According to Business Day, Pick n Pay will spend $13m to raise its stake in TM Supermarkets, Zimbabwe’s largest grocer, to 49% from the current 25%.
The transaction, due to be completed by March next year, will give SA’s second-largest supermarket chain a greater foothold in the regional African market. TM has 51 stores. Pick n Pay currently has 17 stores in Namibia, 12 in Botswana, 7 in Swaziland and 1 in Lesotho and one in Zambian, which opened in July.
The introduction of the US dollar as legal tender last year brought an end to the hyperinflation that rendered the Zimbabwean dollar worthless. The economy has yet to start growing in any meaningful way, however, partly due to a lack of capital. Many Zimbabweans remain fearful of depositing their savings in banks, after years in which that country’s central bank looted savings from commercial banks. Foreign investors also remain wary of putting money in, given the further uncertainty over proposed legislation mandating 51% indigenous ownership in any company. Pick n Pay first invested in TM, part of the Harare-listed Meikles group, in 1996.
“The conversion to the US Dollar as the currency in Zimbabwe has provided a significant amount of stability and was a key factor in our decision to purchase this additional shareholding. With the additional capital available, we believe there is significant upside potential in the TM operation,” Pick n Pay CEO Nick Badminton said in a statement.
In an interview last month, TM Supermarkets CEO Mark Vickery said to refurbish his stores to get them back to “world-class” standard would cost about $40m.
The transaction remains conditional on the approval of the relevant Zimbabwe regulatory authorities and the South African Reserve Bank, Pick n Pay said. Business Day