agreement it entered with AIC to jointly set up the Nigerian subsidiary.
Ikyegh, who delivered the lead judgment, ruled: “I agree with the appellants that since the court below did not find Retail Supermarket liable, the award of damages and costs against it cannot stand. The court below was therefore wrong to have awarded damages against Retail Supermarket.”
The judge declared that he would “allow the appeal in part on this issue and set aside the award of damages and costs against Retail Supermarket; while the appeal of Shoprite Checkers is dismissed for lacking in merit and the decision of the court below as it affects Shoprite is hereby affirmed.
“The trial court held in its judgment that there was a subsisting contract by conduct between the respondent and Shoprite with respect to the joint venture, which the latter had breached upon which it awarded $10 million damages and post-judgment interest thereon in favour of the respondent against the appellants,” he declared.
We are expanding and going fully Nigerian – Retail Supermarkets Nigeria Limited
Meanwhile, Retail Supermarkets Nigeria Limited has formally informed its staff members of its expansion plans and also making the company fully indigenous. This was revealed in an internal memo signed and released to all staff members by the General Manager, Carl Erickson on Friday, July 31, 2020.
The memo sighted by TNG reads in part: “The expansion of the retail business in Nigeria to a greater consumer market should remain everybody’s shared vision. It has, however, become apparent that the best manner in which to do this is by engaging Nigerian investors who share in this vision. In so doing we will be creating a truly Nigerian business run and owned by Nigerians for the Nigerian market.”
AIC Limited tipped as major investor in Retail Supermarkets Nigeria Limited
Unconfirmed reports by TNG has it that AIC Limited promoted by Chief Harry Akande maybe the major investor in Retail Supermarkets Nigeria Limited. While both Retail Supermarkets Nigeria Limited and the parent company, Shoprite are yet to make this public, however the $10m damages in favour of AIC Limited is a major pointer.
An insider source who spoke on condition of anonymity told TNG: “Yes Shoprite is about divesting from Nigeria. They have been on this for a while but decided to keep it in the wraps till maturity. However, while divesting from here they have secured local investors. The local investor is likely to be AIC Limited.”
Nigerians have taken to social media to react to the development. According to some, while this may open up opportunities for local investors in that sector, it is a bad pointer to what Nigeria has become as an investment destination.
The Board of Africa's biggest retailer, Shoprite, has announced plans to discontinue operations in Nigeria after 15 years in. While this may open up opportunities for local investors in that sector, it is a bad pointer to what Nigeria has become as an investment destination. pic.twitter.com/GYTTIrHrmM
— Ayò Bánkólé (@AyoBankole) August 3, 2020
If Shoprite wants to stay,they can stay;if they want to go,they can go;it will help local supermarkets to grow.
— Senator Shehu Sani (@ShehuSani) August 3, 2020
Once again, the planned departure of Shoprite from Nigeria emphasises why as Nigerians, we must buy and consume Nigerian products if we must grow our economy and strengthen the Naira. #BuyNaijaToGrowTheNaira
— Ben Murray-Bruce (@benmurraybruce) August 3, 2020
Finally,the Buhari inefficiency has fingered Shoprite;like everything else. The silence from the 30k a month crew is cos they are right now in their WhatsApp group waiting for talking-points on how to spin this one.Let me give them a key:blame it on Covid. The GEJ angu is stale.
— Mazi Gburugburu (@Mazigburugburu1) August 3, 2020
Dear slay mamas, bear in mind that it's shoprite that's leaving not the malls.
You'll still have places to take your pictures, without the yellow nylon though.
— Victor Babatunde (@vhic_tore) August 3, 2020
Asides the political bottlenecks & chaotic business strains associated with doing business in Nigeria, one other silent contributing factor why Shoprite is closing down, is staff theft. In 2017 alone, a sales girl stole N553M, one month after securing the job. There are many.
— Samuel Otigba: Blvck Apron (@SamuelOtigba) August 3, 2020
Buhari the grim reaper.
When he started fighting corruption in 1983, Kingsway and Leventis packed up and left.
When he started fighting corruption in 2015, Mr Price, Woolworths, and now Shoprite. Soon enough, Multichoice.
The Middle Class #Nigeria is fantastically corrupt.
— Chxta (@Chxta) August 3, 2020