Retailers feeling the pinch as Ghana economy slows down

The excitement which used to characterise shopping at the West African country’s malls is fading as retailers are confronted with the harsh realities of the economic struggles.

Typically, malls in the capital Accra are almost always crowded, but the high human traffic does not translate to sales, as many retailers lamented.

And the exorbitant prices for shop space was exacerbating issues. A small space can cost as much as GHC190 (US$50) per square metre.

The lack of a commensurate volume of business has dampened the mood among shop owners.

“Business here is very bad. When you think of a place like Osu and the way things are going on in this particular mall, it is very disheartening.

“We know Osu to be a very busy place, and initially our expectations were very high and that was why our management thought it wise to bring a branch here, but as it stands now, it is far below our expectations,” lamented an attendant at African Clothing.

A tenant said despite being situated in a plush enclave of the Airport City, business at Marina Mall was nothing to write home about.

Most shops here import their wares and the depreciation of the Ghana Cedi by close to 50 percent in the last three years has boosted prices and damaged sales.

A manager at Lemon Twist, a luxury boutique which is in its third year as a tenant at Marina, reckons this year has been the worst, with outright poor sales.

A shirt in this boutique costs not less than GHC 500, restricting most visitors to this shop to window shopping and savouring the quality of the wares on display.

Apart from the weak currency pushing the price of the boutique’s products up, it has had a telling effect on its rents.

“The rent is very high. We pay a lot yet do not make sales. Moving out of here is an option to look at. For our shop for instance, which is about 40 square metres, we pay about US$1,600 monthly, aside utility bills,” the boutique manager decried.

Tenants at the West Hills Mall in Weija, which cost nearly US$100 million to construct, are not faring any better.

“People do not buy here and I think it is because of the location. I think it is too far from the capital. Our expectations were very high, but now we are in shock as to how things are going now. We are disappointed because business is too slow,” said a supervisor at Telefonika, which sells phones and accessories.

“The rent is also too high and we are incurring losses because we don’t make as much as we pay for rent. We would like management to reduce the rent for us; otherwise, we would have to consider moving out,” he added.

In other places, including Accra Mall, retailers recount a common story of poor sales.

“We do not make sales at all. Things are very bad. The number of people who walk into the malls does not translate into sales,” said an attendant at a clothing and accessories shop.

Managers of the malls are not oblivious of the struggles of their tenants.

At the Oxford Street Mall, rents have been slashed to US$30-40 per square metre a month from US$45-50 in response to tenants’ concerns over weak sales.

According to JHI Property Service, which manages the Marina Mall, every year rent is increased by 5 percent under its lease agreement with tenants (shops pay between US$25-40 per square metre every month).

However, this year, that policy has been set aside following discussions with tenants.

A manager of the company said businesses had been impacted by the challenges in the economy but shop owners must take the initiative to increase publicity and attract more buyers.

Ghana has over the past few years witnessed a surge in upmarket malls.

Historically, one of the first modern retail stores complexes to spring up in this period was A&C Shopping Mall, which was built in 2005.

Such was the significance of the edifice, located within the plush middle- to upper-class precincts of East Legon, Accra, that the opening ceremony was graced by the then President John Kufuor.

That year, the country witnessed 5,8 percent economic growth.

In the next three years it grew by up to 8,4 percent.

The expansion in the economy saw Accra attract more investments, and in 2008, Accra Mall was built.

Reportedly costing US$36 million, the structure occupied a land area of about 25,000sqm off the Spintex Road and was the first large-scale shopping centre in the country.

Five years later, another upscale albeit smaller shopping centre, Marina Mall, was built within a two-minute drive from Accra Mall.

This new mall was to serve the Airport and Cantonments niche residential areas. Two years before it was built, Ghana’s economy had topped more than 14 percent growth and the country had officially been granted a lower middle-income status by the World Bank.

With a bulge in middle-class spending and the prospects of further economic acceleration on the back of newly-found oil resources, investors poured more money into shopping malls in Accra in a bid to grab a slice of the rising consumer spending. As a result, Osu Oxford Street Mall; West Hills Mall, Weija; The Junction Mall, Nungua; and Achimota Retail Centre have all been opened in the last two years.

However, the economic narrative has quickly altered at the same time, with GDP growth, energy supply and consumer confidence all contracting sharply due to worsening fiscal management.

Other negative developments include a currency that has become devastatingly unstable and contributed to high inflation. Ghana is to expect a decline in economic growth from an estimated 3,9 percent to 3,5.

Photo: www.library.yale.edu