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(As reported in Annual Report 2009)
Given the weakness of the rand against the currencies outside of South Africa, prices of South African goods were very competitive during the first half of the reporting period and the Group’s exports to Africa increased by about 35%. A major development during the year was the implementation of the Southern Africa Development Community agreement, allowing member countries to export goods at reduced rates of import duty between one another. In the short term the agreement has positively impacted on the Group’s trade with Mozambique, Malawi and Zambia in particular. It has also levelled the playing fields in that contraband no longer enjoy a price advantage. To improve service levels outside South Africa, the Group has created a special distribution centre in Centurion outside Pretoria where products for export are licensed by the customs authorities before leaving the country. The effects of lower commodity prices were more prevalent in the second six months of the reporting period and in certain countries this led to lower government spending as well as the closing of some mines which resulted in job losses. However, Africa to a large extent operates on a cash basis and the global credit crisis that has hamstrung consumers elsewhere in the world has, in some measure, passed consumers by outside of South Africa. Where the global downturn has become a problem for Africa is in the lack of investment finance. Risk-averse investors from First World countries now prefer to put their money into properties offered at bargain prices in the more stable environments of Europe and the United Kingdom. This lack of development funding has slowed the Group’s growth in Africa and has led the Group to undertake more property developments itself to facilitate its growth strategy.
Due largely to the slump in the price of oil, Angola’s economic growth slowed to 15,8% from an average of 20% in the preceding three years. The government continues its reconstruction programme aimed at improving the country’s infrastructure. Unemployment remained at a low level. The Group enjoyed satisfactory results with its three Shoprite supermarkets, five Usave outlets and one Hungry Lion store. Work has been started on two new shopping centres which are expected to be completed towards the end of the new financial year.
The Group enjoyed a successful trading period in this country whose prudent economic policies over the years have largely protected its consumers from the global economic crisis. The Group’s five supermarkets all performed well, particularly the one in Francistown, which continued to benefit from cross-border trading with people from Zimbabwe. A sixth supermarket is planned for 2010 and expansion will focus on the Usave format which is new to the country. The intention is to open 12 Usave outlets throughout Botswana in the next two years.
Against a background of political and social stability, the country’s economy continued to grow, achieving real average GDP growth of 6.2% between 2004 and 2008. The country is not only rich in commodities such as gold, but its tourism and agricultural sectors are also flourishing. An oil refinery is being built to process crude from neighbouring Nigeria for export. The Group’s two stores in Accra – a supermarket and a Usave – continue to enjoy support from local consumers. A second supermarket will open its doors in the first half of the new financial year. A further four new Shoprite supermarkets are envisaged in the
Despite a weakening economy and increasing unemployment the Group’s four supermarkets and three Usave outlets continued to perform well, reporting an increase in the number of customers and value per transaction. The biggest growth came from the service departments which had been the main focus of the Group. Two new supermarkets are envisaged depending on proposed property development projects and a fourth Usave will be added.
The political crisis that erupted on the island in early 2009 had a destabilising effect on economic growth. Foreign aid was stopped; overseas firms postponed investments in the mining of the island’s recently discovered mineral deposits and tourist numbers halved. In the unrest following the coup, business was disrupted in only one of the seven stores that the Group operates on the island. The new government closed down suppliers with links to the previous regime, resulting in temporary stock shortages of especially dairy products. Despite the upheaval the six stores that remained in operation performed satisfactorily.
Malawi’s economy, based primarily on tourism and small-scale agriculture, grew by more than 8% off a low base in 2008 creating additional employment and stimulating retail sales. However, the chronic shortage of foreign exchange continues to inhibit the country’s growth potential. The Group’s five stores – two supermarkets and three Usave outlets – continue to trade profitably. The supermarkets are located in Blantyre and Lilongwe. Both these stores are well established with a loyal following while the Usave format is proving to be ideal for its rural environment. The addition of a third supermarket is being investigated.
The Shoprite Hyper on the island continues to operate profitably. With the rupee strengthening against the rand during the first part of the reporting period, imported goods from South Africa became more competitive. Products not provided from South Africa are sourced mainly from Italy, Brazil and Dubai. The island, which is largely dependent on foreign investment, has not escaped the global economic crisis. The Group continues to use the existing freeharbour facilities to service markets on the African East Coast where it has representation.
