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Africa′s very own Wal-Mart

On thousands of street corners across Africa, tiny wooden kiosks peddle everything from mobile phone cards to glass bottles of Coca-Cola. But the continent in recent years has been seeing an increase in what has long been a staple in the West: The supermarket "mega-store," selling food, electronics, beauty products, furniture and even, in some cases, cars. It's part of an often overlooked economic boom of sorts across the world's poorest continent.

The Kenyan supermarket Nakumatt, which has 18 stores in Kenya, is set to become East Africa's most wide-reaching mega-retailer with plans to open its first branches outside the country starting in November.

Like Wal-Mart

Like US stores Wal-Mart and Target, many Nakumatt shops are brightly lit and stuffed with television sets, refrigerators and other big-ticket items, alongside staples such as vegetables, milk and bread.

The stores in Tanzania, Uganda and Rwanda would make Nakumatt ready to match the ambitions of South Africa-based giants such as Metcash and Shoprite, according to analysts at London-based Planet Retail. Until now, those companies have been the only retailers in the region with the financial power for expansion plans of this scale.

The African Development Bank reported in May that the rate of economic growth on the continent will rise to six percent this year, the highest level in two decades. Some countries have reported especially striking results — 8.5 percent last year, for instance, in Malawi.

Gearing up for listing

In Kenya, Nakumatt has grown thanks to the relative financial stability in the largest economy in East Africa which last year grew at the highest rate since 1981, reaching 6.1 percent, the government said on Monday. The retailer also is gearing up to be listed on the Nairobi Stock Exchange by 2009.

Planet Retail said Nakumatt will find a large customer base outside Kenya, particularly in Tanzania's urban centers of Dar es Salaam and Arusha. "In both cities, South African retailer Shoprite has already opened stores, but market sizes and economic stability suggest there is room for more," the analysts said in a recent report.

Vast financial woes

South Africa's Shoprite Group of Companies is Africa's largest food retailer, operates 886 outlets in 17 countries across Africa, the Indian Ocean islands and southern Asia.

Another Kenyan supermarket chain, Uchumi — which means "economy" in Swahili — has a branch in Uganda, but the company has suffered vast financial woes. Uchumi shut down in June 2006 after 30 years of business, saying it could no longer sustain its losses and blaming mismanagement, political interference and competition.

Local media described the closures as "one of the greatest corporate disasters in the history of independent Kenya". A government-led rescue plan saw the reopening of all but three of Uchumi's 17 outlets in Nairobi since the June 2006 closure. The Ugandan outlet, operating under a local franchise, has continued to operate.

Doesn't hurt small business

So-called "big-box stores" in the United States, such as Wal-Mart Stores Inc and Costco, have long been the target of critics who say their discounted goods drive out "mom-and-pop" shops and sap communities of their local flavor.

But Nakumatt, which has been in business for more than 20 years but only recently expanded to "mega-stores," has been quick to claim that it is not out to hurt small businesses or local farmers.

Earlier this month, Nakumatt, which in the past has stocked mainly foreign goods, pledged to support local industry. "We stock local products, we deal with local investors, local banks," said Nakumatt's operations manager, Thiagarajan Ramamurthy.

No threat

And the kiosk owners say they don't necessarily see much of a threat. David Mwauria, who has been selling flowers on the roadside just steps away from the newest Nakumatt in Nairobi — a 110 000 square foot, hulking stone building — says he has seen even more customers since the store opened weeks ago.

"Some customers come here to buy, some go there," he said. "There is enough business to go around."

Source: iafrica.com

Publication date: 6/7/2007


 


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