Johannesburg - Truworths [JSE:TRU] closed its two remaining Nigerian stores last month as stringent regulation of stock imports and rising costs made it too difficult for the South African retailer to operate in Africa’s biggest economy.
The clothing company struggled to get stock into Nigeria and cash out of the country, Chief Executive Officer Michael Mark said in a phone interview on Friday. Truworths’ dollar rental bill also soared as the rand weakened against the US currency, he said.
“The regulations were making it extraordinarily difficult to get stock into the stores,” Mark said. “We can’t get money out, so there was no point any longer.”
South African companies to have struggled in Nigeria include food and clothing retailer Woolworths [JSE:WHL], which announced the closure of its three stores in the country in 2013 because of high rental costs, duties and difficulties getting stock into stores. MTN [JSE:MTN], the continent’s largest wireless operator, said on Thursday that 2015 earnings fell at least 20% after Nigerian regulators withdrew services and ordered the company to disconnect 5.1 million customers.
The Nigerian central bank has effectively pegged the naira at 197 to 199 per dollar since March by restricting imports of products from glass to wheelbarrows, halting supply of foreign currency to exchange bureaus and all but shutting down the interbank market with trading limits. The country, Africa’s biggest crude producer, has suffered a slump in government revenue as oil prices plunged.
Truworths is expanding in countries outside South Africa as economic growth and consumer spending remain under pressure in its domestic market. The Cape Town-based company bought a majority stake in UK shoe chain Office Retail Group last year, and also has stores in sub-Saharan African countries including Kenya and Botswana.
“The stores in countries bordering South Africa are doing well and in Ghana it’s OK,” Mark said. “It’s just Nigeria that’s not and we would go back there if everything changes. This is not a permanent thing, we will see what happens.”
Truworths said on Thursday first-half profit climbed 21% even as consumer spending in South Africa remained sluggish. The shares were little changed at R95.65 as of 11:20 in Johannesburg, having gained 2% the previous day.
Follow Fin24 on Twitter, Facebook, Google+ and Pinterest.
24.com encourages commentary submitted via MyNews24. Contributions of 200 words or more will be considered for publication.