The country’s economy seemed relatively shielded from the direct impact of the current global economic situation and the Group’s operations continued to increase in profitability, spurred by a strong growth in turnover. Good results were boosted by the new store in Matola, a suburb of Maputo. The five supermarkets in the country are supported by an efficient infrastructure
and despite the strengthening of the rand in the second half of the year the demand for products produced in South Africa continued to grow. A Usave, the first in the country, will be opened by the end of 2009. Further outlets are being considered and the outlook for the new financial year remains positive.
The economy in Namibia prevailed and so did the Group’s well established network of stores. Employment was boosted by the opening of several new uranium mines – uranium was not affected by the slide in commodity prices – while tourism held steady and agriculture enjoyed another good year. The Namibian business is, after Zambia, the Group’s largest outside South Africa. Sales grew strongly throughout the network of stores. Two new outlets were opened in the second half of the year and the Group now operates 17 supermarkets in the country, 13 under the Shoprite brand and four under the Checkers brand, in addition to 11 Usave outlets. Plans are well advanced to open two new supermarkets and one Usave in the new financial year. Although sales dipped towards the end of the reporting period, the Group expects it to hold steady at present levels.
The Nigerian economy has been heavilyaffected by the drop in the oil price – it accounts for 85% of total government revenue – and the decline in foreign investment due to the global economic crisis. The government eased trading conditions by lifting certain restrictions on the importation of fruit and vegetables as well as food stuffs. The Group currently operates one large supermarket in the country, strategically located in the leading shopping centre in Lagos. Despite the tighter economic conditions the store continued to report good results. The Group is continuing with its plans to open a number of outlets in the country. The lack of development capital is felt strongly in Nigeria with its enormous potential for retail. In the light of the continuing unrest and high volatility in the oil-rich Niger delta in the south, the Group has decided to abandon its plans to expand its operations to Port Harcourt for the foreseeable future.
Despite being influenced by what happens in South Africa, Swaziland’s economy has remained virtually unaffected by the global economic crisis. The Group’s six supermarkets and two Usave outlets all reported satisfactory results and an increase in market share. Two new stores acquired in the previous reporting period contributed to sales and profit for the full reporting period for the first time. The dedicated management team that is based in Manzini has contributed to the success by controlling both costs and shrinkage. Two more Usave outlets are scheduled to open before the end of the 2009 calendar year.
The Group now operates four Shoprite supermarkets in this East-African country. During the reporting period it closed one of the two smaller stores as it proved too small to accommodate a sufficient level of growth. Its major supermarket in the new Mlimani Mall in Dar es Salaam benefited from the centre now being fully let and showed strong growth in turnover. Although all the stores performed satisfactorily, the business in Tanzania still lacks the critical mass needed for breaking even.
Operations are concentrated in the capital, Kampala, where the Group owns, either wholly or in partnership, two major shopping centres which both house Shoprite supermarkets. Both centres are fully let and the supermarkets are profitable. The Group is now readying itself for further expansion. Opportunities in two other towns are being investigated
Zambia, where the Group operates 16 supermarkets and one Megasave wholesale outlet, is the Group’s most extensive businesses outside South Africa. Due to significantly lower commodity prices, its supermarkets in the country’s Copper Belt region reported a drop in sales which was more than balanced by the sustained results achieved by its stores in Lusaka. The two stores in Lusaka – Manda Hill, where the trading area was enlarged and the new Shoprite in Cairo Road – performed well. The Group expects to open a new store in Livingstone in December 2009. The shortage of investment capital experienced by
developers is slowing down the Group’s expansion in this country.
The Group’s Shoprite supermarket in Bulawayo was reopened shortly before year-end. It trades in rand while payment in US dollar is also accepted and converted by added till point programming. Under the circumstances, turnover was satisfactory. The import of fresh produce from Zimbabwe into South Africa has been resumed. The infrastructure is available to grow the number of outlets once the economy becomes more stable
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