South African Pick 'N Pay to Inject U.S.$21 Million Into TM Supermarkets

PICK 'n Pay can now inject US$21 million to recapitalise TM Supermarkets after Government approved the South African retailer's proposal to raise its stake in TM Supermarkets from 25 percent to about 49 percent.

Former chief executive Mr Brendan Beaumont early this year said the retail chain required US$10 million for capital projects and US$11 million for working capital.

After injecting fresh capital in TM, the SA retailer will announce its increased presence by rebranding selected TM outlets as Pick 'n Pay.

Since dollarisation, the local retail giant has struggled to stock adequately while its refrigeration equipment required replacement or rehabilitation.

Despite managing to maintain a significant portion of the retail market, TM Supermarkets has faced stiff competition from other players.

But all this could be ended after the Ministry of Youth Development, Indigenisation and Empowered approved its proposal to up its stake.

Indigenisation Minister Saviour Kasukuwere confirmed the Meikles-Pick 'n Pay transaction last Friday, adding that fresh capital injection into TM Supermarkets would bring healthy competition.

"They wanted to increase their investment in TM to 49 percent," said the minister. "They had about 25 percent and further investment will get them to 49 percent or thereabouts. They will inject capital for rehabilitation of equipment and working capital, which will lead to enhanced supply."

He said the ultimate winner would be the consumer, as they "will be able to get better service and prices from the retailer".

TM had been desperate to recapitalise after suffering a 2,4 percent shrinkage in 2009 due to serious capital and working capital constraints.

Mr Beaumont had said TM had "point-of-sale technology in only six of its 53 branches and this is a key issue in shrinkage and management of selling prices".

This had resulted in the retail giant losing its pace among the country's leading retailers with the former CEO putting it at number three after OK and Spar.

For well-recapitalised and managed retail businesses Zimbabwe offers good returns, as shown by increased interest in the sector by SA retailers.

At one point South Africa's biggest retail chain showed interest in acquiring a stake in OK Zimbabwe, but for unexplained reasons pulled out.

Zimbabwe makes for a good retail investment, considering incomes are still low as the economy is yet to recover from a decade of instability. Disposable incomes have largely remained low since February 2009.


source