Shoprite’s ‘threat’ to leave Nigeria tied to $10m suit?

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In the early hours of Monday, August 3, 2020, news broke out that South African food retail company, Shoprite Shoprite Checkers (PTY) Limited and Retail Supermarkets announced that it would sell off its assets and leave the country for good.

Everyone has enjoyed the services rendered in their huge outlets and bough goods in their second-to-none marts (only rivalled by Next Stores, a distant second Nigerian version).

Not a few wondered why the outlet wanted to leave.

Quick News Africa made a few findings, though.

In 2018, a Lagos High Court presided over by Justice Lateef Lawal-Akapo, awarded damages in the sum of $10 million against Shoprite Stores in Nigeria, Shoprite Checkers (PTY) Limited and Retail Supermarkets Nigeria Limited for breach of contract entered with A.I.C. Limited.

In the judgment delivered by the court, Justice Lawal-Akapo also established and held that contrary to the opinions of the defendants in the suit (Shoprite Checkers and Retail Supermarkets), “there exists a contract between the claimant and the 1st Defendant which contract is still subsisting till date”.

According to the court which also awarded a cost of N1 million to the Claimant against the Defendants, the $10million damages must include “interest at the rate of 10% per annum effective from the date of judgment, until final liquidation of the entire sum.”

In a certified true copy of the judgment by Justice Lawal-Akapo,  the court also established that the defendants were in a breach when they  went behind, “incorporated a company, established the outlet (Shoprite) in 2005 and was running the same without recourse to the Claimant”(A.I.C. Limited).

Already, the Defendants have appealed against the judgment of the trial court, wherein, they were praying the appellate court to set aside the judgment of the lower court.

The Claimant in the suit No: LD/488/2010, where hearing commenced in 2012 urged the court among other prayers to declare that, “by virtue of the agreement between the Claimant and 1st Defendant, the joint venture to be formed by the Claimant and 1st Defendant is entitled to exclusively operate and manage 1st Defendant’s Shoprite Brand in Nigeria and elsewhere in the coast of West Africa, except Ghana.”

Besides, the claimant prayed the court for an order for specific performance of the said agreement for joint venture between the parties for the operation of Shoprite Supermarket across the country.

It further prayed the court among other things for payment of $2.2million Dollars and N13. 6 million as special damages suffered by the claimant as a result of the breach of agreement as well as an order for payment of $92.3, “being loss of profit suffered by the claimant as a result of the said incorporation of the 2nd Defendant by 1st Defendant to operate 1st Defendant’s Shoprite brand in a breach of agreement between the parties”.

The Claimant also urged the court to grant to it a sum of $250million.

In an unanimous judgment delivered on May 21, 2020 the court’s three-man panel affirmed the award against Shoprite Group, thus upholding the decision of the lower court that Shoprite Group breached contract in its dealing with AIC.

Is this what Shoprite is scared of paying? Is this why the multi-million dollar company wishes to sell off its assets? Is the company insisting that the court was wrong to have found that it breached an agreement it had with another party?

In a swift turn-around later today, Ini Archibong, the country director of the company handling the retail giant’s public relations, Chastest Consult, insisted that everyone got it wrong.

“Shoprite has invested over $30million in Nigeria and will not leave the country. We have only just opened to Nigerian investors which we have also been talking to just before now. We are not leaving. Who leaves over a $30 billion investment and close shop? It doesn’t sound right.

“We’ve only just given this opportunity to Nigeria investors to come in and also help drive our expansion plan in Nigeria. So we are not leaving. I have tried to say this to many people as I can. There should be no panic at all and all of that. There is no truth in that report.”

A memo dated July 31 from Shoprite General Manager Carl Erickson also dwelled on the company’s plans to expand its business.

“The expansion of the food retail business in Nigeria to a greater consumer market should remain everybody’s shared vision. It has, however, become apparent that the best manner in which to do this is by engaging Nigerian investors who share in this vision. In so doing, we will be creating a truly Nigerian business run and owned by Nigerians for the Nigerian market,” the memo said.

But doubts remain as to the company’s true intentions.

A business analyst, Ozoemena Nnabuifo, did not buy what he called “that company’s gimmick”.

“See, Shoprite began operations in Nigeria in 2005 and has over 25 outlets in the country. All these time, over 15 years, it did not deem it fit to sell parts of its investments to Nigerian investors. It suddently decides one morning that it wants to do this and expects to believe it? Something does not feel right. It smells like gimmick.”

While Nnabuifo’s prediction might be a little leftist, equity analyst Damon Buss explained that the retail company has been having issues with its Angolan and Nigerian markets, two of its four biggest that are, sadly, oil-dependent.

“Shoprite had exited countries before and the fact that they even mentioned it means they’ve had those discussions. While they have never provided the actual split, their four biggest markets – Angola, Nigeria, Zambia and Mozambique – account for 70 per cent of the non-South Africa business and Angola alone about 40 per cent%, so there’s a long tail from the other ten countries.

“The problem is that their two largest non-SA countries are oil-dependent and under immense pressure. The recent MTN results showed that the Nigerian consumer appears to be going backwards, not improving. Shoprite almost cannot exit its two most problematic territories with the biggest challenges.”

“In the places they operate throughout Africa, there is a lack of real competition, which means when things go well economically, Shoprite does incredibly well. And they’ve been willing to take that risk,” said asset manager Byron Lotter.

It remains to be seen what will become of the sudden drive to get Nigerian investors into the mix by selling off some its investments. Is it a long-term plan for a gradual pull-out? Well, Nigeria is not the market it once was for them so it is easy to see why they want to pull out, many opine.

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