Retailer Massmart, the South African unit of Wal-Mart, said on Thursday it had been forced to sell its sole Makro store in Zimbabwe to meet Harare’s indigenisation laws.
“It was sad, but indigenisation law effectively says foreigners are not welcome in Zimbabwe,” Massmart’s chief executive officer Grant Pattison said at the company’s results presentation.
Zimbabwe’s government last week also gave several foreign-owned banks and mines two weeks to submit new proposals on how they would transfer majority shares to local blacks or risk losing permits.
Massmart suffered a 25% drop in full-year profit, hit by costs related to its $2,4 billion deal with Wal-Mart and price markdowns as it fought to gain a bigger slice in the domestic retail market.
Massmart, majority-owned by the world’s biggest retailer, said on Thursday diluted headline earnings per share totalled 407,5 cents in the year to end-June compared with 542,7 cents a year earlier.
Headline EPS is the main profit measure in South Africa that strips out certain one-off items.
Wal-Mart completed the deal that gave it 51% stake in the wholesale retailer in June this year.
Massmart said the costs related to that transaction totalled R2 billion.
The costs included a R100 million fund to help develop local suppliers the two companies agreed to set up in order to secure regulatory approval for the transaction.
But unions and three government departments, led by the Economic Development Department, have said the fund was not big enough. The government departments have separately launched appeals seeking to attach weightier conditions on the deal.
Massmart said it was confident about its legal position.
“Our legal teams are preparing responses to the interveners’ submissions and are confident about our strong legal position,” the company said as it reported its full-year results.
Massmart said sales increased 11,6% to R53 billion, helped by new stores. Comparable store sales rose 5,2% with product deflation of 1,3%.
The company said it has plans in place to deliver a solid performance in the 2012 fiscal year.