Shoprite buys land for growth in Africa

Cape Town – Shoprite has bought land in Nigeria, Angola and the Democratic Republic of Congo as store expansion outside South Africa was hamstrung by a shortage of malls, the retailer says in its 2008 annual report.

The report says further negotiations are under way to acquire land for supermarkets, “notably in west Africa”. The company sees oil-rich Nigeria, with a population of 148 million, as its biggest growth opportunity, and has “committed” to an additional 12 stores there by financial 2010.It already has 100 stores outside this country but only one in Nigeria.Chief executive Whitey Basson has bemoaned local property developers’ reluctance to build new retail sites on the continent, saying it is holding back expansion in one of Shoprite’s fastest-growing units.Analysts have speculated that the supermarket group could list existing properties in a pan-African fund in order to raise capital to develop shopping malls.Bloomberg has reported that Shoprite might consider forming a separate property investment company that would build and manage its retail sites in Nigeria and other countries, but the retailer did not comment on this.The five sites recently acquired are in Port Harcourt, Huambo, Lubango, Kinshasa and Lubumbashi.The company says it is not primarily a property developer, but is frequently required to fulfil that role.”When … properties reach a level of maturity to generate a sustainable income, they are generally put on the market.”Quinton Ivan, a portfolio manager at Coronation Fund Managers, said Shoprite had proposed to create a property fund, including a mix of South African and African properties.The company would probably have to list the fund, Ivan said.Cash raised from listing a fund would accelerate store expansion in the rest of Africa.But when leases expired at stores, the retailer would have to renegotiate them like any other tenant, with the risk that Shoprite would have reduced pricing power in new lease negotiations at strategic stores, Ivan said.Over the past 10 years, the group has spent more than R1.3 billion on its property portfolio, including property in South Africa.It manages a portfolio, including properties owned by others, worth more than R4.5 billion.Property capital expenditure of R860 million has been approved for new developments this financial year.Basson has said financial 2008 sales growth of 38.1 per cent to R5.49 billion in Africa would be maintained if expansion plans were fulfilled.Over the period, profit growth outside South Africa doubled to more than 100 percent.The return on investment was more than 30 per cent.In the report, Basson says there were worries when the company moved into the rest of Africa in 1995 that depreciating currencies would hurt rand profits.But most currencies had appreciated against the rand, boosting profits.Zambian farmers were now able to fully stock the 16 stores in that country with vegetables.In other countries, an average of 95 per cent of needs were supplied by local farmers.Old Mutual Investment Group Property Investments has said it, Cerberus and a Nigerian partner were doing a viability study for a $2.5 billion (R20.7 billion) mixed commercial development, including retail, in Abuja, the country’s capital.-www.busrep.co.zaThe company sees oil-rich Nigeria, with a population of 148 million, as its biggest growth opportunity, and has “committed” to an additional 12 stores there by financial 2010.It already has 100 stores outside this country but only one in Nigeria.Chief executive Whitey Basson has bemoaned local property developers’ reluctance to build new retail sites on the continent, saying it is holding back expansion in one of Shoprite’s fastest-growing units.Analysts have speculated that the supermarket group could list existing properties in a pan-African fund in order to raise capital to develop shopping malls.Bloomberg has reported that Shoprite might consider forming a separate property investment company that would build and manage its retail sites in Nigeria and other countries, but the retailer did not comment on this.The five sites recently acquired are in Port Harcourt, Huambo, Lubango, Kinshasa and Lubumbashi.The company says it is not primarily a property developer, but is frequently required to fulfil that role.”When … properties reach a level of maturity to generate a sustainable income, they are generally put on the market.”Quinton Ivan, a portfolio manager at Coronation Fund Managers, said Shoprite had proposed to create a property fund, including a mix of South African and African properties.The company would probably have to list the fund, Ivan said.Cash raised from listing a fund would accelerate store expansion in the rest of Africa.But when leases expired at stores, the retailer would have to renegotiate them like any other tenant, with the risk that Shoprite would have reduced pricing power in new lease negotiations at strategic stores, Ivan said.Over the past 10 years, the group has spent more than R1.3 billion on its property portfolio, including property in South Africa.It manages a portfolio, including properties owned by others, worth more than R4.5 billion.Property capital expenditure of R860 million has been approved for new developments this financial year.Basson has said financial 2008 sales growth of 38.1 per cent to R5.49 billion in Africa would be maintained if expansion plans were fulfilled.Over the period, profit growth outside South Africa doubled to more than 100 percent.The return on investment was more than 30 per cent.In the report, Basson says there were worries when the company moved into the rest of Africa in 1995 that depreciating currencies would hurt rand profits.But most currencies had appreciated against the rand, boosting profits.Zambian farmers were now able to fully stock the 16 stores in that country with vegetables.In other countries, an average of 95 per cent of needs were supplied by local farmers.Old Mutual Investment Group Property Investments has said it, Cerberus and a Nigerian partner were doing a viability study for a $2.5 billion (R20.7 billion) mixed commercial development, including retail, in Abuja, the country’s capital.-www.busrep.co.za