Kenyan Retail Sector Expanded in 2016 -P&G

A survey of Kenya’s retail sector indicated a 13.0 percent expansion of the retail sector in 2016 compared to 2015, according to Procter & Gamble (P&G). Expenditure in the sector amounted to 1.8 trillion shillings (USD 17.6 bn) in 2016 across different channels as follows;

Traditional retail outlets on the other hand continue to dominate the fast-moving consumer goods (FMCG) sector, even though supermarkets and other formal retail outlets are increasing their market share.
This can be evidenced by the 18 percent increase in supermarkets expenditure in 2016, which resulted into a 30 percent market share for supermarkets, measured by expenditure, as per the P&G report. This could be supported by the fact that consumers perceive branded products to be of superior quality. This rapid expansion of the formal retail sector is driven by;

• Bulk shopping instead of shopping for individual items when the need arises,
• Increase in middle class spending characterized by rising consumerism,
• Increased supply of malls & shopping complexes countrywide that occupy more than 470,000 sqm, and,
• Penetration of supermarkets into residential areas whose population densify by day.

On the other hand, e-commerce and m-commerce has the least market share with the main obstacles being operational and logistical challenges. Nonetheless, mobile payments made to shops grew by 300 percent in the past 2-years making it the fastest growing sector in retail.

From a developer’s perspective, the opportunity lies in the provision of retail space in areas with high population growth, coupled with propensity to spend particularly in the mid and high income suburbs. Provision of modern warehousing could also answer to the operation and logistic challenges faced by e-commerce.

According to the weekly report by Cytonn Investments, Singapore’s Pacific International Lines (PIL) and China’s Guangzhou Yansha Development Zone signed a trade pact with Kenya Shipping Agency. The partnership seeks to increase the firms’ investments in Kenya by building more rail and road connections in East and Southern Africa. The network is expected to cover Kenya, Uganda, Rwanda, Burundi, South Sudan, Zambia and Malawi.

The report further stated that PIL, a leading carrier, has operations in over 100 countries including China & the Eastern Africa region, and accounts for 1.7 percent of the global shipping market share. Further, the two target the Kenya’s Special Economic Zones (SEZ) being developed by the government. There are several incentives under the SEZ Act 2015, such as:

SEZ enterprises, developers and operators will be subjected to reduced corporate rates of 10 percent for the first 10-years of operation and 15 percent for the next 10-years,

Dividends received by licensed SEZ enterprises, developers and operators are exempt of tax,
Withholding tax on professional services and interest (other than dividends) by a SEZ enterprise, developer and operator to non-residents to apply at 10 percent, and,

The supply of taxable goods to special economic zones enterprises, developers and operators licensed under the SEZA are exempt from VAT.

Infrastructure growth boosts real estate growth and the entire economy as evidenced by projects such as the LAPSSET project, Thika Superhighway and the read developments and bypasses among others.

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