Strong rand cuts overborder profits for food retailer

Shoprite Holdings makes no
secret of it – the company
makes hay while the sun
shines. Growing from a small chain
of supermarkets in the Cape area in
apartheid South Africa in the sixties,
the group has grown to an African
phenomenon with the Shoprite
group of companies now Africa’s
largest food retailer.
Operating more than 800 outlets
in 17 countries across the continent,
the Indian Ocean islands and
southern Asia, there is no stopping
its cross-border activities.
With stores in Angola, Botswana,
Lesotho, Madagascar, Malawi,
Mauritius, Mozambique, Namibia,
Swaziland, Zambia and Zimbabwe
in southern Africa, Tanzania and
Uganda in East Africa, Egypt in
North Africa and Ghana in West
Africa, its strategy of supplying
customers in the broad middle to
lower end of the market with basic
foods and household requirements
in a no-frills fashion has paid off.
Africa is an important market to
the retailer.
“Due to the weakening of most
non-South African currencies against
the rand the turnover of the Group’s
non-South African supermarkets in
rand terms declined by 4.3% in the
last six months of 2009,” said group
chief executive Whitey Basson.
“And, on a like-for-like basis, by
9.3%. At constant currencies an
acceptable rand turnover growth of
16.3% was however achieved.”
According to a spokesman for
Shoprite, a major development
during 2009 was the implementation
of the Southern Africa Development
Community agreement, allowing
member countries to export goods at
reduced rates of import duty within
the SADC.
“In the short term the agreement
has positively impacted the Group’s
trade with Mozambique, Malawi
and Zambia in particular. It has
also levelled the playing fields in
that contraband no longer enjoys
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,” said the spokesman.
As the effects of lower
commodity prices hit Africa during
the latter part of 2009, there is no
doubt that supermarkets across
the continent, like many other
businesses, felt the pinch.