South Africa’s Pick n Pay is exiting Nigeria, joining the retreat of international retailers from Africa’s largest economy.
The grocery giant, which currently holds a 51% stake in its Nigerian joint venture with A.G. Leventis, announced this exit as a strategy to focus on its core South African market, as operational challenges have been increasing in Nigeria.
CEO Sean Summers made the announcement on Monday, less than five years after the retailer first established a presence in Nigeria with two stores.
Pick n Pay’s departure reiterates the difficulties faced by foreign retailers in Nigeria’s tough economic sector. High inflation, currency volatility, and rising costs have corrupted consumer purchasing power and made operations very challenging.
Even with Nigeria’s promising consumer base, these macroeconomic issues have deterred profitability, pushing numerous international businesses to reassess their presence.
The announcement follows a series of similar moves by other South African retailers. Shoprite, for example, exited Nigeria after closing its stores in Abuja and Kano, due to an adverse business environment.
This retreat has affected not just South African companies but also multinationals like Diageo, which recently sold its majority stake in Guinness Nigeria Plc, and firms like GSK, Procter & Gamble, Sanofi, and Kimberly-Clark.
Many of these companies have pointed to the endless issues of foreign exchange restrictions, escalating energy prices, and weakened consumer demand with high inflation as reasons for their withdrawal.
Nigeria has seen unstable inflation, with rates rising from about 24% to over 34% within the past 18 months. This surge, driven largely by the increasing cost of food and transportation, has negatively impacted consumers and retailers alike.
Furthermore, the naira has depreciated greatly, dropping from around N462/$ to more than N1,500/$, following a government-led forex unification effort aimed at closing the gap between official and parallel market rates.
For Pick n Pay, which recently reported a larger half-year loss due to reduced profit margins and increased borrowing costs, exiting Nigeria aligns with its goal of consolidating resources to stabilise its South African operations.
The company posted a pre-tax loss of 1.1 billion rand for the six months ending in August, with losses primarily stemming from its core supermarket division. However, Pick n Pay acknowledged growth in its clothing and online sectors, as well as a profitable performance by its Boxer discount division, which saw a 16% increase in trading profit.
Summers said that the retailer could halve its trading losses in South Africa by year’s end, pointing to these profitable segments as essential to Pick n Pay’s recovery moves.
The company has also set its sights on listing its Boxer division on the Johannesburg Stock Exchange, with expectations of raising up to 8 billion rand, potentially being the largest listing in Africa for the year.
The federal government is striving to attract investment to boost economic stability, yet the challenges facing consumer goods companies are standing as obstacles to achieving sustainable growth in this market.
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