Majid Al Futtaim, Carrefour’s franchisee in East Africa and Egypt, has reportedly taken on the lease for Kampala’s Oasis Mall, and set to open what will be its first store in Uganda in Q1 2019.
According to reports we are seeing, Majid Al Futtaim, Carrefour’s franchisee in East Africa and Egypt, is set to open its first store in Uganda. Majid Al Futtaim has reportedly taken on the lease of what was Nakumatt’s anchor tenancy in Oasis Mall in Kampala.
Oasis Mall is an established premium shopping mall in Kampala’s Central Business District. The former Nakumatt space has 7,000m² of retail space, making it one of the largest hypermarkets in Uganda. It will bring Carrefour into direct competition with Shoprite, which currently has three stores in Kampala, with a fourth due to open in December. Shoprite also has a store in Entebbe. Oasis Mall is directly next to the older, struggling Garden City Mall, whose anchor tenant is leading domestic supermarket chain Capital Shoppers.
Carrefour’s entry comes at a time when mall space in Uganda is rapidly increasing. According to real estate company Knight Frank, there is 182,000m² in Kampala, but a further 128,000m² in the pipeline. This includes new developments such as the modern Arena Mall, in south east Kampala, set to open in September 2019.
Uganda: an unforgiving market for international retail entrants
Uganda has long been an unforgiving market for international supermarket chains. Kenyan supermarket chains Uchumi and Nakumatt have both exited Uganda – Nakumatt most recently in late 2017. Before them, Metro Cash and Carry, the South African chain owned by Metcash, ran aground in 2007. Shoprite decided against entering Kenya until 2018 (in part because of the strength of existing domestic supermarket chains), and exited Tanzania in 2014. It has been present in Uganda since 2000. However, Shoprite was reportedly considering an exit in 2014. Kenyan chain Tuskys still has a presence in Uganda, with seven stores.
Shoprite has already secured the anchor tenancy for Arena Mall. It is also apparently slated to take Nakumatt’s former store in Kampala’s Metroplex Mall. Ironically, the Metroplex store was Shoprite’s until 2015, when the South African chain reduced its network in Uganda down from three to two stores.
The company has been the prime beneficiary of Uchumi and Nakumatt’s exit: few other international retailers already in market (a notable exception is Massmart, which has a single store, in Lugugo Mall). Furthermore, although Ugandan consumers like the idea of buying from Ugandan-owned supermarket chains, existing retailers such as Capital Shoppers and Quality, those chains are ill-equipped to cope with serious international competition.
To date, however, the issue has been demand and cost: most goods typically arrive via Kenya. The quality, coverage and sophistication of the supply chains in Uganda is considerably poorer than in Kenya. Indeed, a recurring mistake retailers have made is seeing Uganda as a ‘natural’ extension of operations in Kenya. Costs and complexity are higher with more dependency on imports, while consumers have lower and more volatile incomes.
Shoprite as a bellwether for optimism
This is starting to change: Uganda’s relative stability, proximity to Kenya and high population growth-powered economy have now made retailers take a second look at the market. In particular, Shoprite’s bullish expansion after a decade and half of holding pattern has acted as a bellwether for optimists.
The question is how Carrefour will repeat its success in Kenya though. Carrefour’s arrival in Kenya at the Two Rivers Mall and Karen Mall was not predicated on Uchumi and Nakumatt’s store empires collapsing. Through 2017/2018, Majid Al Futtaim was being offered prime, hard-to-acquire space from willing landlords, turbocharging its growth plans. It is unlikely to replicate this is in Uganda, where Shoprite has already taken the pick of the empty stores and has a working relationship with Knight Frank for new malls (although Knight Frank does manage malls with Carrefour tenancies in Kenya).
Assuming Uganda regulators agreed, there are two or three acquisition options for Carrefour. There are also a handful of new malls being built in Kampala (e.g. New Dubai Mall). But it’s a longer and slower growth path for Carrefour.
