Kenyan supermarket sector amongst best in sub-Saharan Africa

Shoppers at a Nakumatt outlet. FILE PHOTO | NMG 

By CONSTANT MUNDA

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Summary

• The sector has outperformed the economy in the last five years due to rising households’ disposable income, analysts at financial advisory firm StratLink said in a monthly update.
• The market has in recent years attracted global supermarkets including France-owned Carrefour, the world’s second largest retailer by revenue after Walmart of the US, and South African Massmart which operates under the Game brand.

Kenya’s retail sector is still among the most attractive for long-term investors in sub-Saharan Africa despite cash flow challenges that have left giant Nakumatt Holdings on the brink of collapse, a new report has suggested.

The interest is largely fuelled by the sector’s growth. It has outperformed the economy in the last five years due to rising households’ disposable income, analysts at financial advisory firm StratLink said in a monthly update.

“With a formal retail penetration estimated at 30 per cent, ahead of peer economies such as Nigeria and Tanzania, the Kenyan market is uniquely positioned to offer investors strategic access to the growing spend not only in Kenya but also the wider eastern Africa,” the report states.

The market has in recent years attracted global supermarkets including France-owned Carrefour, the world’s second largest retailer by revenue after Walmart of the US, and South African Massmart which operates under the Game brand.

With Nakumatt suffocating under debt load of more than Sh30 billion, the existing international retailers are looking for opportunities to expand while others such as South Africa’s Shoprite are closely monitoring the developments.

READ: French retailer Carrefour to take TRM space next month after Nakumatt exit

Carrefour, whose domestic operations are overseen by Dubai-based conglomerate Majid Al Futtaim, is reportedly keen to add to its two stores at the The Hub in Karen and Two Rivers Mall in Ruaka by taking advantage of the void being created by Nakumatt.

“Despite the present headwinds, we still believe the retail segment of Kenya’s economy offers great promise for long-term investors,” StratLink analysts said.

Industry and Trade secretary Adan Mohamed on Wednesday said the sector may be regulated in the near term, drawing on lessons from Nakumatt, which on Monday asked the court to allow it appoint an independent administrator to oversee operations.

READ: SA retailer Shoprite mulls Kenya entry

“Lessons learnt offer  potential room for some kind of regulations to make sure that such high number of small people will not be going to suffer because of problems that one large player faces,” Mr Mohamed said, referring to the heavy debt owed to suppliers and commercial banks.

StratLink said delay in repaying suppliers points to lapses in corporate governance standards and adherence to best practices.