The Shoprite Story: It knew what things were worth
Around twenty nineteen, Shoprite Holdings, Africa’s largest food retailer, traded in about fifteen countries.
It had more than two thousand three hundred stores.
Its first store in Lagos had opened in December two thousand and five, and Lagos became the emblem.
A South African supermarket chain in Nigeria’s biggest city stood for South African retail moving north, across the continent.
Then the lights began to go out, one country at a time.
Nigeria. Kenya. Uganda. Madagascar.
The Democratic Republic of Congo. Ghana. Malawi.
Seven exits, all since twenty twenty.
Today the group has more than three thousand seven hundred stores, counting franchise outlets.
Outside South Africa, it now trades in seven neighbours in the south of the continent.
Its supermarkets beyond the border bring in about eight per cent of its sales.
Over those same years, at home, it gained market share for eighty-nine consecutive months, by its own count.
EIGHT STORES
In November nineteen sixty six, Barney Rogut and Basil Geller opened a grocery store in the old Gaiety Cinema building in Wynberg, in Cape Town. It was the first Shoprite.
By nineteen seventy nine there were eight stores in and around Cape Town, turning over about six million rand a year.
It was a small regional chain in apartheid South Africa, trading beside far larger ones: OK Bazaars, Pick n Pay and Checkers.
The only challenge the record documents from those years is scale. No source describes a particular setback.
In nineteen seventy nine, a clothing retailer called Pep Stores bought the chain. The price was about one million rand.
A business putting six million rand a year through its tills changed hands for about a sixth of that.
Rogut and Geller stayed on in management, and the staff were kept.
To run the chain, Pep sent its financial director and head of operations.
He was a chartered accountant, born in nineteen forty six in Porterville, in the Western Cape, who had studied at Stellenbosch and qualified in nineteen seventy. His name was Whitey Basson.
Basson would run Shoprite for thirty seven years. He never owned it.
In nineteen eighty one, ownership arrived from another direction. A businessman named Christo Wiese bought control of Pepkor, the group behind Pep Stores, and so became Shoprite’s controlling shareholder.
Wiese did not start the business either. What he brought was capital.
So within two years of the sale, the company had taken an unusual shape.
The man running it did not own it.
The man who owned it did not start it.
And the two men who did start it leave the record after the sale.
There is no garage in this story, and no founder with a single shop. There is a purchase, at a price, by a clothing business, and an accountant sent to run it.
In nineteen eighty six, Shoprite listed on the Johannesburg Stock Exchange.
Its modern life began as a small business, bought cheaply and handed to someone who read balance sheets for a living.
Between nineteen seventy nine and nineteen ninety one, the chain grew from eight stores to more than two hundred. Those were the last years of apartheid.
No source we reviewed examines how Shoprite hired in that period, where it chose to build, or what positions it took.
That is not a finding that there is something there. It is a finding that nobody has looked.
ONE RAND
In nineteen ninety one, Shoprite took over Checkers, one of those larger chains.
Checkers was controlled by the insurer Sanlam. It had a hundred and sixty nine stores and sixteen thousand five hundred staff, and it was failing.
Shoprite, with roughly seventy stores of its own, was taking over a chain more than twice its size.
The deal was a reverse merger, and Shoprite paid about fifty five million rand.
After it, the group had two hundred and forty one outlets and about twenty two thousand six hundred staff.
By the company’s own account, Checkers was back in profit within nine months.
Christo Wiese became chairman that year, a post he would hold for twenty nine years.
It was the first proof of a method.
Find a chain that is losing money. Pay what it is actually worth, which is very little. Then run it on cost until it earns again.
On the first of November, nineteen ninety seven, Shoprite bought OK Bazaars from South African Breweries. The price was one rand.
OK Bazaars was another of the big chains Shoprite had grown up beside.
It had about a hundred and fifty-seven stores, a hundred and thirty nine under its own name and eighteen large Hyperamas, and about fourteen thousand employees.
The seller did not simply hand it over. South African Breweries guaranteed five hundred and forty million rand in assets and loan accounts as part of the deal.
