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.