Supermarket chain Central has shut down all of its stores as its owner company filed for insolvency, falling under the pressure of a “tough trading environment”. The chain, partly owned by Portuguese group Sonae, had three large supermarkets in the capital, Maputo.
S2 Africa, the joint venture between Satya Capital and Portuguese group Sonae, announced this week the closure of all its three Central supermarkets in Maputo, Mozambique. The company, which filed for bankruptcy before the Mozambican authorities soon after, said that the “abrupt fall in consumer demand (…) made it impossible to operate in the Mozambican market”.
The three supermarkets were still opened for business on Monday but workers were surprised to see the outlets close permanently on Tuesday. According to reports, all salaries have been paid and the outstanding debt with the workers – born out of the premature contract termination – will be settled soon.
Tough trading environment left no other options
S2’s chairman, Miguel Seixas, clarified that the current trading environment led to a continually increasing degradation of the company’s financial situation mostly due to decreasing sales ever since the operation in Mozambique started, as well as to high production costs. Despite all possible scenarios having been considered, S2 stated it did not see it as a possibility for revenues in Mozambique no grow in the near future.
Before shut down, S2 tried to sell the Central chain, as information now disclosed shows. According to the retailer, although the selling process attracted several interested parties it failed to produce any offers at all. Potential buyers pointed towards very high operational costs and the current economic situation of the country as the main reasons for not going through with any proposal for acquisition.
Contested decision and market loss for Sonae
The decision to file for bankruptcy and shut down the chain was not consensual among the two partners in S2. A spokesperson for Sonae said the company regretted the outcome of the situation and emphasised that it had done everything to avert Satya’s decision. Sonae owns only 30% of the joint venture and was not able to enforce its position, despite having always shown disposition to continue its funding of S2.
With the closure of the Central chain, Sonae loses a key market in Africa – one it was actively trying to develop, since it first entered the country in 2016, when it bought the chain Extra, previously owned by South African retailer Pick n Pay. The lack of any presence in Mozambique is particularly difficult after the deal between Sonae and Isabel dos Santos in Angola fell through, leaving the company with no outlets in Angola either. Asked to comment on whether a return to Mozambique was among the company’s short-term goals, a representative for Sonae chose not to comment at this time.