The buyer paid one rand. The seller stood behind more than half a billion.
The business was worth less than nothing, and its owner paid to be rid of it.
With OK inside it, the group had about four hundred outlets and an expected turnover of about sixteen billion rand. Eighteen years earlier, the whole chain had turned over about six million.
Of the three big chains Shoprite had traded beside in nineteen seventy nine, it now owned two. The third was Pick n Pay.
Whitey Basson later gave his verdict on the price, as quoted by CFO South Africa.
“We paid one rand for this business, and we paid too much.”
It is a joke, and it is also the method in one sentence. Even one rand is too much for a business that loses money, unless you know how to make it stop.
In the accounts of the turnaround, making it stop meant cuts. Senior staff were retrenched. Loss making stores were closed.
A hundred and twenty person advertising department was shut down.
Stores that were not converted were offered as franchises. The Mail and Guardian reported at the time that those franchise opportunities would go especially to redundant employees.
In nineteen ninety nine, two years after the deal, OK reported a pre-tax profit of about five million rand.
It had taken two years to go from worth less than nothing to profitable.
The company says the OK Bazaars deal saved fourteen thousand and ninety-one jobs.
The same accounts describe the retrenchments, the closures, and the franchises offered to people who had been made redundant.
About sixteen and a half thousand people came with Checkers. About fourteen thousand came with OK.
No source counts how many of them still had jobs two years later. None of them is quoted, anywhere.
THE VOTES
In two thousand, Christo Wiese was issued a new kind of Shoprite share. They were called deferred shares, and each one cost a tenth of a cent.
They carried votes. They carried no economic rights.
They could not be passed on to anyone else, and they would lapse if his ordinary shareholding ever fell below ten per cent.
Wiese’s say over Shoprite was far larger than his financial stake in it.
Reported estimates of his share of the votes ran from about a third to forty two per cent, moving with the size of his ordinary holding.
His money is the reason the group exists at all. The votes are a separate matter, and they come down to price: what a say in a company is worth.
By twenty sixteen, Wiese held about twenty three per cent of the retail group Steinhoff and about seventeen per cent of Shoprite. He was the largest shareholder in both, and he pushed for them to merge.
On the thirty first of December, twenty sixteen, Whitey Basson retired after thirty seven years.
His last pay package, a hundred point one million rand, drew a protest from the union federation COSATU.
Pieter Engelbrecht became only the second chief executive in Shoprite’s history.
In February twenty seventeen, the merger was abandoned. Other large shareholders, among them the Public Investment Corporation, did not agree on the price.
It died over what Shoprite was worth.
Within months, Steinhoff tried a second route. In August and September twenty seventeen, its African retail arm was structured to take fifty point six per cent of the votes in Shoprite.
It would get there through options over shares held by Wiese, by the Public Investment Corporation and by an investment company called Lancaster.
And through a buyback of Whitey Basson’s own shares, eight point seven million of them, for one point seven billion rand.
The Basson buyback was the piece that tipped it over half. Without it, the structure fell short. With it, control would pass.
Business reporting at the time noted that the structure avoided a change of control offer to Shoprite’s minority shareholders. Control would move without anyone offering to buy them out.
None of it had anything to do with how the stores were run. It was built out of votes.
In December twenty seventeen, Steinhoff disclosed accounting irregularities. Its share price fell by more than eighty per cent.
Wiese was Steinhoff’s chairman when it collapsed, and he lost heavily.
By the fifteenth of December, the control deal had unravelled. Wiese kept his Shoprite shares and his votes. Nothing happened to Shoprite.
Had the deal completed a few months earlier, Shoprite would have been consolidated into a company that turned out to be fraudulent.
In twenty seventeen, the Steinhoff documents had put a value of four billion rand on Wiese’s deferred shares. In twenty nineteen, Shoprite’s board proposed buying them for three point three billion.
Votes that had cost a tenth of a cent each were now priced by the board in billions.
More than fifteen per cent of shareholders signalled that they would vote against it, and the proposal was withdrawn.
