Harare – Shoprite's [JSE:SHP] expansion in West Africa has provided a growth pad for Zambian meat processing company Zambeef, which is running in-store butcheries in partnership with the SA grocer in the region.
South African retailers, including rival stores under Pick n Pay, are expanding into the rest of Africa markets as competition and market maturity in some key areas back home intensifies.
Zambeef is now anticipating Shoprite's growth in West Africa to continue into its 2017 year. The company has just completed a successful capital raising exercise for about $65m invested by the UK’s CDC Group after a share issue finalised in September.
Shoprite has said that it will look at other markets in Africa for its expansion strategy, with growth outside its home market significantly contributing to its 17% profit growth for the year to June 2016.
"Zambeef’s West African operations have grown, with six new Shoprite stores opening in Nigeria and one in Ghana during the year, taking the West African retail network to 25 Shoprite stores and six Master Meats outlets,” said Carl Irwin, chief executive officer of Zambeef.
Such momentum will likely continue into 2017, with a further four Shoprite stores in Nigeria and one in Ghana expected to be opened. The Zambian meat company - which specialises in beef and chicken products - operates in-store butcheries inside Shoprite stores in West Africa.
The butchery and retail operations Zambeef runs on its own and in partnership with Shoprite generate about 56.7% of the firm’s total revenues. After-tax profits for the company amounted to $14.5m compared to a loss of about $7.7m in the previous year, while earnings before interest, taxes, depreciation and amortisation increased by 38% in US dollar terms to $29.2m.
The model is proving lucrative for the company and also benefits Shoprite through extra income and fewer responsibilities, as Zambeef runs the butcheries on its own. Shoprite is sticking it out in Nigeria despite economic difficulties and currency exchange volatility in the West African country.
“Shoprite are continuing their impressive expansion and, as a result, our operations will continue to grow strongly. It has been a difficult year for the Nigerian business and economy,” said the company.
With urbanisation in most of Africa gathering pace, Zambeef is keen to expand its footprint and has earmarked further exports into other regions of the continent. It already exports its meat products to Zimbabwe, Angola, the Democratic Republic of Congo, Burundi, Botswana and Malawi.