By Kuria Kimani
Kenya generally has a positive investment climate that makes it an attractive destination for foreign investment. This can be attributed to leadership commitment to strategic partnerships and agreements. The retail industry contributes to economic growth by creating employment opportunities and avenues to make a difference in society. Giant retailers like Nakumatt and Tuskys went under due to infighting among family members, excessive debts, tax-related issues and poor management. With the big names out of the game, an opportunity for new local and foreign retailers opened up. This gave rise to retailers such as Naivas, Carrefour, Quickmart, Cleanshelf Supermarket, and Kipchimatt Supermarket.
In order to stay afloat and keep operations running, Kenyan supermarkets have sought foreign investment which are now reaping good returns.
Offshore Investors Putting Their Money In Kenyan Supermarkets
Kenyan supermarkets have had to pitch well-researched and data-backed proposals to receive investment funding. There has been significant growth and upscaling evidenced after investment funding was pumped into some of Kenya’s supermarkets. In this search, a breed of tax-notorious investors using shell companies as investment vehicles to gain access to the Kenyan retail market has emerged. For instance, Mauritius based round-tripping investors are backed by the Double Taxation Agreement signed by Mauritius and Kenya which allows for tax payment in one jurisdiction in turn making Kenya attractive to foreign investors.
These then tip the scales in favour of companies benefiting from the Mauritius treaty against local companies that have to pay hefty taxes and thus seem to be failing comparatively. Some of the foreign investors include:
Adenia Partners-Quickmart Supermarket
Adenia Partners is a private equity management firm whose headquarters are in Mauritius. The firm has been in operation since 2002 raising funds to pump into building Africa through investments in companies that meet specific criteria standards. Since inception Adenia Partners has been able to raise $500,000,000 across four funds. Nnennia Ejebe, one of the firm partners, describes the private equity as a responsible investor keen on delivering value to investors, companies and communities. Moreover, Managing Partner Alexis Caude says the firm takes their responsibility to investors very seriously. Out of twenty-five investments, the company has had a remarkable 64% exit rate. Quickmart Supermarket was a very successful case for the investment company, growing it from ten to 46 retail stores in 12 counties and creating more than 4,000 job opportunities.
Amethis Finance-Naivas Supermarket
This is among the private equity firms that have invested in Kenya’s retail industry by pumping billions in Naivas Supermarket propelling it to become the number one retailer in the country. Amethis Finance seeks to offer small and medium enterprises capital injections and support operations scaling for their clients in line with their ESG model. In collaboration with three other investors – International Finance Corporation (IFC), Amethis and DEG, Amethis Finance brought up Naivas’ valuation to Ksh 20 billion.
MCB Equity Fund
The largest banking group in Mauritius, MCB Group runs a private equity arm offering equity and quasi equity to established and fast growing businesses across Africa. The fund creates opportunities to invest in institutions, firms, and enterprises that maximize return on capital and are in line with the fund’s values and goals. Naivas Supermarket was a beneficiary of this investment in billions which boosted it’s operations leading to a store presence of seventy four outlets.
International Finance Corporation
IFC pulled resources alongside Amethis Finance, DEG, and MCB Equity Fund solely pumping in Ksh 1.6billion to Naivas Supermarket in a mega investment run. IFC is additionally set to invest more resources in Supporting Growth in Africa’s Creative Industries offering several opportunities for the youth to tap into.
German Investment Corporation
DEG is a German sovereign wealth fund whose investment in Kenya’s retail industry has been evidenced in Naivas Supermarket. With a Ksh 1 billion investment in the retailer, DEG contributed to making Naivas the leading retailer in the Kenyan market.