Botswana’s premier brewer and beverages conglomerate Botswana Stock Exchange listed Sechaba Brewery Holdings Limited(SBHL) has posted sterling performance figures for its half year trading period ended 30 June 2019, unaudited financial results released last week reveal.
The Group which owns 49.9 % stake in alcoholic drinks outfit Kgalagadi Breweries and soft drinks giant Coca Cola Beverages Botswana experienced significant growth in overall volume registering a 14 % hike during the first six months period of 2019 with all categories recording modest to significant increase except Traditional Beer segment which experienced volumes decline.
This increase in traded volumes for all other segment coupled with high net revenues and benefit from overall savings in cost pushed profits during the period to a splendid 118 % growth when gauged against the corresponding period in the prior year. Sechaba directors noted in the financial results that each segment of the business is doing significantly better as separate entities owing to focus on specialized area and focused marketing distribution efforts.
Zooming into financial highlights per investment in associates shows that Kgalagadi Breweries Limited (KBL) volumes increased by 6 % from 669 000 hectoliters to close the period at 707 200 hectoliters. On the financial figures KBL experienced ballooned upswing as profits before tax went up 122 % from P88.5 million recorded in 2018 H1 to close the first half of 2019 at over P196 million. The premier alcoholic brewer paid the taxman over P39 million compared to P20.2 million in the prior period to end the half year at over P156 million Profits after taxation against P68.3 million mirroring 129 % increase.
For Coca Cola Beverages Botswana (CCBB), volumes went up by 33 % to close the six month period at 418 800 hectoliters from 315 800 recorded at 2018 H1 end. This resulted in 191 % pick up in profit before tax for the business which is involved in the manufacturing, import ,distribution and marketing of a portfolio of soft drinks , purified water and other non- alcoholic beverages. CCBB raked in over P46.7 million before paying the taxman P9.6 million to close the half year end at P37.175 million.
This is against P16 million profits before tax registered in H1 2018 and P8.7 million taxation representing the 191 % and 10 % increase respectively. Against the P7.3 million take home recorded in 2018 half the 2019 figure of P37.175 million mirrors a sterling 404 % growth year on year. On the overall Sechaba operating profits increased by 116 % from just over P44 million recorded at 2018 H1 end to P95.4 million 2019 H1 figure.
Following an agreement between AnheuserBusch InBev (AB InBev) and The Coca Cola Company(TCCC) for the latter to acquire the non –alcoholic ready –to –drink business segment of Kgalagadi Breweries early last year ,on the 3rd of July 2018 the two companies entered into a Master Purchase Agreement in terms of which the Sellers have agreed to dispose of their interests in KBL’s business of preparing , packaging , distributing , promoting and selling of non –alcoholic ready –to –drink beverages with exception to Mageu .
It was later announced that an agreement was reached that in essence separated and transferred Non –alcoholic ready to drink (NARTD) assets from Kgalagadi Breweries Limited into Coca Cola Breweries Botswana putting Sechaba Breweries Holdings Limited at 49.9 % shareholding in KBL and the same percentage stake in CCBB.
AB InBev has management control over KBL, offering insight and experience with regard to management, technical, brand building and distribution expertise. KBL operates four traditional beer breweries, a clear beer brewery, a sparkling soft drinks production plant and four sales and distribution depots around the country. Botswana Development Corporation, wholly government owned investment entity owns 25.59 % stake in Sechaba Breweries Holdings Limited while Botswana’s largest Pension fund BPOPF holds a significant stake of over 20 % through its different assert managers . AB InBev has direct shareholding on Sechaba as well as KBL.
EMERGING FROM ALCOHOL LEVY DEPRESSION
In the prior year’s Kgalagadi Breweries which has been the sole investment of Sechaba holdings was hit by downturn and compressed figures at the hands of amongst others Alcohol levy. At 2018 half year 1 the company‘s profits after taxation mirrored a 14.2 percent contraction compared to the 2017 first half performance. Sechaba Company cited the levy as the forefront factor in depressed take home figures.
During the last 2 financial years before review of the levy in October 2018 Sechaba Holdings boldly outlined that the taxation was significantly hurting company financials year and year out .Alcohol levy was introduced in 2008 .The levy rate for alcohol content of 5% and less was sitting at 50% and for alcohol content of above 5% at 55%. Additionally the calculation for the levy on locally produced alcoholic beverages included excise duty payable in terms of customs and excise Duty Act. In October last year Government took a major decision at cut the levy by 20 % to 35%
In the coming months prices will go up and inflation will shoot sharply above the target of 3 percent to 6 percent towards the third quarter of 2021, the Bank of Botswana on the other hand will continue to withhold its knife on the Bank Rate. This is according to a forecast made by Kgori Capital in its recent Market Watch Segment.
