The announcement that one of the first South African companies to expand into Nigeria – Shoprite, was divesting its holdings in Nigeria came as a shocker last year. As much as was publicly known, the company was not financially distressed, nor had it fallen into corporate or diplomatic hassles that could have necessitated its exit from Africa’s most populous country.

The company explained that this was part of a larger strategy to modify its business structure in Africa due to currency volatility, a double-digit inflation rate of 13.22% in August 2020 (Nigeria’s highest in 29 months), high import duties and dollar-based rentals. 

Shoprite also exited Kenya and restricted capital allocations to its supermarkets outside South Africa. According to the financial statement released by the company in August 2020, the non-South Africa supermarket operation of the company, excluding Nigeria, contributed a paltry 11.6% to the group sales. Its non-South Africa sales also declined by 1.4 per cent in 2020. In addition, the lockdown restrictions pertaining to store closures, social distancing, transport restrictions, trading hours, among others, significantly affected the company’s growth potential, leading to a need to restructure the business, despite a 6.4 per cent increase (R156.9billion) in total sales of merchandise by the company.

The reality of the currency devaluation and high inflation rate in Nigeria were perfect reasons as to why a Nigerian company should be the one to acquire the franchise. This year, the acquisition was perfected with Ketron Investment’s acquisition of Shoprite Nigeria in a multi-million naira deal, a development that should have brought a lot more excitement than it did in Nigeria’s media space. 

It would seem that the fear of job losses and economic shrinking, which was hinted across several media outlets, did not allow many to see the fortuitous benefits in this move. A few even suggested that the effects of the divestment would include direct job losses and crisis across an entire value chain of beneficiaries with increased unemployment and misery. Others opined that it would worsen Nigeria’s position in world business rating, with Nigeria being labelled as one of the least favourable places for investors. One could say these fears were justified as the country’s unemployment rate jumped to a staggering 33.3%, according to the latest report from the National Bureau of Statistics (NBS).

If this bleak state of affairs was true in any other situation, it is certainly not the case for Ketron’s acquisition of Shoprite Nigeria. For one, the company was not driven out of Nigeria by any government policy. Also, Shoprite did not get shut down or announce any financial distress or corporate mismanagement. The company simply changed ownership and is now 100 percent owned by Ketron, a Nigerian company owned by a group of institutional investors led by Persianas Investment Limited.

If it had been acquired by some newbie in the retail space or some corporate shark whose sole focus is to make money, then there might have been a cause for worry indeed. But that is not the case. Shoprite Nigeria was acquired by Ketron Investment Limited, led by Tayo Amusan – a Nigerian businessman with over 25 years of business experience in Nigeria, spanning retail and real estate. He is credited for building Nigeria’s first mall of international standards – The Palms Shopping Mall in Lagos, as far back as 2004, so he sure knows what he is up to. 

“With benefits from our knowledge of the ever-evolving Nigerian retail marketplace, well-grounded social and economic research, and hands-on experience from our team, we are confident that this acquisition will foster a robust and sustainable business model for the ultimate benefit of all stakeholders,” Amusan stated.

Every country has distinct marketplace barriers, challenges and opportunities, but no one understands the Nigerian retail marketplace better than a Nigerian who has started and grown a retail brand from scratch. 

There are not many cases where a local investor takes over a foreign-owned business so it may not be easy to reference, but one can point to the Nigerian Enterprises Promotion Acts (1972 and 1977) which led to a series of share acquisitions and transfers and gave birth to banks completely owned by Nigerians? We can see how the Banks which resulted from this decree have been managed and grown by indigenous management. 

Barclays Bank DCO became Barclays Bank of Nigeria Limited and later, and later, Union Bank of Nigeria Plc. Standard Bank of West Africa became Standard Bank of Nigeria and then First Bank of Nigeria. The British and French Bank Limited (BFB) also became what we now know as United Bank for Africa (UBA). All three banks are still standing, on decades of strong corporate governance, financial management and asset acquisition. All are also still thriving despite macroeconomic pressures including declining real gross domestic product (GDP) growth rates, rising inflation and unemployment rates, and fluctuating naira-to-dollar exchange rates caused by unstable oil prices. In fact, the banking sector has grown by a compound annual growth rate of approximately 23.5 percent in the past ten years, according to McKinsey, building resilience and contributing significantly to the Nigerian economy in the process.

One can also take a look at the Fintech industry where a lot of local companies are having foreign investors. During the November 2020 Fintech webinar, Segun Aina, former President of FinTechNGR had remarked on the implications for the local economy, saying “A lot of money might be coming in, but it comes from abroad. The market is here, the money is made here, but the returns go to other countries.”

That a Nigerian acquired the Nigerian franchise of Shoprite is a big win for Nigeria and the larger economy. The money made in Nigeria will circulate in the country rather than going straight out of the economy. Ketron has also publicly announced that there are no plans for any lay-offs, but instead an improvement of the welfare conditions of its staff. Also, the company will be expanding into more cities instead of the retail stores it had in just 11 states, despite being in Nigeria for 15 years. 

From the construction of these new branches to the commencement of actual operations, the execution of this plan means more employment opportunities across the value chain and an increase in economic activities in the selected locations. This will bring about economic growth in those locations as well, instead of an undue focus on only top commercial locations, as has been the practice over the years. That in itself is no surprise, as foreign investors tend to minimise their business risks and only invest in locations they are sure of making good returns on their money in a short while. 

While announcing the acquisition, Tayo Amusan had said; “The addition of ShopRite further diversifies our portfolio, motivating us to take on obligations to upscale the business and further drive the expansion of this impressive chain of retail outlets across the country. We look forward to building an even stronger company following our acquisition and are excited about the greater impact we will drive for consumers, customers and stakeholders now and in the future.”

We can take him for his word, as there has been no cause for any doubt. No lay-offs. No shut down of any of the retail outlets so far. The plans to introduce more Nigerian-made products in the stores are also an impressive opportunity for many Nigerian small businesses in search of an outlet for their products, and Amusan has emphasised that the best quality will be made available to Nigerians. 

Nigerians should anticipate the benefits of having a truly Nigerian brand – owned and led by Nigerians, instead of drowning in premature fears of what could go wrong. Domestic investment is just as critical to economic growth as foreign investment is, if not more. Every country strives to get local investments from its citizenry so that the cash flow continues to run within the economy. 

In fact, there are strong pointers to the fact that foreign takeovers are the equivalent of handing the reins of a company to decision-makers abroad who feel no emotional connection to the workers, the market or the firm. That is why the French government in 2014, passed the décret Alstom, granting the state additional powers to veto foreign takeovers where there are “strategic interests” in the areas of energy supply, water, transport, telecoms and public health. A country’s “strategic interests” are best protected by the country and its citizens, and that is what this acquisition should translate to for Nigeria and Nigerians.