According to Reuters, the CEO of one of South Africa’s largest publicly traded clothing chain, Truworth, announced that it has closed down its operations in Nigeria due to stringent import restrictions put in place by the government of the country.
“We were unable to operate the stores properly any longer because we were unable to send merchandise to the stores because there’s regulation preventing that,” Michael Mark told Reuters in telephone interview.
In a bid to boost local production and save the ailing Naira, Nigeria put in stringent measures, which are currently affecting imports into the country. The government has successfully banned the import of about 700 goods. For the importers who were not affected, they have been unable to bring goods into the country due to a shortage of foreign exchange.
Apart from lacking access to foreign exchange to stock their stores, a major challenge faced by Truworth was also the high cost of rentals. It would be recalled that in November 2013, a South African retailer, Woolworth closed down its business operations in the Nigeria due to high rental costs, duties and complex supply chain processes. This happened barely 18 months after it expanded into the country.
Looking at the two companies that have left the country, a common complaint is the high cost of rent in Nigeria. But even though these companies complained of rental costs, their abilities to apply the right strategies in their unique spaces is also questionable. This is because there are other South African retailers, such as Pick n Pay and Shoprite, currently thriving in the Nigerian market.
However, Truworth seems to be doing well in its South African market. According toReuters, as of yesterday, the company reported a 21 percent increase in half-year profits, boosted by the recent acquisition of a British footwear chain. Its headline earnings per share totalled 404 cents in the six months to the end of December compared with 333 cents a year earlier. Shares in Truworths rose as much as 4 percent shortly after the announcement, before paring gains to trade 1.8 percent higher at 95.49 rand.