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Shoprite exits Kenya with Stanbic’s Sh1.5 billion loan

Shoprite entered Kenyan market in 2018
A Shoprite store in Ghana. The South African retailer entered Kenyan market in 2018. FILE PHOTO | AFP 

Stanbic Bank Kenya #ticker:CFC is eyeing the repayment of the Sh1.5 billion loan it had provided to the Kenyan subsidiary of multinational retailer Shoprite Holdings which is exiting the local market due to losses.

Details of the unsecured loan has been disclosed by the South Africa-based retailer in its results for the year ended June. The debt had nearly tripled from Sh545 million a year earlier.

Shoprite says it is committed to settle the debt in the near term.

“Because Kenyan interest rate was similar to South African interest rate, we raised Kenyan debt and as we exit Kenya we will settle that debt and it will be set to reduce in the second half of the financial year,” said Anton de Bruyn, Shoprite’s chief financial officer.

The loan is denominated in Kenya Shillings and is payable after 21 months from June. It has an interest rate of 9.7 percent.

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By not taking security for the loan, Stanbic will now rely on the retailer’s promise to settle the debt.

Recent debt crises in the Kenyan supermarket business has shown that the retailers operate on an asset-light business model, paying lenders, landlords, suppliers and employees from sales collections.

The bank is one of two institutions ultimately owned by Johannesburg-based Standard Bank Group and which have provided loans to Shoprite subsidiaries in markets outside South Africa.

The other one is Stanbic Bank Botswana which provided the retailer with a Sh2 billion loan.

Shoprite, which entered the Kenyan market in 2018, had opened a total of four stores with plans to expand further before it started scaling down its operations this year.

It closed the City Mall branch in Nyali, Mombasa, in August. This followed the closure of the Karen branch in Nairobi in April.

Shoprite says its struggling operation was further hit by the Covid-19 pandemic, informing the decision to cut losses.

“Given the ensuing economic impact of Covid-19 and our experience to date, we expect to close or dispose of our remaining two stores in the region in the year ahead,” the multinational said.

Shoprite is among the foreign retailers that had sought to fill the void left by the collapse of former supermarket giant Nakumatt Holdings.

Its exit now leaves Naivas and Carrefour, a franchise backed by Dubai-based conglomerate Majid Al Futtaim, as the strongest supermarket operators in the country.

Tuskys is currently to fighting to win back the confidence of suppliers and landlords after falling into a cash crunch.

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