The South African retail giant Massmart is to further increase competition in the sector in Kenya, having booked space in what will be the country’s biggest mall.
Through its subsidiary, Game, Massmart has reserved space in the Sh12.6 billion ($150.2 million), 50,000 square metre Garden City mall development on the Thika Superhighway in Nairobi, which will be completed by May 2014.
Private equity firm Actis confirmed the move, which will provide serious competition to a retail market currently dominated by Tuskys, Nakumatt, Uchumi and Naivas. It is the first time a South African retail firm has made an effort to enter the Kenyan market since the exit of Metro Cash and Carry in 2005.
This exit typified the problems encountered by South African companies in the Kenyan market, with Cinema firm Nu Metro, fast food company Nandos and magazine publisher Media24 having also quit the country in recent years. Game currently operates 105 stores in 12 African countries, and will rely on the low-cost model that has brought success in Uganda and Tanzania.
“The retail mall will include a flagship store for Game, their first in Kenya,” said Actis in a statement. Game executives confirmed their interests in Kenya through PR firm Africa Practice.
Wal-Mart, the biggest global retailer, bought a majority stake in Massmart for $2.4 billion last year. Massmart already has a presence in countries such as Ghana, Nigeria and Uganda, and is now looking to tap into the Kenyan market, which is the second most developed in sub-Saharan Africa, with a Citigroup study showing that about 30 percent of retail shopping takes place at formal outlets. The same study named East Africa as the next growth frontier for the large South African retail firms, though it noted that the dominance of local firms acted as a barrier to investment.
“East Africa is where SA retailers lack scale due to strong local retailers. Acquisition looks to be the easiest route to build scale in this region,” the report said.
Expansion is at the heart of Massmart’s surprisingly impressive recent sales figures, which increased by 16 percent – around R100 million ($12.2 million) – on last year as a result of the inclusion of recently acquired stores.
Competitors in the Kenyan market claimed not to be worried by the prospective entry of Massmart.
“There is room for growth in the industry and therefore we don’t see stiff competition coming from Game,” said Frank Kamau, the general manager of Tuskys.
