Nigeria still far behind in mall development –Omisore
Tokunbo Omisore is the Chief Executive Officer of Top Services Limited and President of African Union of Architects. In this interview with MAUREEN IHUA-MADUENYI, he says governments need to encourage retail mall development as a means of job creation
What is your assessment of the growth of retail malls in the country?
First, there is a need to understand what is the proper definition of a mall. It is true many places claim to be providing malls but malls of international standard are usually in excess of 7,500 or 10,000 square metres gross lettable area and all malls of such standard do have a retail supermarket, which will take at least a 2,000 or 3,000 square metres space. But then you will have some taking less than 1,000 square metre built up areas referring to such developments as malls without even knowing who the anchor tenant is.
We have turned all shopping centres and plazas to malls. The growth of malls is still very low. I say that because if we take the measure from a Shoprite occupied mall and possibly, a Spa, which has two or three shops and Shoprite which has to date 13 operational with the 14th intended in Akure Mall, which we are involved with and which will open in October; if you add all those gross lettable areas, we are under half a million square metres of lettable floor areas in comparism to South Africa, which has over 20 million square metres of lettable shopping space.
So, we are far from achieving malls in that order.
Second, when we talk about malls and our malls have to rely 70 per cent on foreign retailers because ours are not empowered or not encouraged to develop, then to us as developers, we are at a big risk. It means that if a condition comes up and the international brands have to stop, then we have a problem. We have to start coming down to the level of small, upcoming local retailers who are also challenged economically.
You said Nigeria is still lagging behind in mall development but some business analysts are worried that these malls will stifle smaller businesses, especially those that are trade-oriented. Do you share this sentiment?
No, I don’t; it depends on what areas we are referring to and what sort of malls we are encouraging. For instance, as a company, we build affordable neighbourhood malls. We use the word affordable because to date, we remain the only developer that has a Shoprite as anchor tenant in a mall far cheaper than any other.
The rent we expect from the mall is quite affordable to encourage the local retailers; we are all challenged by the energy cost; so, the service charges are high. We design and build to a budget; so, we may not have the best gold-plated mall but it is functional and has been built and designed to what we believe the people can afford and not what is expected. Affordability and the ability to buy are two different things.
But, if we have neighbourhod malls in place, these malls will provide opportunities for all these small, corner street traders or retailers to get into and display their business. And of course, if the planning of towns and cities is right, there are places where the street retailers are still maintained all over the world.
There are quite a lot of things that could be done but what is important is for our government to support malls that will encourage and develop local retailers.
You mentioned that 70 per cent of retailers in Nigerian malls are foreigners, what is the implication of this to the economy?
With the exception of a few Nigerian retailers like Ruff n Tumble, HealthPlus, CasaBella, Diva Accessories and Da Viva and a few of them that are trying to grow but are finding it very tough, it is quite a harsh environment.
The local retailers may be reluctant to key into the development because the cheapest malls we have done are denominated in dollar but payable in naira. To date, we have the cheapest mall. The Cocoa Mall in Ibadan sold for $150 per square metre, which at the time was N24,000 using a yardstick of N160 to a dollar before the devaluation. Every other mall is in excess of this amount.
Now, the limit of the local retailers’ commitment is not limited to the rent; there is the service charge with energy taking up to 70 per cent and this works out to almost $120 per square metre per annum. By the time you add $150 to $120, which is the cheapest mall – averagely, malls go for about $500 per square metre – so $500 by $120, you are looking at $600. It means that if you take 100 square metre space, you are going to be paying about N10m per annum, which is not a very big space. So, you need to know that there will be patronage for whatever you are going to sell. This forces local retailers into mushroom space-taking in malls except those that believe they can but then a few find out that after a year or a few months, they cannot sustain rent and the service charge. We should have proper funding of malls, which is why we said that the government should see it as infrastructural development because it creates employment.
In a mall of 10,000GLA, Shoprite on its own plus its direct and indirect staffing, should have well over 400 jobs. So, a 10,000GLA gives employment to a minimum of 1,500 to 2000 people. It means that if we have 100 of such malls, 200,000 people, at least, will be employed. And 100 of such will be nothing for 10,000GLA which is like a small neighbourhood mall.
It also helps the Small and Medium Enterprises to develop themselves, their brands and have a place to display. So, the government needs to look into this area. This is why we ask, what is happening to the pension fund? Every developer all over the world uses pension funds. Now, it is in excess of N4.3tn and it is sitting in a cooler somewhere, where it is not being utilised; it is not helping employment or creating opportunities. When will this be made available to Nigerians to make the positive change that we are all craving for?
A lot of developers are focused on residential buildings due to the high deficit. What is your interest in retail mall development?
Housing provides shelter; mall development provides opportunities for employment. Now, when everybody is employed, people are able to live in decent housing estates and those housing estates are properly maintained and where mortgages are involved, there are no defaults because of unemployment. It’s been proved all over the world that once you live in a housing estate, whether given to you through government subsidy, if those within are not employed or have something to do, they turn such estates into slums.
You can imagine 50 or 60 per cent of the youths of such places or even those that are not youths but losing their jobs and having to live in such estates, it becomes derelict. Crime rate increases out of boredom.
When you look at the developed nations of the world such as the United States of America, what runs its GDP is retail. It runs the GDP of all the developed nations; it is the only way to keep above waters. It gives employment opportunities to many. It develops more brands, more innovations. And when you look at the tradition of the Africa, especially Nigeria, we have always been traders; we have night markets, day markets, weekly, monthly and bigger markets. Marketing, trading and being retailers have been part of our people. The only difference is that the developed nations may say ours is not structured but if we really go down into what they did in the past, it was structured in their own way. This is because they knew which days of the week to trade and what sections to display their wares.
Whatever structure we have, we should improve on that, infuse it with Information Technology and put it forward as an African solution. People have to eat. After the death of Kingsway Stores, the UTC and others, we lost over 20 years not improving structured retail business. But when Shoprite came about 10 years ago, it gave opportunities to those in the food and business sector. There were many people that loved to go into food processing but had nowhere to sell their products. Most felt frustrated and moved away. But when it came, it has helped those in packaging to improve. It has helped those in food processing too because the concept behind Shoprite is not to say no to your product if it is properly packaged. And if consumers buy it off on displaying it, then you are in business.
It’s been a big help and a showroom and something to develop the minds of the youth in seeing that they can be out of school and develop themselves as entrepreneurs and develop businesses that can do well. To miss out of retail will be a big minus to us. Everybody has tried to be in oil and gas but the future of that sector is no longer the same. But we have all seen that food will always be in demand. You need food, shelter, clothes and of course entertainment; these make the total package and this is why as a nation with over 160 million people, we need to be more involved in retail growth rather than paying lip service to it.
What is the impact of the naira fluctuation on property development?
It has had a lot of impact; we don’t even know what it is affecting right now. As a standard for malls internationally, it is denominated in dollars because international brands coming in do so on dollar rating. The CBN regulations and demands put restrictions on what foreign exchange should be, which at the end of the day, will have impact on the economy. But the immediate impact is that it will kill a lot of businesses, opportunities and, if care is not taken, it will increase unemployment.
PUNCH.
