Economic malaise dampens mall fever

It’s been barely a decade since Accra caught the shopping mall fever, but already the excitement is waning as retailers confront the harsh realities of a struggling economy.

Comprising a swarm of local, regional and global brands from food to clothing, retailers gambled on the belief that Accra’s rising middle-class would shun local markets and turn to shopping malls for their needs and wants, but the script has not played out quite well.

Accra’s shopping malls are typically crowded, but the high human traffic, retailers lament, does not correlate with sales. Against the backdrop of pricy rents, which could cost as much as US$50 (GH¢190) per square metre, the lack of a commensurate volume of business is worsening the plight of shop owners.


Fever begins

As Ghana entered the 21st century, the nation’s economic performance soared on account of substantial debt-forgiveness that paved the way for higher growth-inducing investments.

Foreign capital flowed in abundantly, with telecoms, housing and modern retail services among the beneficiary economic sectors.

One of the first modern retail stores complexes to spring up in this period was A&C Shopping Mall, which was built a little over a decade ago 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 Agyekum Kufuor.

That year, the country witnessed 5.8 percent economic growth, and in 2006, 2007 and 2008, growth was 6.2, 6.5 and 8.4 percent respectively. 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.


A changed narrative

But the economic narrative has quickly altered at the same time, with Ghana’s GDP growth, energy supply and consumer confidence all contracting sharply due to worsened fiscal management. Other negative developments include a currency that has become devastatingly unstable and contributed to high inflation.

Osu Oxford Street is famous for its classy restaurants, casinos, night clubs, and artifacts peddlers. The shopping mall named after the street was built by Ghana Libyan Arab Holding Limited (GLAHCO) and considered to be the icing on the cake.

Although rental space is highly sought-after in this area, the mall, after opening to much fanfare and interest in 2013, is now suffering attrition among its tenants.

Business, the tenants say, has not been good, forcing them to seek alternatives elsewhere.

“Business here is very bad because 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, one of the mall’s tenants.

Although sited in the plush enclave of the Airport City, business at Marina Mall has not been performing creditably as expected. Most shops there import their wares and the depreciation of the currency by close to 50 percent in the last three years has boosted prices and damaged sales.

A manager of Lemon Twist, a luxury boutique which is in its third year as a tenant of Marina, reckons that this year has been the worst, with outrightly poor sales. A male shirt in this boutique costs not less than GH¢500, restricting most visitors to this shop to window shopping and savouring the quality of the wares on display.

Apart from the weak currency making the boutique’s products costly, it has had a telling effect on its rents, too.

“The rent is very high; we pay a lot and don’t 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 dollars monthly, aside utility bills,” the boutique manager cried.

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 the 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. Our bosses think it’s our fault that business is not brisk, and we feel bad getting paid at the end of the month and not making enough sales to keep the business going,” said an attendant in a clothing and accessories shop.
Managers’ sympathy
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’ complaints 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), but this year that policy has been set aside following discussions with tenants.

A manager of the company said businesses have been impacted by the challenges in the economy, “making the cost of living very high these days.” He however added that shop owners must take the initiative to increase publicity and attract more buyers.

For Kofi Sekyere, Chairman of the Board of West Hills Mall, the depreciation of the value of the cedi and the devastating shortage of electricity have contributed to the sharp decline in discretionary and disposable incomes of Ghanaians, hence the reduced sales experienced by the Mall’s retailers.

“In the current circumstances where trading levels are not as expected, rent paid by tenants may appear to be high. We know that when the trading environment improves, rent as a percentage of their turnover will not be viewed as high as is the case currently,” he said.

Mr. Sekyere is hopeful the situation would improve. According to him, the mall, which is the biggest in West Africa, is in talks with its retailers to find ways to convert the foot traffic into increased sales.

He is confident that his facility would come good in the long run.

“It is important to note that any newly constructed mall takes about two years to adjust with local retail trends and settle down fully for business. The shopping behaviour and pattern of the people in the catchment area take time to adjust to the new shopping destination, and retailers need to understand the local demographics better so they may adjust their products and pricing accordingly.”

Asked whether Ghanaians are adjusting to the shopping mall concept, Anthony Akun Egan, Operations Manager of Broll Ghana, which manages the Accra Mall, said the concept still has a long way to go.

This notwithstanding, and despite the economic problems, he says there is a tall list of retailers waiting to join the Accra Mall.

Perhaps these are sellers who are yet betting that the economy will realise the turnaround promised by the government. For the incumbent tenants, however, the performance of Ghana’s economy seems tied to their fortunes.

And the longer the economy takes to get on track, the bleaker the outlook seems to be for these retailers.