Why Sameer could exit regional markets

Sameer Africa Chairman Erastus Mwongera (left) and Managing Director Allan Walmsley peruse through the group’s 2015 annual report (PHOTO:WILBERFORCE OKWIRI)

NAIROBI, KENYA: Sameer Africa is reviewing its presence in Tanzania, Uganda and Burundi, and may pull out of the loss-making markets.

The firm’s management says profits have been elusive in the three East African Community countries owing to a combination of negative factors overshadowing the group’s efforts to turn them around.

Managing Director Allan Walmsley said the company wants to continue with its strategy of cutting overhead costs, which may include a review on whether it is viable to continue with operations in the regions.

“Given the macro-economic challenges still facing the business, we will need to reduce costs further and also review our continued presence in Uganda, Tanzania and Burundi, where the general trading environments are becoming increasingly hostile,” he said.

In notes contained in the 2017 annual report, Group Chairman Erastus Mwongera says there is rising credit indiscipline across the region, and very high levels of private debt.

The three markets have proved unprofitable for several years, dogged by a combination of political instability, declining purchasing power, tight liquidity and arbitrary and unwarranted tax demands.

“The group is therefore considering the most viable option for dealing with these regions, among the possible being to exit from these markets, changing the current business model to be exclusively dealer driven or franchising the entire regional operations,” said the company.

Cut links

Profitability earned by the Kenyan market is being eroded by subsidiary company losses, resulting in an overall reported loss by the group, it said.

If the firm settles on the decision to cut links with the three regional markets, it will mark the second major strategic shift in less than two years since shutting down the Nairobi tyre plant in favour of imports.

In the financial year ended December 2017, the group got Sh13 million profit, up from a loss of Sh652 million the previous year. Since making a profit of Sh401 million in 2013, the firm had been enduring back-to-back losses up to 2016.