Statistics from Statistics Botswana show that the recent 1.8 percent increase in the September inflation, from 1 percent in August, was a reflection of the upward adjustment in public transport fares (Transport (from -6.9 to -3.9 percent) in September 2020, which is estimated to have increased inflation by approximately 0.64 percentage points.
Local anti-trust body, Competition and Consumer Authority (CCA), this month received back to back acquisition proposals from South African clothing retailers to wipe out their former rivals, Edcon, from Botswana malls.
Last week BusinessPost was in possession of Merger Notice No 23 of 2020 whereby a South African clothing retailer owner, Retailability Proprietary Limited, through Oclin Proprietary Limited, proposed to acquire parts of the Edgars business conducted by Edcon in Botswana (through Edcon Botswana), as a going concern, consisting of certain assets and identified liabilities.
South African government’s Business Rescue Practitioners earlier this year announced that Retailability will buy Edgars, after the latter filed for a business rescue plan in April after it failed to pay suppliers. This move will see Retailability add Edgars to its portfolio consisting of brands such as; Legit, Beaver Canoe and Style.
Retailability landed on Botswana shores 18 years ago with its flamboyant urban fashion Style which had 17 stores. Style, having almost the same target market as Edgars as it offers men’s and ladies’ contemporary and formal fashion, gave the 91 year old legendary clothing retailer a run for its money, and has won the battle as its parent company has taken over Edgars.
Retailability brands are synonymous with Botswana shopping centres and there are currently five (5) Beaver Canoe stores, 10 Style stores and seven (7) Legit stores across this country. The Beaver Canoe stores sell clothing apparel for men and boys only. The Legit stores have a fashion store format which focuses on the retailing of clothing, footwear, accessories, colour cosmetics and cellular products.
Retailability operates in over 460 stores across South Africa, Namibia, Botswana, Lesotho, and Eswatini. Many observers suggest that because of the deal with Retailability to swallow Edcon, most Edgars stores in Botswana will change their name and be branded Style. A sad tale for religious consumers of the Edgars trademark who got used to love their favourite brand for years.
According to CCA’s Merger Notice No 23 of 2020, Retailability is controlled by Clifford Raymond Lines (through a company which functions solely as a holding company of his interests in Retailability) and Metier Investment and Advisory Services Proprietary Limited (“Metier”). Metier is a private equity enterprise with investments in a number of industries spanning from healthcare, hospitality, FMCGs and telecommunications.
Retailability directors are mostly South Africans; Clifford Raymond Lines, Mark Richard Friday and Norman Victor Drieselmann. Only Nasreen Essack, who was appointed February this year, is a Motswana. He comes after Brian Thuto Tsima left on the same date. Retailability 100 percent owns Oclin Proprietary Limited, the company it is acquiring Edgars with, by a capacity of 3000 shares.
The target business, Edgars, offer textiles, cosmetics and cellular products. Edcon has a Motswana director, Charles Mzwandile Vikisi, a South African, Shane Van Niekerk and Zimbabwean Jethro Kamutsi.
“The Target Business comprises of two (2) Edgars franchise brands and private label stores across Botswana. These stores target middle to upper income customers and are home to a range of private label brands such as Free2BU, Charter Club and Stone Harbour, and a wide range of market label brands (such as Levi’s and Guess) for clothing, footwear and cosmetics.
In addition, the Target Business operates iconic Edgars Home and Edgars Beauty stores as store-in-store formats rounding out the department store offering in Botswana,” said CCA. Foshini also lines up to take Jet Botswana from Edcon.
The Foschini Group (TFG) released a statement confirming its latest intentions to acquire Edcon assets or Jet for a cash purchase consideration of R480 million. This was after the business rescue practitioners offered TFG to buy Jet by that amount.
CCA is currently mulling on a proposed merger by TFG to take over Jet operations in Botswana. Merger Notice No 21 of 2020 from TFG came a few days before the Retailability proposal. In this merger TFG, acting through Foschini Botswana, want to take over “parts” of the Jet business conducted by Edcon through Jet Supermarkets Botswana.
