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Rise, exits of supermarket in Tanzania:  implications to  farmers, agro-processors

Rise, exits of supermarket in Tanzania:  implications to  farmers, agro-processors

The supermarket upsurge has yet to be firm in Tanzania as it has in other countries in the region and perhaps compared to other parts of the world.

Within east Africa after years of attempting to have their brands or enters partnerships, supermarket chains in my assessment have only succeeded to take over a big sales portion of food retail space in Kenya and, to a lesser extent, some of its neighbouring Uganda.

They have made some gains in Rwanda and are not quite sure what is like in Burundi but, their share of the overall food market and buying food from these stores remains small or from an investors point of view, the business isn’t cost effective.

The news that well-known South African store, known as Game, is lined up to close its doors in Tanzania, not only shocked my expectation but reminded me of Shoprite from south Africa; Uchumi and Nakumatt from Kenya, who at different times decided to close their doors in the Tanzanian market.

Much as many shoppers might view this exit as a normal exit, as the government, known to be putting in place setting aimed at attracting investment one need to go further and think not only critically but strategically about what this will exit mean to emerge homegrown entrepreneurs who might want to invest in such sector.

While joining those shocked with Game exit news, was triggered to think beyond a common man’s sight as to what is likely to be implications of such for horticultural farmers and companies that have borrowed from financial institutions earmarked the Game as their off taker?

Likewise, reflection went further to try to think is Game exit instigated by the high cost of operation.

The unpredictability of supplies from local suppliers both farmers and those adding value or caused by logistic issues or the fact that the culture of most Tanzanians isn’t there yet at buying their groceries and other home appliances from supermarkets and malls? Or is increased the small efficient retailer’s also known as mini-supermarket or the so called “magengeni” meaning food and vegetable vendors found across upcoming urban areas share squeezing out of larger supermarkets?

All these thoughts were reverberating in my thinking cognisant of the fact that there has certainly been a rapid growth in the role of supermarkets in almost all parts of the world although measuring the exact market shares for a place like Tanzania is complicated by a lack of reliable data and difficulties in defining what exactly is meant by the supermarket to many local Tanzanians.

In an endeavour to deep dive on survival and consequence of the presence of supermarkets make to believe that in Tanzania as elsewhere, the growth of supermarkets can be linked to increased demand for the services they can offer, resulting from but not limited to rapid urbanization, per capita income growth and importantly the growth of a middle class.

Another reason in my opinion and analysis is increasing employment of women, with a consequent increase in the opportunity cost of their time.  Households are said to be cash rich, time poor and this could lead to a demand for meals that are easier to prepare i.e., processed products and for retail outlets that offer a wider range of prepared products.

This trend has been enhanced by the development of new products that meet the needs of this new market triggered by effects of globalisation of lifestyles, particularly among younger people a demographic trend, with a snowballing percentage of young people growing customed to credit modern forms of payments i.e., cards, which might be rarely accepted by the known mangi shops or magengeni food outlets or traditional markets.

Furthermore, changes in family structure with, in Tanzania, a growing proportion of nuclear  families and, even, one-person households, as opposed to extended families and reduction  of  effective food  prices for  consumers  because

of supermarkets’ greater ability to control costs through economies of scale, improved logistics, etc. could be a reason behind the presence of supermarkets as growing access to refrigerators, allowing larger quantities of food to be stored, and to cars, allowing shopping to be done away from the immediate vicinity of the home and for larger quantities to be purchased at any one time.

But with all such benefits including a wider range of products and, particularly for fresh fruits and vegetables, to the possibility of being able to consume many products out of season, why to-date a good number of supermarkets have closed their door in Tanzania although poised to attain middle income status?

I might be wrong, but my honest opinion is that government and decision makers must critically need to take care in concluding the impact of these exit trends linking it to the backward linkages amidst effort the government is taking to call for value addition along various value chains.

Critical thinking on the departure of supermarkets from Tanzanian soil is vital because, in my opinion, where many people depend on agriculture for their food, changes occurring in the agri-food systems especially on the demand side could have large implications for the rural poor who are producers.

Seeing presence and well flourishing investment in supermarkets in Tanzania in my opinion is thus of concern to those involved in attracting investment, ministry of industry and trade, bureau of standards, local governments, and revenue authority to mention a few because supermarkets in my assessment and from an economic point of view are important markets for farmers and processors that government is striving to encourage to increase efficiency and productivity.

But the potential threat of some exiting Tanzania might not only send tremors, but a workup calls on what can be done to attract more supermarket chains to set up in Tanzania. Since Tanzania depend on agriculture as the mainstay of its economies, and because small-scale farmers comprise most agricultural producers, and the government is encouraging value addition to create more value and more taxes, seeing off takers leaving in my view would pose a real threat to livelihoods, poverty alleviation initiatives, and rural development in general.

As Massmart operates the Game Stores unveiled their plan to exit up of its 14 Game stores in East Africa and West Africa.  What plans are in place to retains the remaining ones considering their vital role or our policymakers are just pulsed just like me and you hearing exit news? Massmart owns five Game stores in Nigeria, four in Ghana, three in Kenya, one in Uganda, and one in Tanzania.

The exit plan according to Massmart is to ends five-year stint believed to be faced with headwinds trying to crack the local market. Could one explain what would this mean in our Tanzanian context?  Are we ready to export jobs opportunities and instead import products that would put more pressure on Tanzania balance of payment? Could something strategically be done to prevent other supermarkets from exiting tomorrow through re-thinking of their business environment?


IN last week’s article, we commenced discussion ...


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