Sale of Game Store operations in Uganda could cost $1.5m - Expert

South African retail giant, Massmart will be hoping to recoup at least $1.5m or Shs5.5b from its single store in Uganda, according to analysts familiar with the matter.

Massmart, which operates one Game Store in Kampala, will in the next six months seek to find a buyer to concentrate on its operations in South Africa. 

The move will be part of a larger plan in which Game Stores will dispose of its interest in three stores in Kenya and one in Tanzania, as part of an exit from East Africa and West Africa. 

Mr Aly Khan Satchu, a Kenyan-based stock and equity markets analyst, yesterday told Daily Monitor that Massmart will seek to recoup at least $8m from its five stores in East Africa, with the Ugandan unit costing about $1.5m (Shs5.5b). 

However, he said the figure will be a good buy out, noting that it will be difficult to find a buyer who will offer the real value of any particular store due to Covid-19 related disruptions that have impacted a number of retail businesses and dampened customer potential across the globe.        

Massmart is Africa’s third-largest distributor of consumer goods and one of the biggest retailers of general merchandise, liquor, home improvement equipment and supplies and wholesaler of basic foods.

In a notice to shareholders on Friday Massmart Chief Executive Officer Mitch Slape, said among other negotiations, the company was discussing to reduce Game Store’s portfolio exposure in East and West Africa.

“We are completing the relay of 64 Game Stores within six months since the inception of the programme in February 2021,” he said, noting that other exits would include the sale of food stores and 12 cash and carry stores for a consideration of $93.9m (R1.36b) within five months, which will deliver annual profit before interest and tax improvement of approximately $51.8m (R750m) per annum. 

At least 14 stores across Uganda, Ghana, Nigeria, Kenya and Tanzania will be disposed of.
The exit comes barely a week after another South African retail chain - Shoprite - announced its exit from Uganda and Madagascar. 

Retail businesses have faced a rough ride in the last five years with retail giants such as Kenya-based Nakumatt, Uchumi and Tuskys all exiting operations outside Kenya. 

However, the new announcements to exit come at a time when businesses across the globe are struggling to shake off the effects of Covid-19 that have devastated cash flow positions and customers potential. 

Mr John Walugembe a Ugandan businessman and the chairman of Federation of Small and Medium Enterprises, early this week said that whereas Covid-19 had compromised financial bottom-line of a number of businesses, some have been worsened by internal mismanagement and poor financial decision making. 

By 2014, Shoprite had been forced to start a review of its operations in Uganda after a series of bad results. 
However, the retailer had delayed its decision to exit from markets such as Uganda that it had started to deem a burden to its operations. 

Wrong model    
According to Mr Aly Khan Satchu, an equity and stock markets analyst believes that South African businesses had underestimated the challenges of finding a model that is working is at home. 

He says they might have just exported their operations model from South Africa and imposed it in other markets around Africa. 

However, he notes, that the two supermarkets exit at a time when other strong brands such as Carrefour have entered the market while local capacity has also grown to extreme levels.