The pending take-over of Zambian branches of South African supermarket chain store Shoprite by Brait Private Equity may take longer than planned following the start of court proceedings against the company.
Brait Private Equity, another South African investor, bought Shoprite stores at a cost of R13,2-billion late last year, and was initially scheduled to take over operation of the Zambian stores in January this year. But the Lusaka High Court’s recent order restraining the company from removing its assets and funds until it paid termination benefits to about 800 workers could delay the process.
The employees sought the court’s intervention after Shoprite Zambia’s contract with the new owners failed to specify their fate in the face of the imminent changes. The contract stipulated the termination benefits for management officials but was silent on unionised workers and it was not clear whether all employees would be retained by the new investors.
Stephan Kranz, country general manager for Shoprite Checkers in Zambia, told the Mail & Guardian in the capital, Lusaka, this week: “Everything now waits upon the courts to resolve this matter — the workers’ fate and even the coming in of new owners all depend on the court action … It’s just a pity that in a way this action will result in delays for the new owners to come in but we shall continue opening in the meantime.”
Business analysts and economists question the timing of the takeover of Shoprite stores as it coincides with the end of the company’s 15-year tax holiday, which it was offered as part of the government’s incentives to lure foreign investors into the development-hungry Southern African country.
Under the current law, all foreign companies doing business in Zambia are exempt from paying tax on all capital goods brought into the country, for a period of up to 20 years in some cases, and there is no restriction on the amount of profits or dividends that can be externalised.
Bob Sichinga, a Zambian business analyst and former Member of Parliament, said the pull-out of Shoprite from Zambia raised many questions about morals and business ethics. “Why should they leave only after the expiry of their tax holiday, when we are all rejoicing, thinking that now is the time for the government to start benefiting from taxing these companies?
“It appears to be a well-calculated move, but what is more disturbing is that the new investors will also be entitled to the same tax rebates, thereby denying the government the much-needed tax revenue forever. What will keep Spar supermarkets or Game stores from doing the same at the end of their tax holidays?”
Shoprite, unlike most foreign supermarkets in Zambia, has mostly been targeting low- and middle-income shoppers at its nearly 20 supermarkets, which employ well more than 1 600 Zambians across the country. This makes it a major player in Zambia’s economy, as it is the biggest chain store.
While acknowledging that the factors leading to Shoprite’s pull-out could be purely external, Sichinga said, “We should not be blind to the fact that Shoprite knew that the pricing of their commodities would now [have to] factor in the production costs, which would reduce their profitability and therefore they had to pull out in order to avoid the repercussions following the expiry of the tax holiday.”
But Shoprite’s Kranz dismissed assertions of “fleeing taxation”, saying “the change of ownership has nothing to do with the tax incentives we were offered, unless these incentives were offered only to Shoprite alone. But for all I know every foreign investor in Zambia is entitled to the same incentives.”
Zambia’s Commerce, Trade and Industry minister Kenneth Konga appealed for calm during the transition period, but declined to comment on the expiry of Shoprite’s tax holiday. “As a ministry, we have already put up a committee looking specifically into the interests of all Shoprite employees, and government will not forsake them. Their interests will be safeguarded, but I have no comment over the tax rebate issue,” Konga said.The pending take-over of Zambian branches of South African supermarket chain store Shoprite by Brait Private Equity may take longer than planned following the start of court proceedings against the company.
Brait Private Equity, another South African investor, bought Shoprite stores at a cost of R13,2-billion late last year, and was initially scheduled to take over operation of the Zambian stores in January this year. But the Lusaka High Court’s recent order restraining the company from removing its assets and funds until it paid termination benefits to about 800 workers could delay the process.
The employees sought the court’s intervention after Shoprite Zambia’s contract with the new owners failed to specify their fate in the face of the imminent changes. The contract stipulated the termination benefits for management officials but was silent on unionised workers and it was not clear whether all employees would be retained by the new investors.
Stephan Kranz, country general manager for Shoprite Checkers in Zambia, told the Mail & Guardian in the capital, Lusaka, this week: “Everything now waits upon the courts to resolve this matter — the workers’ fate and even the coming in of new owners all depend on the court action … It’s just a pity that in a way this action will result in delays for the new owners to come in but we shall continue opening in the meantime.”
Business analysts and economists question the timing of the takeover of Shoprite stores as it coincides with the end of the company’s 15-year tax holiday, which it was offered as part of the government’s incentives to lure foreign investors into the development-hungry Southern African country.
Under the current law, all foreign companies doing business in Zambia are exempt from paying tax on all capital goods brought into the country, for a period of up to 20 years in some cases, and there is no restriction on the amount of profits or dividends that can be externalised.
Bob Sichinga, a Zambian business analyst and former Member of Parliament, said the pull-out of Shoprite from Zambia raised many questions about morals and business ethics. “Why should they leave only after the expiry of their tax holiday, when we are all rejoicing, thinking that now is the time for the government to start benefiting from taxing these companies?
“It appears to be a well-calculated move, but what is more disturbing is that the new investors will also be entitled to the same tax rebates, thereby denying the government the much-needed tax revenue forever. What will keep Spar supermarkets or Game stores from doing the same at the end of their tax holidays?”
Shoprite, unlike most foreign supermarkets in Zambia, has mostly been targeting low- and middle-income shoppers at its nearly 20 supermarkets, which employ well more than 1 600 Zambians across the country. This makes it a major player in Zambia’s economy, as it is the biggest chain store.
While acknowledging that the factors leading to Shoprite’s pull-out could be purely external, Sichinga said, “We should not be blind to the fact that Shoprite knew that the pricing of their commodities would now [have to] factor in the production costs, which would reduce their profitability and therefore they had to pull out in order to avoid the repercussions following the expiry of the tax holiday.”
But Shoprite’s Kranz dismissed assertions of “fleeing taxation”, saying “the change of ownership has nothing to do with the tax incentives we were offered, unless these incentives were offered only to Shoprite alone. But for all I know every foreign investor in Zambia is entitled to the same incentives.”
Zambia’s Commerce, Trade and Industry Minister, Kenneth Konga, appealed for calm during the transition period, but declined to comment on the expiry of Shoprite’s tax holiday. “As a ministry, we have already put up a committee looking specifically into the interests of all Shoprite employees, and government will not forsake them. Their interests will be safeguarded, but I have no comment over the tax rebate issue,” Konga said.