Two years after those votes had nearly passed to Steinhoff, shareholders would not pay three point three billion rand to buy them back.
In November twenty nineteen, shareholders voted against Wiese’s reappointment as chair.
On the sixteenth of November, twenty twenty, he retired as chairman, after twenty nine years in the chair and forty one years on the board, by one count. He stayed on as a non-executive director.
Wendy Lucas-Bull, previously chair of Absa, succeeded him, the first woman to chair Shoprite.
In May twenty twenty six, Wiese raised about a billion rand against his Shoprite stake, and kept the votes.
The deferred shares still give him voting power in Shoprite. No source we reviewed states how much.
THE MAP
In nineteen ninety, Shoprite opened in Namibia, its first market outside South Africa.
Zambia followed, with a first store in Lusaka in nineteen ninety five.
Uganda came in two thousand, and Madagascar in two thousand and two.
In December two thousand and five, it opened in Lagos, Nigeria.
The Democratic Republic of Congo followed in twenty twelve, with a store in Kinshasa, and Kenya in twenty eighteen.
At home, by around twenty ten, it had become South Africa’s largest grocery retailer, with a reported market share of about thirty four per cent.
By around twenty nineteen, the map covered about fifteen countries.
No source we reviewed says how much of the group’s sales those countries produced at the peak.
In September twenty nineteen, xenophobic violence against foreign nationals in South Africa set off reprisals in Nigeria.
Protesters in Nigeria targeted businesses seen as South African.
Shoprite stores in Lagos and in Ibadan were looted.
Stores closed temporarily in Nigeria, in Zambia, and in South Africa itself.
A South African brand had become a political target, standing in for the country it came from.
The exits that followed were driven by losses.
In Kenya, Shoprite had four stores. In the year to June twenty twenty, its losses there were reported at three point two billion Kenyan shillings, and it announced that it was leaving.
In twenty twenty one, it sold its Nigerian business, about twenty five stores, to Ketron Investment. That was sixteen years after the first store opened in Lagos.
The same year it announced the sale of Uganda, with about five stores, and Madagascar, with about ten. Both were losing money.
The Democratic Republic of Congo went in twenty twenty two.
Malawi, with about five stores, and Ghana, with seven, went in twenty twenty five. The Ghana business sold for seventy million rand.
The reasons the company gave were specific. Currency volatility. Double digit inflation. Import restrictions and duties. And leases pegged to the US dollar, worst of all in Nigeria and Angola.
It left Nigeria. It is still in Angola.
Under a dollar-pegged lease, the rent is set in dollars, while the store earns in naira, or shillings, or kwacha.
When the local currency falls, the rent goes up, however well the store is run.
Every item on that list is a cost of the same kind. Currency moves, inflation, import rules and dollar rents are costs that operating skill cannot manage down.
No store can be run tightly enough to get around an exchange rate, or an import restriction.
Managing costs down was the thing Shoprite had been built to do. The company that knew OK Bazaars was worth one rand, and no more, priced its own stores across the continent the same way.
In seven of those countries, the numbers did not work, and it left. It was the arithmetic that had built the company, turned on its own map.
Leaving happened to people. In Kenya, hundreds of jobs were reported lost. A landlord in Nairobi claimed five hundred and twenty million shillings, and the outcome of that claim is not known.
Beyond that, no source we reviewed says what happened to the staff, to the local suppliers, or to the malls that were built around Shoprite as their anchor.
What remains outside South Africa is seven neighbours: Angola, Botswana, Eswatini, Lesotho, Mozambique, Namibia and Zambia.
Together, those supermarkets bring in about eight per cent of the group’s sales. Zambia, the second country it entered, grew by twenty seven point four per cent last year.
Mozambique is slow, its growth tied to a gas project now delayed to twenty twenty nine. In Angola, income from government bonds fell as they matured.
This is the map the story opened on.
HOME
Pieter Engelbrecht took over as chief executive in January twenty seventeen. He had spent about twenty years inside the company. The exits from the continent all happened on his watch.
