Nakumatt – an example of Africa’s many strong, yet unlisted, companies

In a town in Kenya’s Rift Valley the story about a little mattress shop begins. The town of Nakuru has a population of around 300,000 and it’s here that the Atul Shah family set up their shop many years ago.

The Rift Valley, part of a system of geological troughs that run thousands of kilometres from Ethiopia through Kenya and Tanzania, is well known by many. The area’s unique ecosystems and landscapes – the World Heritage site of the Ngorangoro crater, the spectacular wildlife migrations of the Serengeti and the Masai Mara – are major draw cards for tourists. But Atul Shah’s shop was not established to serve the tourist market. It was set up to cater for the inhabitants of Nakuru, a town very few people in the world have heard about.

The growing spending power of Africans and what they spend their money on is much talked about in investment circles. This shop that was set up to cater for the growing local consumer market – and it sold mattresses – something we all take for granted but all need if we are not to be grumpy every morning. Over the years, the Nakuru Mattress Shop has gone from strength to strength.

Today Nakumatt, as it is now called, is not known as a mattress shop. Investors around the world would recognise it as a typical supermarket chain. It has its own loyalty card, credit card and in house magazine; employs 4,000 staff to cater to the needs of the 200,000 customers who shop there each day; around 75,000 line items are offered through its expanded network of stores across Kenya, Tanzania, Rwanda and Uganda, and further stores are planned in Burundi and South Sudan. The company boasts that it is the largest retailer in east Africa.

Unfortunately for many investors in Kenya the business remains unlisted. There have been many announcements by Nakumatt that they will soon list the company but this has not yet come to fruition, and the company has expanded through using its own capital and via private equity funding.

A listing of Nakumatt and other such companies is eagerly awaited by investors in the stock markets across Africa. However, while the continent provides an attractive investment destination for investors looking for growth and diversification, the current levels of liquidity on the region’s stock markets are relatively poor. Nakumatt clearly demonstrates that there are firms with strong potential waiting to list. Africa has many such firms and as they expand and need further capital, and as the stock markets increase in value, listing will become a more attractive option for these firms.

What companies like Nakumatt do prove is that growth in Africa is possible and that there is a depth to the local economies beyond the listed companies we see. Not that Nakumatt is the only supermarket in east Africa; competitors in Kenya and beyond compete for consumer spending.

These listed and unlisted companies provide a depth that will feed into growing and deeper stock markets allowing investors more opportunities to invest in the frontier markets of Africa.

Sven Richter is head of frontier markets at Renaissance Asset Managers