The-Accountant-Sep-Oct-2017-Final

Economy
on. The owners were reluctant to cede
control to someone who was taking
up only 30 per cent of the company.
So the investors walked away, leaving
Nakumatt’s owners with 100 per cent,
but a growing mountain of urgent
challenges. The 100 per cent may soon
turn out to be 100 per cent of nothing,
as the iconic bronze elephants which
grace the entrances of many Nakumatt
branches turning an embarrassing white.
Another strategic weakness that is
adding to Nakumatt’s woes is its reliance
on rented premises. The company is now
hostage to the forbearance of landlords
whose rents remain unpaid, many of
whom have pressures of their own from
financial institutions that advanced them
money to put up malls which are accruing
arrears but not bringing in the cash they
need to meet their obligations. The
financial institutions who are carrying
a big portfolio of advances secured on
shopping mall property are in a dilemma.
If they foreclose, and take possession of
the properties, cash buyers have become
scarce and those that are still in the
market are looking for bargain basement
prices. And no-one is interested in
borrowing to buy a property which is
unlikely to attract paying tenants.
One likely outcome of the demise
of the supermarket chains will be the
increased penetration of the East African
market by multinational retail giants
with deeper pockets, stronger business
models, superior management skills,
and greater economies of scale. Foreign
ownership of the retail sector is likely to
lead to increased importation of foods
and consumer goods from the countries
where the multinational chains are
domiciled, and where they are able to get
massive discounts from their suppliers,
which lowers their cost base so much
that they are still able to cover the costs of
shipping from Southern Africa, Europe,
or even North America. If foreign
suppliers are able to increase their market
share of the East African market for fastmoving
consumer goods, an increasing
number of local manufacturers, and the
farmers who supply them, will be driven
to the wall. In the age of globalisation,
East African governments will have very
few economic tools at their disposal to
stem the rising tide.
clivemutiso@gmail.com
september - october 2017 23