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Promoting Good Governance.

FACT CHECK: Are Shoprite supermarkets in Nigeria franchise outlets?

FOLLOWING recent xenophobic attacks and violent reactions in Nigeria that have seen properties of companies believed to be owned by South Africans being damaged in protest, some have claimed that Shoprite, one of the affected companies, is a franchise brand and local stores are owned and managed by Nigerians.

“Shoprite in Nigeria is not owned by a South African,” one Twitter user, @HustlerVibez, with 23,900 followers wrote.

“Nigerians own it!! It’s a fucking franchise. Y’all are hurting your own people. You Nigerians should read more cause some of y’all are just plain stupid.”

The tweet has been liked over 3,600 times and shared by over 2,300 users. Several other users of the social media platform have made similar statements. But checks by The ICIR show that the claim is incorrect.

Our findings

The Shoprite Group has repeatedly referred to its stores in Nigeria and other countries as corporate stores. It did so in its 2017 integrated report, where it stated that it has 2,301 corporate stores across Africa, with 23 of them located in Nigeria. It  also did the same thing in its integrated report of 2018 when the number increased to 2,425 across Africa and 24 in Nigeria.

At the end of June 2019, Shoprite operated a total of 2,934 outlets in 15 countries: including 2,319 corporate stores, 25 of which are in Nigeria (24 Shoprite stores and one Usave store).

Source: Shoprite Holdings 2018 Integrated Report, p. 43

Corporate stores are different from franchise stores. According to Stefon Walters, author of Finessin’ Finances, in the case of retail franchising, a company “licenses its intellectual property, business procedures, business model and brand to a franchisee who then owns and operates the store”. He explains that the franchisee pays an upfront cost and then subsequently pays royalty fees to the brand owner. He must also uphold the corporate policies agreed upon.

On the other hand, in the case of corporate stores, “the parent company is solely responsible for all stores’ business-related activities. From picking retail locations to hiring employees to operations to tax planning, they handle it all”. This is also the explanation of Encyclopedia Britannica and US-based franchise consulting firm Accurate Franchising.

Shoprite, however, also has up to 418 franchise outlets, but these are not in Nigeria. Its OK Franchise Division, existing in South Africa, Namibia and Swaziland, franchises “five different types of retail formats (OK Foods, OK Grocer, OK MiniMark, OK Express & Sentra), a liquor outlet (OK Liquor) and a wholesale outlet (Megasave)”.

Source: Shoprite Holdings 2018 Integrated Report, p. 43

1.5 per cent of Shoprite staff in Nigeria

While Shoprite generally employs 147,478, over 2,000 of these are staff in Nigeria. The local subsidiary states that 99 per cent of its workers are Nigerian citizens and it has built a relationship with “over 300 leading Nigerian suppliers, small businesses, and farmers”.

Indirect subsidiary

Retail Supermarkets Nigeria Ltd is listed as an indirect subsidiary of Shoprite Holdings Limited in its financial statements of 2018, unlike some of its companies in South Africa and Mauritius. This was registered in Nigeria, according to the Corporate Affairs Commission, in 2004, and is based in Victoria Island, Lagos.

Parent companies do not have complete control over indirect subsidiaries and do not have enough interests to entirely affect their operations. An instance of this is a joint venture where one of the founding companies has more than 50 per cent interest. Indirect subsidiaries may be formed in order to raise capital or attract skilled partners.

Verdict

While it is incorrect to say Shoprite stores in Nigeria are owned and run by Nigerians, they are managed by an indirect subsidiary of the parent company. This means other individuals or corporate bodies have financial stakes in the venture.

It is also the case that Shoprite employs over 2000 people in the country, mostly Nigerians, and sells products from Nigerian farmers and local businesses.

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