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A host of factors – a shift towards organised retail, self-regulation, improved business models, recovery in consumer demand and cash from private equity funds – has rekindled hope for Kenya’s retail sector, said to be the second-most highly developed in Africa.

The sector seems to have shaken off the ghosts that bedevilled large players in the past few years and is well on course to full recovery. New store openings, acquisitions, and e-commerce have been driving the Kenyan retail industry as it stares at returning back to normalcy.

The retail sector is said to be the second-most highly developed in Africa with large players like supermarkets taking up 30 to 40 per cent of the trade.

However, over the past five years, Kenya’s retail sector has experienced uncertainties resulting in the collapse of the once major supermarkets like Nakumatt and Uchumi and the exit of other foreign supermarkets like Shoprite and Choppies from the local market.

The ailing of this sector left many supermarkets struggling to pay workers, creditors, and suppliers, a crisis that threatened to bring down more businesses. The address part of the reason that was identified as contributing to the poor performance and decline of the sector, Kenya Association of Manufacturers (KAM), Retailers and Suppliers were forced to sign a Code of Practice to guide prompt payments.

Association of Kenya Suppliers, KAM and Retail Trade Association of Kenya, developed the Retail Trade Code of Practice, which was adopted by the Competition Authority of Kenya (CAK) on June 11, 2021 effectively strengthening its enforcement.

Retail trade code

The code was meant to encourage self-regulation and harmonise the retailers’ and suppliers’ ways of engagement and in so doing, also apply international best practices applicable to the Kenyan situation. “The Retail Trade Code of Practice has ensured fair dealing amongst retailers and suppliers as well as the prompt payment of suppliers,” a senior Kenya Association of Manufacturers manager told Business Hub.

In a bid to avert a stalemate with suppliers, Naivas Supermarket 2020 sanctioned the sale of a 30 per cent stake to a consortium of International Finance Corporation (IFC), Amethis Finance (France) and MCB Equity Fund (Mauritius), and German sovereign wealth fund DEG raising Sh6 billion in the process. After the acquisition, the leading local retailer embarked on remodelling its business operations growing its retail store outlets to 84. Only Quickmart, a homegrown supermarket established in 2006, with 53 branches comes close to Naivas which has maintained that only productive outlets will be left to operate.

“We won’t hesitate to shut down unproductive branches. We will only operate stores that are sustainable,” Naivas Chief Commercial Officer Willy Kimani told Business Hub during the opening of their new outlet at Imara Mall. In what comes as a sigh of relief to the sector, the woes of the industry now seem to be coming to an end with major players witnessing a turnaround back to profitability. 

A recent report revealed that Kenya’s major supermarkets opened 19 new stores last year, partly spurred by a recovery in consumer demand and cash from private equity funds which acquired stakes in two of the four retailers in prior years.

Naivas, Quicksmart, Carrefour and Chandarana Food plus tightened their grip on Kenya’s retail sector, capitalising on the gap left by Nakumatt, Tuskys, Uchumi, and the exit of Botswana retailer, Choppies.

Data collated by property fund Ilam Fahari I-Reit Showed that in 2021 Quickmart opened six more outlets followed by Naivas and Carrefour with five each, while Chandarana Food plus invested in three new stores. After Adenia acquired Quickmart the transaction also paved the way for the merger of Quickmart with Tumaini Self Service Ltd, another supermarket retailer that had already been acquired by Adenia in December 2018. 

Following the merger, Quickmart has since been named among Africa’s fastest-growing companies in Africa by the international business publication, Financial Times.

Quickmart was ranked 11th on the continent as turnover climbed three-fold in the review period to Sh18.64 billion from Sh4.64 billion, with employees increasing to 3,265 from 708.

Increased revenue

International Retail brands also seem to have started gaining a foothold locally with Majid Al Futtaim, the exclusive holder of Carrefour’s franchise in Kenya, recording increased revenue from Sh26.2 to Sh32.9 billion last year as it opened more branches and attracted more customers to its stores concentrated in Nairobi.

Unlike its foreign peers that have either recently exited the Kenyan market or reduced their footprint, citing losses, Carrefour said it will continue the expansion of its retail business with a focus on online shopping.

However, fears still abound that the leading retailers may follow in the footsteps of their predecessors if they don’t take the necessary measures to secure themselves.

Elizabeth Irungu, General manager in charge of business development at ICEA Lion Asset Management says that having expanded into a complex business, these retailers need to have put in place complex processes and systems.

“Opening up the businesses enables you to share in a bigger pie” she adds.

Irungu opines that besides strengthening internal control processes and opening up to public scrutiny, big supermarkets should adopt the franchise model to deal with the issue of theft and misuse of funds.