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Malls: the double-edged features of development

 

Thika Road Mall

Thika Road Mall

If you take a drive along Thika Road, you almost runs out of fingers to count the number of malls that line the route.  First there is  Mountain Mall, which is opposite East Africa Breweries, followed in close succession by Garden City Mall and Thika Road Mall. Further on is the yet-to-be-opened Kenyatta University Uni-City,  and shortly afterwards, you see Spur Mall and Juja City Mall.

Malls are springing up not just in Nairobi,   but  in many urban centres across the country. According to Actis Public Relations Manager Kirsten Smith, this is because Kenya boasts a large and fast-growing population, GDP per capita growth, high urbanisation levels, and an expanding middle class. Actis is a private equity, real estate investor and is the company that spearheaded the setting up of Garden City Mall, as well as The Junction, also in Nairobi. And from the look of things, the proliferation of these shopping complexes is not likely to slow down any time soon.

According Ms Kirsten, Nairobi is still an under-retailed market. “There is a growing urban middle class with purchasing power that is changing Nairobi’s shopping landscape. Almost half, (45 per cent) of the Kenyan population is now classified as middle class. Nairobi is continuing to expand in population and wealth. It is estimated that by 2030, the city’s population will have doubled to about eight million. That’s a lot of new consumer demand that will see the number of shopping malls rising,” she says.

While the increase in these large-scale outlets might be celebrated as a sign of progress, they have had some negative effects. Areas in which malls have been set up have had to contend with a host of  problems, ranging from increased rent, heavy traffic jams and even the death of micro-enterprises  in the locales.

CHOCKING TRAFFIC

Traffic jams, especially during rush hour, are fast becoming synonymous with huge shopping malls. Motorists who use Kiambu Road, for instance, have had to contend with getting stuck in traffic for even an hour due to the congestion caused by vehicles going to or leaving Ridgeways Mall on that road.

Stephen Kamau, a matatu operator plying the Kiambu-Nairobi route, says  Kiambu would be better off without the mall.

“When coming from Nairobi, especially in the evenings, one encounters a heavy traffic jam right from Muthaiga, which sometimes takes an hour to navigate. I used to cover the same distance in 10 minutes  in 2012. Miraculously, there’s no jam after you pass Ridgeways Mall,” he says.

Mr Kuria, a motorist, also blames the mall that houses Nakumatt Supermarket for the chaos experienced on Kiambu Road every morning and evening. “Matatus drive crazily along this road during rush hour, overlapping and sometimes driving on the wrong side of the road in order to beat the traffic,” he told DN2.

In fact, so serious was the problem that in September last year, a parliamentary committee asked the Kenya National Highways Authority to ensure that the owner of the mall, Mr Stanley Githunguri, took measures to ease congestion in the area. Members of the Transport, Public Works and Housing Committe insisted that Mr Githunguri, a former MP, move the mall’s exit away from Kiambu Road.

“From 5pm, you can’t use that road. The owner is supposed to provide an access road. You can close that mall until the issue is dealt with,” the committee’s chairman, Mr Maina Kamanda, said.

A spot-check confirms that a new, rear entrance via Ridgeways Road has been created. But road users are still unhappy because the jams persist during rush hour.

But it is not just motorists who are affected. For five years Mrs Tabitha Njuguna, a widow, operated a shop in Ruaka on Limuru Road, which she ran with the help of an assistant. She sold groceries and household goods, and made enough from the shop to sustain her family of four.

But her fortunes started changing early last year when Ruaka got its first hypermarket, Quickmart. Mrs Njuguna began losing customers to the ultra-modern supermarket, and when a shopping mall was opened later in the same area, it sounded the death knell for her only source of income. She has since taken up subsistence farming  to provide for her family.

Mrs Njuguna tells of her excitement when Ruaka got its first shopping mall, Ruaka Square. However, the excitement soon died down when she started  losing customers to the mall’s major client, Tuskys Supermarket. In the end, she threw in the towel and decided to close up shop.

“All my previous customers now preferred to shop at the new mall. My stock was not moving and finally, I had to fire my shop assistant and shut down the business,” she explains. “Many of my fellow traders, including barbers and hotel owners, had to wind up their businesses as well.”

DEATH OF SMALL BUSINESSES

She recalls the story of a man who dealt in electronic gadgets, who traded mainly in mini-radios. He would purchase his stock from wholesalers at about Sh1,500 apiece, and sell them at Sh 2,500 each. However, he was forced to close shop because the same model would be going for Sh1,700 or less at the shops in the  newly established hypermarkets.

Ms Joy Kagika, a Nairobi-based economist, says it can be catastrophic for small-scale traders when a large-scale retailer aggressively pushes them out of the market.

