Shoprite joins Pick n Pay in dropping exclusivity clauses in mall leases

The agreement with the Competition Commission follows findings from a Grocery Retail Market Inquiry released in November,
Image: Dean Hutton/Bloomberg

Shoprite Holdings on Wednesday joined Pick n Pay in agreeing to drop exclusivity clauses in shopping mall leases against small and speciality retailers with immediate effect.

Supermarket chain Shoprite will also immediately cease exclusivity against other supermarkets in non-urban areas and phase out exclusivity over five years in urban areas, South Africa’s Competition Commission said in a statement on Wednesday.

The agreement with the Competition Commission follows findings from a Grocery Retail Market Inquiry released in November, which found that exclusive lease clauses contained in various leasing contracts impeded competition in the South African grocery retail sector.

The investigation also found that there were no compelling justifications for the continued existence of these exclusive lease agreements.

Shoprite confirmed that it had signed the agreement with the Commission.

The phasing out of exclusivity will involve waiving this clause as leases come up for renewal and Shoprite will not sign any new lease agreements that contain exclusivity clauses.

The agreement applies to all Shoprite’s brands that include upmarket supermarket chain Checkers, budget grocer Usave and franchise business, OK Foods.

Where Shoprite holds the lease on behalf of a franchisee, the agreement will be implemented immediately and within a period of 12 months if the franchisees hold the lease, the Commission said.

The agreement has been referred to the Competition Tribunal, which makes the final ruling, to be confirmed as an order.

“The Commission welcomes this development which will see the introduction of much needed competition in the South African grocery retail sector, and bring to an end an area of concern that the Commission has raised for almost ten years,” Competition Commissioner, Tembinkosi Bonakele said.

“This move by Shoprite Checkers is timely considering the devastating impact of the coronavirus pandemic on the South African economy in general, and specifically the retailing and retail property sectors.”

On Tuesday, Pick n Pay Chairman Gareth Ackerman announced at the company’s annual results presentation that the grocery retailer would not seek to enforce any exclusivity clauses and would seek to finalise its agreement with the Commission.

Get access to Moneyweb's financial intelligence and support quality journalism for only
R63/month or R630/year.
Sign up here, cancel at any time.

COMMENTS   5

Sort by:
  • Oldest first
  • Newest first
  • Top voted

You must be signed in to comment.

SIGN IN SIGN UP

The sanctimonious monopolists.

Nonsense why would you willingly take 20,000 m2 in a shopping centre as an anchor tenant only to see profits only realized after about 5 years and ordinarily these guys take 20 year leases which sustains the landlords centre

They have favourable rental rates

It is the duty of comp Com to keep competition not entrench monopolies. Also the line shops cross subsidize the anchors.

Take less space and allow a competitor in the same Centre or even better open a stand alone on the high street and dont go into a shopping centre.

Graham..you know squat it seems. Most leases signed by supermarkets are based on a turnover clause subject to a minimum rental, which ever is higher. These clauses sit at between 5 to 10% which is perfect for any retailer as it is a low percentage and a fixed cost percentage wise. Most smaller tenants pay a fixed monthly rental no matter what the turnover is. So in low season they are paying in excess of 30% of turnover in rental.

End of comments.

LATEST CURRENCIES  

USD / ZAR
GBP / ZAR
EUR / ZAR

Podcasts

NEWSLETTERS WEB APP SHOP PORTFOLIO TOOL TRENDING CPD HUB

Follow us:

Search Articles:Advanced Search
Click a Company: