April 29, 2012
The British multinational grocery and general merchandise retailer, Tesco, is conducting negotiations with the Ethiopian government to open a mega store here. Tesco is the third-largest retailer in the world measured by revenues after America’s Walmart and France’s Carrefour and the second-largest measured by profits after Walmart.
Ethiopian government representatives had started negotiations with the giant retailer after the infamous squabble between the government and local wholesalers and retailers took place last year, The Reporter has learnt. The dispute arose following the unprecedented commodity prices’ surge in the market.
At the time the government blamed the wholesalers for artificially creating a price hike and issued a three-stage ultimatum of which the last one was inviting foreign retailers into the market. Apart from Tesco, Walmart has also reached the final stage of negotiations.
A consumer, who requested anonymity, said that the arrival of foreign retailers will create trouble for local traders on whom the government has waged war for some time now.
“After looking into the local market’s inability to deliver basic commodities at affordable prices to the public, the move by the government to invite multinationals may be a good idea,” he says.
According to him, local businesses are warned time and again of their intolerable prices and this has created artificial inflation to a point where it can wreck the entire economy. However, he said that the government should be more agile in its policies and see long-term effects instead of rushing in search of a remedy for its Achilles heel.
On the other hand, a retailer, on conditions of anonymity, told The Reporter about the downside and raised some questions regarding the arrival of the multinationals.
“First of all, what value will these companies add when they begin operations and will they be able to bring down the prices of basic commodities?” he asks.
According to him, since they will repatriate earnings in foreign currency this will lead to a shortage of supply of hard-earned foreign exchange.
Another question posed by the retailer is whether the foreign exchange controls that are applicable to local traders should also be imposed on the multinationals.
In addition, he doubts if the companies will be able to offer customers prices much lower than the currently prevailing prices given the huge start-up and other operational costs like warehouses and transportation that they will incur.
Tesco has stores in 14 countries across Asia, Europe and North America and is the grocery market leader in the UK (where it has a market share of around 30 percent), Malaysia, the Republic of Ireland and Thailand.
The company was founded in 1919 by Jack Cohen as a group of market stalls. The Tesco name first appeared in 1924, after Cohen purchased a shipment of tea from T. E. Stockwell and combined those initials with the first two letters of his surname, and the first Tesco store opened in 1929 in Oak, Middlesex. His business expanded rapidly, and by 1939 he had over 100 Tesco stores across the country.
Originally a UK-focused grocery retailer, since the early 1990s Tesco has increasingly diversified geographically into areas such as the retailing of books, clothing, electronics, furniture, petrol and software; financial services; telecoms and internet services; DVD rental; and music downloads.
Tesco is listed on the London Stock Exchange and is a constituent of the FTSE 100 Index.
Source: Ethiopian Reporter
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