Sudan shopping mall fights the odds post-secession

KHARTOUM Wed Dec 5, 2012 2:22pm GMT

1 of 6. A customer looks at clothes inside the 'Luxury' shop in Khartoum November 29, 2012.

Credit: Reuters/ Mohamed Nureldin Abdallah

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KHARTOUM (Reuters) - Shop assistants display expensive Italian baby clothes in a vast showroom, waiters in white shirts serve latte in trendy cafes and an army of cleaners mops the floors - Khartoum's new al-Waha mall is a world away from the rest of Sudan.

Owners of the mall, with its shiny elevators and air-conditioning, promise a shopping revolution in a city where battered cars and donkey carts make their way down bumpy roads lined with street vendors.

There's just one problem: the place is almost empty.

"I haven't had a single customer in the past 10 days," said Kamal el-Din, the manager of a Chinese furniture shop on the lower ground floor.

"Five more months like this and we will be closing," he told Reuters in his large glass office, tallying losses on a calculator.

Riddled with ethnic conflict and poverty and hit by U.S. sanctions over its human rights record, Sudan has never been an obvious place to do business.

But ambitious plans backed by Gulf Arab investors were drawn up when the economy started to accelerate, driven by petro-dollars, after the government signed a peace deal with southern rebels in 2005.

New hotels such as the Saudi-built Rotana and expensive stores such as German sports retailers Adidas and Puma set up shop in Khartoum, a rundown city that had seen little development since independence from Britain in 1956.

Hopes that growth would continue after South Sudan seceded in July 2011 were dashed when tensions with Juba escalated this year. Unable to agree on fees for oil exports through northern pipelines, the landlocked South shut off its oil wells in January, throwing both economies into turmoil.

Annual inflation shot up to 45 percent in October after the pound collapsed with the loss of oil, the main source not just of state revenues but also of dollars needed to buy food imports.

Prices for foreign goods have soared, deterring even wealthy customers.

HIGH HOPES

Al-Waha's majority owner, the Bank of Khartoum, a lender funded mainly by Gulf investors like Dubai Islamic Bank, hoped to copy the success of glistening shopping-cum-business-centres in Dubai and Cairo.

Sudan's President Omar Hassan al-Bashir attended the mall's opening ceremony on July 1, the 23th anniversary of his 1989 coup.

But the occupancy rate at the 17,000-sq-metre building is just around 35 percent, the Bank of Khartoum said.

"Coming soon" banners are everywhere in the shops. A tower reserved for a luxury hotel sitting on top of the mall is still vacant, as is the business tower, although the owners insist the first leases have been signed.

At a lease cost of $15 per square meter, prices at the few open shops, mostly foreign fashion retailers, include a hefty premium that is way beyond the means of most Sudanese.

El-Din, a Chinese Muslim who took his Arabic name when he arrived in Sudan to study Islamic law two years ago, said the only people at his "Bedmate - forever with you" outlet are students from a nearby university who come to gawk at sofas, beds and armchairs costing between 7,000 and 60,000 Sudanese pounds ($1,100-$10,000).

"This is like a museum for them," he said.

So many "visitors" come that he's put a sign at the entrance asking them not to bring in food or drinks and to avoid trampling too much on the carpet.

"It's a really nice place, something new, but expensive," said Ibrahim Adel, a young man drinking orange juice in one of the mall's elegant cafes. "I've been to the hypermarket downstairs because it's cheaper than other places but haven't shopped elsewhere."

Business has however picked up across from the mall's main entrance, where dozens of one-room shops fill a cluster of crumbling buildings dating back to British colonial rule.

"We have a lot more shoppers coming since the mall opened because people only go there to look at the latest expensive foreign brands," said Mahmoud Yahia, who runs a small fashion shop in a windowless, stuffy room with no air-conditioning.

"Once they get an idea about the latest fashion trends, they come here to look for the much cheaper Chinese version," he said, grinning as he pointed to stacks of shirts, trousers and suits with foreign brand names but labelled "Made in China".

"Waha mall is too expensive," agreed a housewife who gave her name as Leila, checking out prices for cheap shirts in another shop next door.

STILL OPTIMISTIC

The Bank of Khartoum hopes the economy will stabilise after Khartoum and Juba agreed in September to resume oil exports within months. Its Gulf shareholders have just decided to triple the bank's capital to expand even more in Sudan.

The bank, Sudan's oldest, owns 60 percent in the mall, and the rest is held by the government, according to mall operator Mourjan. Construction costs were around $200 million.

Al-Waha's general manager, Khalil Muhsen, a Palestinian who has worked for many years in the Gulf and Jordan developing shopping centres, says he also remains optimistic.

He said the mall has 7,000 customers a day, though the few people inside seem to be mainly students or teenagers. The underground park for 600 cars is almost deserted.

"When we opened, purchasing power was at its lowest," he said, adding that lease contracts for 60 percent of the mall's space had been signed so far. "(But) we are within our plan. The occupancy rate will reach 80 percent by the end of next year."

Muhsen said the challenges were not just economic - the concept of a mall with fixed prices for quality goods is new territory for many Sudanese who are used to haggling with vendors in an economy flooded with cheap Asian products.

He had to persuade the retailers to open on Fridays, a day when families have time to shop but Khartoum is shut down.

"We need to educate customers and tenants, present them new ideas," he said.

Local businessman Hassan Elhidairi had to close his Khartoum flower boutique - something almost unheard of in Sudan - last year for similar reasons.

"People here only buy flowers for Valentine's and Mother's Day," he said.

He opened a fashion shop in the upmarket Riyadh district instead, selling Chinese copies of Western brands such as Pierre Cardin, though at better quality than the low-budget dealers in front of al-Waha mall.

With price tags between 80 and 120 pounds, his shirts are much cheaper than in the mall. But even Elhidairi's shop is still empty, and he wonders how long he can hold out.

"Last year it was good business, but if the situation doesn't improve in the next five months it's probably better to close," he said.

(Editing by Sonya Hepinstall and Paul Taylor)

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