And although it might appear that the local economy is growing, sometimes no significant change is actually recorded.

When large scale-retailers set up shop in a locale, says Ms Kagika, they might at first inject cash into the economy by paying taxes and rates, while at the same time providing employment to dozens of people.

However, after a year or two, and due to economies of scale, small-scale business that were operating in the area before  find that they cannot compete favourably and opt out. This leads to a slump in the revenue collected from the smaller businesses. It might even lead to the loss of more jobs than are created, such that the cycle of unemployment continues to thrive.

Ms Kagika says that most employment opportunities offered by large-scale retailers tend to be minimum-wage jobs and are often outsourced from other regions rather than from the immediate community, making it difficult for the jobs to alleviate poverty  in the local community.

Consumers, too, are likely to feel the pinch when a huge shopping complex opens in their neighbourhood and leads to the closure of small kiosks and makeshift roadside  stands. This, Ms Kagika explains, is because they will be forced to walk or travel long distances to get to the mall, when sometimes all they want to  buy  is something as simple as a matchbox.

And even though a shopping mall can transform a sleepy neighbourhood into a vibrant commercial centre, this comes at a steep price to land buyers and tenants in the area.

Mr Evanson Gakii has been working as a salesman at a car bazaar near Ridgeways Mall  for almost a decade now. He explains that before the shopping mall was established in the area in 2008, half an acre of land in the area cost about Sh8 million.

“Buying a piece of land of the same size in this area today will cost you about Sh30 million,” he says.

Tenants have also reported sharp increases in rent due to high  demand for houses near the shopping complexes.

While acknowledging that shopping malls do make small-scale retailers suffer, however, Bungoma-based financial consultant Dennis Wanjala says they are a necessary evil.

“As opposed to one huge shopping complex, many small shops are characterised by higher prices, lower quality products and they also tend to breach laws and regulations more often. These establishments do not submit their taxes regularly, and this hurts the economy more than shopping malls, which often operate by the book,” he explains.

Mr Wanjala vehemently refutes claims that shopping malls create low-grade jobs.  He estimates that one supermarket alone can provide up to 250 jobs while an entire mall can provide employment for as many as 2,000 retail staff, excluding those in management.

“Establishments in shopping malls usually provide training for their staff, thus equipping them with skills such as accounting, besides offering them management experience. Even at minimum wages of about Sh13,000 to 17,000 per month in urban centres, the impact in a country with an unemployment rate of almost 40 per cent is highly significant.”

SOCIAL PROBLEMS

“Jobs offered by huge shopping complexes are of higher quality than those offered by local kiosks and small-scale traders. This is because these jobs often come with additional benefits such as employment security, insurance and satisfactory work environments,” he says.

However, Mr Wanjala admits that there is a need for shopping establishments to allow room for the growth of small-scale traders who operate kiosks and cannot afford the rents charged in the shopping complexes.

“Due to their significant impact on communities in which they’re based, shopping malls should also be compelled by goodwill to engage in CSR activities that benefit the locals people’s welfare,” says Ms Kagika.

This is an area in which Garden City, which will eventually include 200 houses and apartments, plus more than 25,000 square metres of office space, seems to be doing quite well.

“Nairobi’s densely populated neighbourhoods often suffer from extremely limited access to human services and facilities. Garden City is seeking to assist in tackling some of these core social problems. Through specific community needs analysis, Garden City is targeting four core problems: water and sanitation, education, employment and security,” says Ms Smith.

Garden City has already started implementing its CSR strategy with a programme via  which it is building additional bathrooms for Murema Primary School, which is located less than five kilometres from the shopping mall.

In order to forestall the problems that arise following the construction of huge shopping establishments, Ms Kagika proposes that county governments initiate mandatory impact reviews for retail developments.

“As soon as a developer files an application to build an establishment large enough to significantly change the status quo of the area’s economy, the county government should demand that the application be subjected to rigorous assessment,” she suggests.

“The county government should contract qualified consultants to carry out an impact analysis for the proposed development. Such studies should take into consideration the views of the local people as well as the traders in the area. The study should then be presented to the county assembly for a thorough review by the members of the county assembly before it is approved.”

 

FYI

45%

The proportion of Kenyans classified as middle class.

Malls are mushrooming in the country because:

  • Kenya has a large and fast-growing population
  • Growth in GDP per capita
  • High urbanisation levels
  • An expanding middle class

The pros and cons of malls

The good side

Cheaper goods

High-class products

Employment

The downside

Lead to congestion/traffic jams

Push out small businesses

Lead  to increase in land prices and rent

 

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