Why does Uganda’s economy fail to sustain businesses like Carrefour?

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Carrefour opened its first store in Kampala in 2019 and has racked up losses, according to its September financial statement. Shoprite, which opened in 2000, packed its bags and left. Nakumatt failed. Uchumi failed. Game failed.Had the trolleys in these supermarkets groaned under the weight of serious shopping, the stores would still be open.The failure of these supermarkets is worth paying close attention to. They have been failing despite impressive economic growth averaging six percent. When, for example, former IMF managing director Christine Lagarde visited Uganda in January 2017, years after Nakumatt and Uchumi had closed, she said: “Uganda has experienced a threefold increase in per capita GDP over the past generation. And you have reduced extreme poverty to one-third of the population.”Ms Lagarde said she does not normally begin her speeches with statistics, but her speech about Uganda was an exception. Uganda, she said, is an African success story and that its economic growth has made it one of the countries that have more than achieved the United Nations goal of halving poverty. But this growth, it seems, has yet to create considerable purchasing power to sustain businesses like supermarkets. True, few Ugandans buy goods from supermarkets, and this could partly explain the failure of the supermarkets. Nonetheless, the principal reason people choose local shops over supermarkets is that they do not have sufficient purchasing power. When there is a strong middle-class and people’s incomes are rising significantly, supermarkets have high chances of succeeding.While there may be other reasons for the supermarkets’ failure, weak purchasing power appears to be the foremost.Supermarkets stock fast-moving goods they know will attract customers. But the kind of goods Carrefour in Kampala stocks suggest there is not a sufficiently large number of customers with real purchasing power. The size of stores Carrefour opens in places like Uganda is telling. They tend to be relatively small. Yet in the United Arab Emirates, Saudi Arabia and Qatar, for example, Carrefour opens large stores with a wide range of commodities.Carrefour stores in Uganda or Kenya stock a limited variety of goods. A Carrefour store in Kampala will likely not have the same goods as the Saudis or Emiratis would expect to find on the shelves. That is where purchasing power comes in. Uganda’s economic growth may be reducing poverty, but the people who have banished poverty still cannot afford goods in supermarkets. With the exception of stores strategically located in suburbs like Lubowa, Entebbe and central Kampala, which cater to foreign diplomats and expatriates like staff for international organisations, a supermarket chain in Uganda has slim chances of doing brisk business.The economic environment is distinctly harsh when you are operating in a country where, according to the Bank of Uganda, only one percent of working Ugandans earn above Shs1m. This means the big shopping trolleys will be used by a handful of customers; the rest will go for baskets that can accommodate a few bottles of mineral water, milk, butter and bread. That is your typical supermarket customer.For Uganda to have dozens of stores with comparable sizes to those run by Carrefour in Europe and the Middle East, current growth will have to be sustained for decades while incomes rise substantially. It is worth mentioning that countries rarely have a thriving supermarket industry when the vast majority of their people still live in poverty. Incomes, among others, will build a foundation for Carrefour and others to be truly profitable in Uganda.

Mr Namiti is a journalist and former Al Jazeera digital editor in charge of the Africa desk [email protected]

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