He moved Checkers upmarket, into a premium banner. By the company’s claim, it is growing about five times faster than the premium food market.
In the year to June twenty twenty six, Checkers and Checkers Hyper sold a hundred and five point two billion rand worth of goods, up ten per cent.
Shoprite and Usave held the value end, and they are still the larger half, at a hundred and twenty one point six billion rand. Engelbrecht still calls the group a value retailer.
In November twenty nineteen, Checkers launched Sixty Sixty: groceries delivered on demand, straight from the stores it already had.
The riders are independent contractors, engaged through a third party. Shoprite counts about twenty thousand job opportunities from Sixty Sixty in its job creation figures.
No primary source gives the number of riders or what they earn.
Riders have gone on strike when a daily minimum of three hundred and fifty rand was removed, and in Durban in twenty twenty five. The company blamed the Durban stoppage on disgruntled former contractor riders.
In the year to June twenty twenty six, Sixty Sixty sold twenty five point five billion rand of groceries, up thirty four point seven per cent, about eleven per cent of sales in its core supermarket business.
It runs from nine hundred and ninety seven stores. Management says it is now profitable.
In September twenty twenty six, Engelbrecht said: “What we thought may be our Achilles heel is our big store footprint… became our strength.”
By its own count, Shoprite has now gained market share for eighty-nine consecutive months.
Pick n Pay, the rival that defined South African grocery for two decades, has had to raise about twelve and a half billion rand, through a rights issue and the listing of its Boxer chain, and it still expects a larger loss.
Shoprite employs about a hundred and seventy four thousand four hundred people, which makes it South Africa’s largest private-sector employer.
The company says it created five thousand four hundred and ninety one new jobs last year, that its employee share trust has paid one point three billion rand to staff, and that it has spent more than a billion rand on training.
For twenty years, unions have argued that much of that work is variable time or casual. In March twenty eighteen, workers held a two day national protest, demanding a guaranteed forty hour week and permanent posts.
The last published breakdown is undated, probably from the mid two thousands. It put full time staff at about thirty five per cent. No current figure exists.
The size of the workforce is sourced. What kind of work it is, today, is not.
In twenty nineteen, a Competition Commission inquiry into grocery retail found exclusive leases in more than seventy per cent of the roughly two thousand shopping centres it examined. Those clauses kept smaller competitors, spaza type traders among them, out of the malls.
In twenty twenty, Shoprite became the first major grocer to sign a consent agreement to phase them out. Exclusivity ended at once against small businesses and in centres outside the cities.
For urban centres, after Shoprite argued that the original terms favoured its rival, the Tribunal in twenty twenty three extended its deadline to the end of twenty twenty six, the same as Pick n Pay’s.
Now it is moving toward those same small traders. It has bought a majority stake in R and A Cellular, which runs more than fifteen thousand terminals in the informal market.
It also runs a Cash and Carry platform aimed at spaza owners, and it describes the informal sector as a nine hundred billion rand opportunity.
No source measures what Shoprite has meant for informal traders, for better or worse, and no trader is quoted.
Shoprite has had two chief executives in forty seven years. No plan for a third has been made public.
In nineteen seventy nine, Pep Stores bought Shoprite for about one million rand.
In nineteen ninety seven, Shoprite bought OK Bazaars for one rand.
In twenty twenty four, Shoprite agreed to sell OK Furniture, the surviving piece of that deal, to Pepkor, the group that grew out of Pep, for about three billion rand.
The sale has not closed, and it is not expected to before March twenty twenty seven. This is Asili Africa. Every empire has an origin. See you on the next one.
Key Takeaways
- EIGHT STORES. In November nineteen sixty six, Barney Rogut and Basil Geller opened a grocery store in the old Gaiety Cinema building in Wynberg, in Cape Town.
- THE VOTES. In two thousand, Christo Wiese was issued a new kind of Shoprite share.
- THE MAP. In nineteen ninety, Shoprite opened in Namibia, its first market outside South Africa.
- HOME. Pieter Engelbrecht took over as chief executive in January twenty seventeen.
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