Why multinational supermarkets have a short shelf life in Uganda

There is a very upsetting trend that seems to linger on in Uganda when it comes to the sudden closure of mega supermarkets, especially those with international ownership.

Many enterprises have gone down the drain. This includes Nakumatt, Uchumi, Shoprite, and Tuskeys, among other top supermarket chains of global repute.

This shadowy tendency has not only devoured large-scale supermarkets but also crept into other vital sectors like banking and telecommunications and claimed promising telecoms such as Africell that withdrew from the Ugandan market in September of 2021.

At the dawn of this month, another similar business tragedy seems to be unfolding.

Game, a South African retail store announced this October that it has started a process of exiting the Ugandan market.

The exit of Game stores from the Ugandan market means the supermarket chain joins its counterpart Shoprite Holdings which withdrew last year (2021).

Game‘s Vice President Neville Hatfield in a statement that was issued on Tuesday, October 4, 2022, announced that they have started a formal process of exiting Uganda after they failed to sell the company to local investors.

Hatfield explained that in March 2021, Massmart, the owner of a Game retail store in Uganda, announced that following a review of its Game store portfolio in East and West Africa, it was exploring the idea that store performance might improve under the management of investors and entrepreneurs with a better understanding of local market conditions.

This is quite similar to what happened to Africell, a year ago. By the time Africell threw in the towel on grounds of stiff competition, it was Uganda’s third-largest telecom company.

But in 2021, in the third quarter of the year, Africell Uganda Limited announced plans to close the business due to stiff competition from the existing giant telecoms; MTN Uganda, Airtel Uganda, Uganda Telecom and Lycamobile a more recent entrant in the market.

The telecom giant owned by Africell Holdings (53 per cent) and Hits Telecom Holdings (47 per cent) was only seven years old in Uganda but sought and proceeded to exit the economy as the side effects of Covid-19 continued to bite.

The foreign-funded telecom company ceased its services on October 7, 2021. This telecom’s sudden demise and closure subsequently terminated the services of its employees causing massive unemployment by November 30, 2021.

A similar trajectory is taking place as this multinational employer prepares to close shop.

In September 2020, Uganda witnessed the demise of another top and renowned multinational supermarket brand Tuskys, the Kenyan supermarket chain which was struggling under debt, and was compelled to close all five of its branches in Uganda.

Tuskys supermarket is one of the supermarkets that have closed in Uganda
Tuskys supermarket is one of the supermarkets that have closed in Uganda

The unfortunate closures were stimulated by substantial debts that were likely to lead the retailer to exit Uganda after 11 years.

Tuskys subsequently shut down its branches at Bugolobi, Nakulabye, Makerere, Ntinda and Kitintale in Uganda.

At the time of its closure, the Kenyan company employed 150 people in Uganda, where it had operated for 11 years.

Tuskys entered Uganda after purchasing local supermarkets Good Price and Half Price. Tuskys was Shoprite’s main competitor. 

In a related tale but with a telecom twist, Africell Uganda before its exit said its vision was to be a leader in mobile services and giving an impact on the digital transformation of society.

The statement by the telco’s management acknowledged that the stiff competition in the market had made it difficult to achieve its business objectives, hence the decision to quit.

In his response to Africell’s departure from the Ugandan market; Matia Kasaija the Minister for Finance, Planning and Economic Development said it is sad that foreign companies are exiting the Ugandan market at this time, saying distressed companies should instead approach the government for advice or help before taking such a decision.

The Finance Minister notes that companies that quit in times of economic hardships lose their credibility as far as being a partner in economic development is concerned.

In July 2021, the telecom sector regulator Uganda Communications Commission (UCC), said that “the sector continues to demonstrate resilience as it weathers the storm driven by Covid-19”.

UCC said subscriber numbers and revenues were both up in the first quarter of 2021 compared with the same period of 2020.

Massmart, together with the Game management team, initiated a process over 12 months to investigate, as a preferred option, the opportunity to sell the Game store in Uganda to local investors.

Game Supermarket

“Unfortunately, this initiative has not yielded meaningful results. One possible way forward is now to consider closing our Game store in Uganda and we have, therefore, initiated potential store closure consultations with our staff members in the potentially affected stores,” Hartfield said regarding Game’s winding up.

