Cape Town - Woolworths has completed the buy-back of its franchise businesses in Botswana, Namibia, Swaziland and Ghana, the retailer announced on Thursday.
"This significant investment signals Woolworths' commitment to driving growth in key geographies on the continent, creating a wholly-owned operation of major scale and bringing turnover in African markets outside of South Africa to R1bn per annum," the company said in a statement.
While the 100% buy-back of the franchise businesses in Botswana, Namibia, Swaziland and Ghana is still subject to competition commission approval in three of these countries (Namibia, Botswana and Swaziland), Woolworths is confident that the process will be completed as planned.
Once confirmed, the current 33 stores in these countries will operate as Woolworths corporate stores.
They all trade predominantly in clothing and general merchandise, but Botswana also boasts a significant food business.
The transaction marks the end of franchise stores in African countries.
All future investments on the continent will be in the form of either corporate stores or joint ventures with local partners.
“I am delighted that we have retained Mr Handa’s considerable retail skills in the group," said Woolworths CEO, Ian Moir Commenting on the retention of its long-term regional partner and former franchisee.
Handa will become a non-executive director of Woolworths in both Botswana and Namibia on conclusion of this deal.
Woolworths also announced the decision to pull out of its three stores in Nigeria, following an assessment of its operations in the West African country.
Pulling out of Nigeria
High rental costs and duties and complex supply chain processes made trading in Nigeria highly challenging.
The Nigerian business was unable to sustain a compelling product and value proposition which represents the brand well and meets the needs of the Nigerian customer in a climate that is hot throughout the year.
Given that Woolworths could not see these circumstances changing in the medium term, the investment was deemed no longer viable.
In terms of the withdrawal from Nigeria, Moir explained that Woolworths assesses the viability of all its investments on an on-going basis.
He also expresses disappointment that the Woolworths clothing and general merchandise business in Nigeria has not been successful, despite several attempts to improve performance.
“When an investment no longer generates viable returns, difficult decisions have to be made to contain costs," said Moir.
"However, Woolworths overall Africa strategy remains unaffected. We will continue to grow our footprint in different parts of the continent through our robust expansion plan."
The remaining 59 stores in 11 African countries will continue operating normally.”