Nakumatt plans Burundi, South Sudan expansionTuesday March 05 2013
Nakumatt Holdings plans to set up shop in Burundi and South Sudan by March 2015, making it the first Kenyan retail chain to enter the two East African emerging markets.
The regional retailer, which has been eying the fledgling economies since 2011, now says it has finalised talks with developers in the two countries where it intends to lease two shopping malls in Bujumbura and Juba.
The supermarket chain wants to export the shopping mall culture to the informal retail markets of Burundi and South Sudan which have low retail penetration dominated by mini-marts and kiosks.
“Potential property developers have already been identified and we will start operations with a single branch each in Bujumbura and Juba,” said Atul Shah, managing director Nakumatt Holdings.
“We aim to grow, develop and deepen the retail penetration in these markets,” Mr Shah said in an interview with Business Daily.
Nakumatt, which had earlier pegged its regional growth plan on selling about 25 per cent stake to a strategic investor to fund expansion, now says it will roll out into the two countries on its own.
(Read: Nakumatt set for share sale to fund expansion)
“The regional roll-out is not pegged to the resources of a strategic Investor,” said Mr Shah, adding that the firm has set aside a Sh1 billion war chest to fund the strategy.
The Bujumbura mall will be developed by Toyota Burundi, and construction is set to begin by mid-year. Nakumatt has booked space at the planned shopping complex as the anchor tenant.
“Nakumatt operates on a lease model for its retail space needs across the region,” the firm said.
Nakumatt is ranked Kenya’s largest retailer grossing Sh38 billion in sales in the fiscal year ended February 2012.
The firm first ventured into Rwanda in 2008 where it currently has two stores. It has four outlets in Uganda and a single one in Moshi, Tanzania, where it entered in 2011.
The 40-outlet strong supermarket chain joins a growing list of Kenyan companies that have set base in Burundi and South Sudan, two frontier markets that are now coming out as attractive investment destinations after many years of civil strife.
“Burundi is emerging as an attractive market as it has now reviewed its business laws and regulations and harmonised them with that of other EAC member states,” said Benjamin Mweri, Kenya’s ambassador to Burundi.
“There are a lot of opportunities in the retail sector as there are no large supermarkets in Bujumbura. Some have to travel to Nairobi for a shopping experience,” he said in an interview with the Business Daily.
Burundi’s retail market is dominated by small shops and independent convenience stores such as Dimitri, Au Bon Prix, Escale du Bien Alimentation, Belladone, Poissonnerie and Bambino.
Listed retailer Uchumi has lined up a Sh1.5 billion rights issue set for the second half of this year to help bankroll local and regional expansion plans. Uchumi, which posted sales worth Sh13.9 billion, last year, has 27 outlets across Kenya, Uganda and Tanzania.
Tuskys has 45 outlets across Kenya and Uganda and plans to venture into Rwanda.
Financial institutions such as UAP Group, Co-operative, KCB and Equity banks have already set up shop in Africa’s newest nation of South Sudan, which has also applied to join the EAC bloc.
Nairobi-headquartered firms operating in Burundi, EAC’s smallest economy, include Diamond Trust Bank, KCB Bank, Jubilee Insurance, KenolKobil and Pembe Flour Millers.
TPS Serena is currently putting up a high-end hotel in Bujumbura after the firm acquired the five-star Hotel Source du Nil, sold last year by the Burundian government.
Nakumatt estimates that the average EAC retail penetration stands at 14 per cent, a pointer that the bloc could accommodate franchises and supermarket chains to hook more buyers into the formal retail sector.
In 2012 a Citi Group report graded Kenya as the second most developed retail market in sub-Saharan Africa after South Africa, with a retail penetration of 30 per cent. Kenyan retailers are major rivals for South Africans.