Game’s Vice President also emphasised that from the very beginning of the process the management explored alternative options for their store in Uganda he says that they have been firmly committed, regardless of the decision taken, to honour their obligations to their staff members, customers and business partners.

The Lebanon-based Africell Holdings entered the Ugandan market in 2014 by acquiring Orange Uganda and has been mostly known for its affordable internet service packages, and relative network stability. The Uganda Communications Commission in 2020 had previously rated Africell as a top performer in terms of service delivery.

In 2019, the company was reported to be indebted to the tune of Ush250 billion, while it made a loss of more than Ush1.5 trillion. Part of the debt was inherited from Orange when it purchased it. In the same year, Ziad Daoud was named Chief Executive to stabilise the company. He resigned in March 2021 to be replaced by Houssam Jaber. The letter to the staff says that they will no longer accept new customers starting now, while the remaining period will help the existing ones migrate to other networks.

Industry sources confirmed the news of Africell’s exit but said the company was playing its cards near the chest and that they were not sure of the exact date of closing. Africell launched its commercial operations in Uganda in November 2014 after acquiring shares of Orange Uganda earlier in the year for USD12 million and inherited an estimated 1,000,000 subscribers at the time of its purchase.

Industry sources say Africell saw its market share decline since 2019, during the onset of the global COVID-19 pandemic. They add those travel restrictions, “which have led to increased competition in the telecoms market, have largely benefited large operators such as MTN, Airtel and Uganda Telecom. They had the sufficient financial capacity to invest in strengthening and expanding their network to meet growing consumer demand across the country”.

UCC said the number of customers in the country had grown from “27.7 million in December 2020 to 28.3 million accounts at the end of March 2021,” of which 21.5 million were broadband cellular subscriptions. Penetration is now almost 70 per cent, said the regulator. The number of active mobile money accounts is now 20.3 million.

Revenue was 7 per cent up compared with the same period in 2020. Africell also has telecommunication operations in Gambia, Sierra Leone, and DR Congo. The storm of Africell’s closure hints at the fact that the company has not posted anything on its Twitter page since August 12, 2021.

Africell’s imminent departure followed the exit of Smart Telecom which closed operations in Uganda at the end of August in 2021.

Smart Telecom, owned by the Aga Khan Fund for Economic Development (AKFED), indicated that the effects of COVID-19 were the last straw that broke the camel’s back.

Tuskys’ exit from Uganda meant that the international supermarket chains in Uganda would be Carrefour and Shoprite at the time.

Shoprite, which entered Uganda in 2000, had five branches in the country. In 2018, it opened its first branch outside Kampala, a 2,800m² supermarket in Entebbe.

The South African retailer’s presence in Uganda faced a similar predicament as it went under review as it decided to exit Kenya recently and previously exited Tanzania in 2014.

According to a report by Reuters, Shoprite Supermarket with South African roots reviewed its long-term options across Africa over the previous year (2020) as currency devaluations, lower commodity prices and high inflation had hit household incomes and weighed on earnings.

One of the Shoprite supermarket branches

In August 2023, Shoprite announced that;

“In line with the group’s non-RSA review process, our operations in Madagascar and Uganda have been classified as discontinued.”

By the time of Shoprite’s closure and several others that have fallen victim to the tough economic times in Uganda, the country had and still has some high-end supermarkets including Mega Standard supermarket and Quality supermarket which are capable of occupying that vacuum.

Majid Al Futtaim opened its first Carrefour store in Uganda in January 2020, after months of delays.

The first store, in Kampala’s Oasis Mall, was joined in 2020 by a 3,400m² outlet at Kampala’s Metroplex Mall. At the time of the launch of the Oasis Mall store, Majid Al Futtaim revealed three more stores were planned to open within the next three years.

Two Kenyan supermarket chains namely; Nakumatt and Uchumi also left Uganda after financial difficulties.

Before its exit in 2017, Nakumatt operated nine stores in Uganda.

Seven of those stores were located in Kampala and one chain had one store in Entebbe and Mbarara.

Shoprite ended up moving into three of those vacant stores. Uchumi exited Uganda in 2015, filing for bankruptcy after five years of losses.

Business Times Uganda

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