South African fashion retailer TFG (The Foschini Group) is assessing whether its twelve stores in Kenya and Ghana will remain open. The company will review economic prospects, tax legislation and lease costs to decide if it is worth continuing.

The announcement follows on the heels of Woolworths’ exit from Ghana and a broader pattern of South African retailers struggling in expansion markets. New TFG CEO Anthony Thunstrom highlighted a vicious cycle in which low commodity prices hit economic growth, devalue currency and also incentivise governments to raise taxes to boost revenues.

“The other difficulty is, because of where the commodity cycle is, government revenues are massively down in those countries. So you get all sorts of funny tax things coming up where suddenly the VAT rate has increased overnight or you can’t claim the input VAT and your cost of business goes up 20%.”

Thunstrom has also highlighted another recurring theme for South African retailers: Southern cone countries offer a better balance of risk and opportunity.

“Closer to home has been better for us. Much less risky and at the moment we’re doing okay.”