Carrefour takes US$28.3m loan facility from Standard Bank to finance expansion in Kenya

KENYA – Dubai-based conglomerate Majid Al Futtaim (MAF) has obtained a sh.3 billion (US$28.3m) loan facility from South Africa’s Standard Bank Group to finance expansion of its Carrefour franchise in Kenya.

“Provided Majid Al Futtaim, Dubai’s leading shopping mall, retail and leisure group with a Sh3 billion (US$28.3m) loan to expand its retail presence in Kenya. MAF currently has seven Carrefour hypermarkets in Kenya and plans to open another six by the end of 2020 ” Standard Bank said in its latest annual report.

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Last month Carrefour Kenya recorded a 28 percent jump in sales to Ksh18.7 billion (US$175.9m) for the year ended December 2019, an increase from Ksh14.6 billion (US$137.3m) recorded in 2018.

This was evidence that its aggressive expansion bid across major towns in the country was paying off.

The retailer said since launching in Kenya four years ago, the franchise of the French hypermarket chain had grown faster than expected; attracting a strong clientele base among the country’s expanding middle class.

The retailer has been expanding its presence in Kenya taking over spaces previously occupied by struggling supermarket chains, including Nakumatt and Uchumi, as well as opening new outlets to cash in on the underserved market.

It has seven branches in Kenya with the eighth one set to open on Uhuru Highway near Nyayo roundabout. It was scheduled to be opened before the end of March but has been delayed due to the current Covid-19 pandemic.

The new credit facility signals further expansion and replaces earlier loans that Carrefour Kenya had taken to launch its operations.

The retailer took Sh1.5 billion (US$14.1m) loan from its parent company MAF and repaid them last year ahead of their contractual maturity.

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Carrefour Kenya’s expansion can be seen through a sharp increase in its asset base. The company reported total assets of Sh7.1 billion (US$67m) in the year ended December 2019 compared to Sh4.5 billion (US$42.5m) the year before, a growth of 57.2 percent.

The retailer has been attracting shoppers through a mix of loyalty programmes and aggressive discounts on a wide array of merchandise.

In other related news, the Competition Authority of Kenya (CAK) has started investigating supermarkets over delayed payments to suppliers without justification.

In a notice, CAK Director General Wang’ombe Kariuki requested local suppliers owed by supermarkets beyond a 90-day credit period to submit information to the watchdog as part of the investigations.

Mr Kariuki claimed that supermarkets could be “abusing buyer power” hence contravening the Competition Act that is meant to protect suppliers.

“The Authority has commenced investigations into possible contraventions of the Act in the retail sector through delays in payment of suppliers without justifiable reasons,” said Kariuki.

Persons found abusing buyer power face, upon conviction, a jail term of not less than five years or a fine of at least Sh10 million (US$94,000).

Delayed payments to suppliers have been a problem in the country. Nakumatt, that fell with a Sh38 billion (US$358.9m) debt, owed suppliers Sh18 billion (US$170m) while Uchumi, that recently survived a liquidation vote, owes over Sh5 billion (US$47.2m).

However, the issue of non-payment is nowadays well monitored as there are methods installed to pursue payments.

In 2018, CAK established a Buyer Power Department to address increased concerns over the negative impact on businesses caused by delayed payment of supplies.

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