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Shopping malls in Nairobi will feel the economic pinch following the events at the premier Westgate Mall, and face a tough task to convince shoppers to return, says Alnoor Amlani

This article was first published in the November/December 2013 International edition of Accounting and Business magazine.

Nairobi has been in the international news because of the terrorist attack on Westgate Mall. It was not the first in the Kenyan capital: in 1998 the twin US embassy bombings included Nairobi, and many years ago the Norfolk hotel survived a bombing attack. Yet previous attacks did not attract such sustained media interest, perhaps because they were quickly executed.

This attack, Kenya’s most prolonged, lasted several days, during which confusion abounded and many innocent lives hung in the balance.

Indeed they still do because, according to the Red Cross, it is not clear, even weeks later, how many people are still missing.

The mall lies smouldering in ruins and the government is conducting an enquiry into the handling of the situation. Shopkeepers are slowly being allowed back to assess the damage to their outlets, but it is clear that the structural damage to the building means it will have to be torn down before anything else can be built, and it remains unclear whether or not this mall will ever reopen.

Westgate was hugely popular with the Kenyan middle and upper classes, and on the weekends many events were held there for children. Its coffee shops were also meeting places: often families went together, splitting up to do different things and regrouping later.

Westgate was the premier outlet for many of Kenya’s most popular brands. It housed branches of the most popular supermarket, the leading mobile phone operators’ outlets, coffee shops, two major banks, several cinema halls, three clothing shops and two electronic stores among others. It also featured many small vendor kiosks selling locally made jewellery, furniture and other items. On Tuesdays the Nairobi Masai Market would operate from the upper-level parking area.

All of these businesses sustained losses in the attack. Many lost staff who died or were badly injured, and many sustained damage to their outlets and now face losses due to the closure of their operations. Many were not insured against terrorism and hence may not be able to recover any of their losses. The mall itself was insured via Lloyd’s for Ksh 6.6bn (UK £46m) in a policy that did cover acts of terrorism.

Before the attack, the International Finance Corporation was negotiating to inject £40m into the development of £150m Garden City Mall, and South Africa’s Stanlib had stated that it would invest £40m in two new shopping malls in Kenya. Each mall costs £15m to £20m, and in 2012 retail space was let out at a monthly rent of £22 to £13 per square metre, much higher than prime office space, at between £10 and £5.

Consumers shun malls

Operators with multiple outlets in several malls must now also cope with sharply falling visitor numbers to the city’s malls. At the Yaya Center, Junction Mall, Village Market and Galleria Mall, the traditional long vehicle queues are gone and parking spaces are readily available.

This is no surprise, since no one wants to risk their life just to go shopping. On the other side of the coin, small shopping centres, supermarkets, kiosks and cafés not located in malls are all getting more business.

Meanwhile army personnel are patrolling the major malls and extra private security measures are being taken by mall and outlet owners in the hope that shoppers will return for the Christmas season.

Malls are a relatively new phenomenon in Kenya. The 1980s Sarit Centre was the first. Now there are more than a dozen malls in Nairobi, with more under construction. With the threat of more attacks hanging in the air, these malls will struggle to attract the footfall they need to be economically successful unless they can adequately secure their premises and convince shoppers to return soon.

Alnoor Amlani FCCA is an independent financial management consultant in East Africa who writes regularly on social and business issues

Last updated: 5 Nov 2013