For 15 years, Shoprite, a South African multi-national retail group, has been the place for shopping for the elite, middle class, socialites and wannabes. Some social media freaks even go there to pose for photographs, to show their followers that they belong. It is a place where you can buy almost anything from a needle to a vehicle.
Therefore, it must have come as a rude shock to many when the company announced, in its operational and voluntary trading update for the year ended June 28, 2020, the commencement of a formal process to discontinue its operations in Nigeria. In its statement, it announced a 6.4 per cent increase (R156.9billion) in total sales of merchandise for the outgoing year and said that it decided to discontinue its Nigeria operations “following approaches from various potential investors and in line with our re-evaluation of the group’s operating model in Nigeria.”
But why should a company with 25 outlets across the country and employing over 2,000 take such a decision? Many reasons, though not directly from Shoprite’s management, have been adduced by market observers. Most of the reasons boil down to our currency and purchasing power which have been on the downward spiral.
It said its unaudited Constant Currency information shows that Nigeria’s naira performed poorly in the countries within which the company operates, with the percentage change in sales of -12.3% for the year under consideration. Constant Currency in accounting and finance is the adoption of a fixed exchange rate that eliminates fluctuations when calculating financial performance figures. Companies with significant operations in other countries often represent their earnings in constant currency terms since floating exchange rates can mask true performance.
Naira to dollar fluctuation and multiple exchange rates have greatly affected businesses, more so those who rely essentially on importation due to a shortage of U.S. dollars coupled with weak oil prices. Incidentally, Shoprite’s two biggest markets outside South Africa are Nigeria and Angola which are oil-dependent and under immense economic pressure.
Though it reported significantly improved growth in the second half of 2019, mainly because of its South Africa operations with group sales rising by 74.9 per cent, rising inflation in Nigeria and other African countries, according to Shoprite in August last year, led to a decline in local currencies against the dollar and impacted its full-year financial results.
The coronavirus scare and the resultant nationwide lockdown have hurt people and businesses across the world, with many struggling to feed and shelter themselves. Job losses, slashed salaries and depleting incomes have become so common, thus affecting consumer choices and purchasing power. With 82.9 million Nigerians estimated to be poor and the rise of e-commerce, retail businesses like Shoprite will have more difficulty in attracting consumers.
With the probable exit of Shoprite from Nigeria’s consumer market landscape, what will happen to the vacuum it will leave in the Fast Moving Consumer Goods (FMCG) sector and the inevitable job losses, another burden on a country panting under the burden of high unemployment figures?
To many Nigerians and the Nigerian Investment Promotion Council, it is a good opportunity for Nigerians to take over the company. According to the executive secretary/CEO, NIPC, Yewande Sadiku, Shoprite’s outlets across Nigeria provide market access to over 500 Nigerian farmers and small businesses, helping to get local produce and products to millions of Nigerian consumers. According to her, “retail market remains a material growth driver in the Nigerian economy, accounting for 16% of gross domestic product (GDP) and presenting opportunities for domestic and foreign investors in retail stores, e-commerce, real estate and several promising career paths for Nigerians.”
No economic expert will doubt that. But this is just good as a half complete hypothesis. No business can thrive anywhere in the world without its host government’s support and protection. All the richest men and women in Nigeria were products of deliberate government policy to encourage them to empower others through employment. The richest companies in the world enjoy their governments’ support and protection. Huawei in China and the American automobile industry are two examples.
Time was when we had AG Leventis, Kingsway and UTC. I am not talking of Lennards or Bata that were a one- commodity multi-nationals. I am talking of retail multi-nationals selling multiple consumer products. Leventis and the others were spread all over Nigeria and their prices were not extortionist. They employed more Nigerians than Shoprite and their managers were also Nigerians.
Unlike Shoprite that seeks to repatriate its profit back home in hard currency, their forebears, especially Leventis, engaged in social responsibility projects in communities and sometimes even intervention programmes. They even ran a football club which was a top side in the Nigerian domestic league. Remember Leventis United? The club groomed some great players for our national team. They were more Nigerian in outlook.
Leventis, for instance, was founded by Anastasios George (AG) Leventis, a Cypriot, in 1937. The Leventis Stores at a point in the 1970s was Nigeria’s second-biggest employer of labour. AG Leventis’ firm constructed the Federal Palace Hotel in Lagos, which housed the guests for Nigeria’s independence celebrations in 1960.
He was conferred with the chieftaincy title of Babalaje of Egbaland by Ladapo Ademola, the Alake of Egbaland, which has its seat of power in Abeokuta. The Egba Scholarship Scheme popularly known as A.G. Leventis (Egba) Scholarship Scheme, which gave study funds to both undergraduate and postgraduate students of Abeokuta and Egbaland, in general, was coined after his name and it exists till date.
But he did not stop at just that scholarship programme because by the time of his death in 1978, the Leventis Foundation was already deep into the promotion of education, agriculture and conservation in Nigeria and West Africa in general. The foundation has at least eight schools spread across the country that teach Nigerians of whatever age, with at least secondary school qualification, for one year, agriculture, agricultural tools fabrication and maintenance, value addition and marketing strategies where the students eat what they produce. It is a worthy programme that is free of charge – no tuition, accommodation or feeding fees – which one of my sons benefitted from.
At our current level of development, when other nations, including African, are hurtling at jet speed towards development, while we are being bogged down by massive unemployment, excruciating poverty, pervasive rebellion against the state and wanton insecurity, it does not need special insight to see that we need a Leventis more than a Shoprite.
In Leventis we see how it ploughs back its profit into our development while Shoprite explores all avenues to repatriate hard currency out of our shores; Leventis develops our potential while Shoprite robs us of it and kills it.
It is only here that multi-nationals take us for granted and do whatever catches their fancy, and if they condescendingly give us a minute fraction back, they think they are doing us unusual favours. Our market can sustain any business; it is only for the government to consciously put things in place for them to prosper. It is a cyclical win-win affair; sustain the businesses and they will employ more of your citizens. That empowers a lot of people, directly and indirectly, put money in the pockets of many more, who in turn go shopping, increasing demand which gingers production, necessitating more employment and all translating into more revenue for government through taxes.
There are many Nigerians who can invest in such supermarket businesses. There are some Nigerians already into it, anyway. Popular among them are Sahad, Ebeano and Hubmart. H-Medix, which started primarily as a pharmaceutical outlet, is also coming up as a strong player in the retail business.
However, these businesses need to be encouraged to stock their shelves with Nigerian produced goods. No harm in getting foreign wares for choice and competition, after all, we live in a global village, but at least 70 per cent of all things on shelves should be sourced locally.
The government should go into encouraging small and medium scale businesses as well as supporting researches as these ventures will feed the retail stores. The government will also do well to deliberately encourage local production of items, rather than encouraging importation. We must do all that is possible to arrest capital flight.
A good beginning for the government should be rebuilding our refineries. This will go a long way in taking off the streets some of our able-bodied and brilliant youths as well as stimulating production capacity in many areas, strengthening our currency and purchasing power.
Sadly, the Nigerian National Petroleum Corporation (NNPC) spent about $42 billion (N15.21trn) on fuel importation between 2013 and 2018, an amount capable of building about 14 refineries with an average capacity of 100,000 barrels of crude oil per day at an estimated cost of $3 billion, or three of the type Dangote is building – which is 650,000 barrels per day and is estimated to cost between $12 billion and $14 billion while about $6 billion of the amount could have been used to upgrade existing refineries, pipeline and depots infrastructure.
If our governments were doing what they ought to be doing, we can all say that with businesses like Leventis, who wants a Shoprite?