South African retail giant Massmart, which operates the Game Stores, has fallen out with its employees over redundancy pay ahead of the retailer’s exit from the Kenyan market.
The Kenya Union of Commercial Food and Allied Workers yesterday warned of court action if Massmart fails to reach a deal with the union by Friday.
The workers are demanding severance pay of 30 days for every year worked, goodwill of 15 days for every year spent in the retailer on top of an equivalent gratuity and two months’ salary instead of notice for workers shy of their five years in the firm.
Massmart has rejected the additional pay demands, arguing it is cash-strapped and cannot afford the union’s demands.
The retailer wants the employees to accept a severance pay of 15 days for every year worked, drop the goodwill demand and for a month’s salary instead of notice for workers who have spent less than five years in the firm.
“Given the precarious financial position of the company currently, the company is of the view that the proposals are not reasonable,” Massmart said in a letter to the union seen by the Business Daily.
“You and the rest of the associates are aware the company has never made a profit in Kenya since it commenced trading and it has suffered trading losses year after year,” added the South African retail giant.
The union had nearly 200 members working for Game Stores.
Game Stores will shut down its three outlets in Kenya on December 25 after rival local supermarkets snubbed offers to buy the branches, giving a new dimension to the troubles facing the supermarket business in the region.
This will mark the end of its seven-year struggle in the market, adding to a growing list of local and foreign retailers that have closed shop in recent years.
The Johannesburg Stock Exchange-listed retail giant said earlier that it did not find domestic buyers for its 14 Game stores in Kenya, Uganda, Tanzania, Ghana and Nigeria after putting them up in the market last year.
The retailer said in March last year it would also explore the option of engaging potential buyers to improve the performance of some of its stores under the management of investors and entrepreneurs with a better understanding of local market conditions.
Kenya has become a tough market for retailers following the collapse of Nakumatt and Tusky’s, which had dominated for decades.
Uchumi has also struggled to survive the cut-throat competition as deep-pocketed newcomers such as French retailer Carrefour and Quickmart battle for a space in the market.
The South African retailer said the decision to exit Kenya was made in March 2020 and the supermarket commenced negotiations with various landlords to surrender their leases ahead of time.
The exit of Massmart will add to the growing list of firms from Southern Africa to close shop in Kenya.
It comes a few months after Shoprite, another Southern African retailer, closed shop barely two years after launching operations in Kenya. Shoprite cited the underperformance of its supermarkets for the closure.
The firm said the underperformance was worsened by the impact of Covid-19.
But fierce competition from cash-rich retailers such as Naivas, Quickmart and Carrefour could also have contributed to the exit.
Investment analyst George Bodo said most South African firms launch in the country without a proper understanding of the Kenya market demographics.
Mr Bodo said unlike South Africa, Nairobi does not have a large thriving middle class.
Before that, the South African owners of Nairobi’s Fairview Hotel, Town Lodge and City Lodge Two Rivers also exited the Kenyan market over mounting debts.
City Lodge revealed that it sold three hotels in Kenya and one in Tanzania to real estate investor Actis for a combined Sh1.0 billion.
The company indicated the East Africa units were loss-making to the tune of Sh2 billion as of the end of 2020.
Earlier in 2017, Tiger Brands, also of South Africa, left the Kenyan market after disposing of its 51 per cent stake in the local unit, Haco Tiger Brands, to billionaire businessman Chris Kirubi, now deceased, who then held the remaining 49 per cent share.
The firm also stated that Kenya was a difficult business environment, leading to its exit.