January 10, 2014 / 2:20 PM / in 4 years

Kenya's Nakumatt to buy Shoprite's stores in Tanzania

NAIROBI, Jan 10 (Reuters) - Kenyan retailer Nakumatt is in talks with South Africa’s Shoprite to buy its three stores in Tanzania as it moves to secure a bigger share of a large, untapped market.

Retail is a red hot sector in Africa thanks to a consumer base of 1 billion people gaining increasing spending power from robust economic growth.

The sector is typified by local players such as Nakumatt, which started off with rural shops two decades ago and has grown into a chain with 44 stores across the region, but has also pulled in global groups including Wal-Mart.

The U.S. retailer bought South Africa’s Massmart in 2011 as a springboard into the rest of the continent, joining private equity funds and other investors that have been piling in.

Although Tanzania is the second-largest economy in east Africa, it is not very well covered by Kenyan retailers, which have traditionally focused on their domestic market and neighbouring Uganda.

Nakumatt Managing Director Atul Shah said the company plans to take over two Shoprite stores in the Tanzanian commercial capital of Dar es Salaam and a third in the northern town of Arusha.

The company, which has stores in Kenya, Uganda and Rwanda, already has one outlet in the Tanzanian town of Moshi. It is Kenya’s largest retailer, with annual sales expected to reach $650 million by the end of its financial year next month.

Shah did not disclose the value of the proposed deal, which he expects to be completed in the next three to five months, but he said that it will be financed through loans from the company’s existing lenders.

Shoprite is exiting its Tanzanian operation to focus on its operations spread around the continent, Shah added.

Reporting by Duncan Miriri; Editing by James Macharia and David Goodman

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