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Johannesburg - Food retailer Shoprite will continue to expand its operations in oil- and mineral-rich African countries despite the continent's infrastructural difficulties, said CEO Whitey Basson.
Shoprite's African footprint includes operations in Nigeria, Angola and Botswana. The group has constantly expanded its presence on the continent since it opened its first African store in Namibia in 1990.
However, in the year to end-June 2009 Shoprite managed to add only five new stores, while closing three others "due to the endemic lack of suitable trading space", said Basson.
He said property developers in targeted countries such as Nigeria experienced difficulties in securing funds to build shopping malls and other trading centres, which put a damper on Shoprite's expansionary plans.
In the period under review Shoprite grew its turnover from operations outside SA by a whopping 39.9% in terms of SA rand, making a 13% contribution to the group's total turnover, which was up 24.5% to R59.3bn.
However, Funeka Beja, investment analyst at Afena Capital, attributed most of this growth to SA's weak currency in the second part of the reporting period.
More affordable food in pipeline
"Although the African operations' revenue grew 39.9% in rand terms, a large portion of that number can be attributed to the rand weakening against other African currencies," she said. "The constant currency revenue growth is much lower, due to slowing space growth in the second half of the reporting period."
Among other highlights in the results is a 1.5% increase in trading space for Shoprite at the expense of rival food retailers Woolworths and Pick n Pay.
While analysts have said that high food inflation (at 15.8%) was one the main reasons for Shoprite's top line growth, Basson said food inflation started coming down in the second half of the year, culminating in 7.4% in July.
"Inflation has been expected to fall, particularly in the second half of this calendar year," said Beja. "What it means for consumers is that food will become more affordable, as long as the growth in their disposable incomes is higher than food inflation. It certainly does not mean that food prices will become cheaper."
- Fin24