TFG will be willing to add Jet to its portfolio of 30 retail brands that trade in clothing, footwear, jewellery, sportswear, homeware, cell phones, and technology products from value to upper market segments throughout more than 4085 outlets in 32 countries on five continents. TFG will also get Jet’s distribution centre located in Durban and certain stores in Botswana, Lesotho, Namibia and Eswatini. Also part of this fat deal is that the company is looking to also acquire JET Club and all existing JET stock of no less than R800 million.
Johannesburg listed TGF owns Foschini Retail Group which owns the local operations called Foschini Botswana, the acquiring enterprise according to CCA merger notice. “TFG is not controlled by any enterprise/s and for completeness, the three largest shareholders of TFG holding shares greater than 5% as at 27th March 2020 are: Government Employees Pension Fund (16.2%) Public Investment Corporation (13.2%); Old Mutual Limited (6.7%); and Investec Asset Management (6.3%). The remaining issued share capital in TFG is widely held,” said the merger notice.
Only Abdool Rahim Khan is a Motswana in the Foschini Botswana directorship, the rest; Ganeswari Shani Naidoo, Anthony Edward Thunström and Gustav Jansen (alternate director) are South Africans.
According to the CCA merger, the Jet Business is Edcon’s discount department store division, selling clothing, footwear, homeware and some cosmetics as well as cellular products and targets lower-to-middle income consumers throughout Botswana. The Jet Business does not directly or indirectly control any enterprises, says the notice. CCA seeks any stakeholder views for or against the proposed merger, which may be sent within 10 days from date of this publication to the following address.
Botswana Communications Regulatory Authority BOCRA signed a memorandum of Agreement (MoA) with the Ministries of Transport and Communications (MTC), Basic Education (MoBE) as well as Local Government and Rural Development (MLGRD).
The MoA seeks to continue the collaboration that dates back to 2016 when the three parties first agreed to work together in a project aimed at computerizing and providing broadband Internet to primary schools in remote and underserved areas of Botswana.
The project benefitted 68 primary schools and 9 secondary schools through the construction of Local Area Network (LAN) in each primary school, provision of 5 Mbps dedicated broadband Internet to each Primary School and provision of Wi-Fi enabled tablets, laptops and related peripherals such as printers and copiers.
Further, the project will see the augmentation of computers in 9 Junior Secondary Schools with 30 laptops per identified school and employment of Information Technology (IT) officers at each primary school.
When speaking at the signing ceremony in Gaborone, Chief Executive of BOCRA and Chairperson of Universal Access and Service Fund (UASF) Board of Trustees Martin Mokgware said the project’s ultimate goal is to facilitate pupils in schools and host villages to be able to play a meaningful role in the digital economy.
Mokgware indicated that this necessitates upgrading of existing Telecommunications infrastructure to high capacity broadband that will support delivery of education, accessibility to the quality Internet and usage of ICTs.
The Fund began its inaugural programme by sponsoring the provision of WiFi hotspots in public areas around the country as its first project. Following the successful implementation of public WiFi hotspots, the Fund identified Kgalagadi, Ghanzi and Mabutsane areas for mobile network upgrades, schools computerization and internet provision.
Conscious that the project would not be possible without buy-in and support from MoBE, MTC and MLGRD, the Fund facilitated the signing of the first MoU between the three parties in 2016 for implementation of the project.
BOCRA Chief Executive said the signing of this agreement is aimed at benefitting the Kweneng District, adding that they have already assessed the area and have determined that they will be covering 62 underserved villages and 119 schools, 91 of which are primary schools.
“This is a project for which the partner Ministries need to re-commit for its success. Lessons from the previous schools’ computerization and internet connectivity project require that we increase our involvement and resources dedicated to the project for it to be successful. It is my belief as the project coordinator, that we will not do things the way we did them during the first project, for if we do, then we will not have learnt anything,” he said at the signing ceremony.
The purpose of learning is so that there can be continuous improvement to minimize the length of time and amount of resources utilized, he said expressing confidence that their partners will step up to the plate and ensure they play their part in the implementation of the project and that it will progress smoothly having already tread along a similar path.
UASF’s role lies mainly in funding and project management. According to Mokgware, once the project is completed, the work to integrate ICTs into the classroom begins in earnest. Therefore, he said, the project will not succeed without full cooperation and oversight of partners.
“MoBE will put in place the necessary content and ensure that the curriculum is available to all. MLGRD will provide, among others, the enabling environment by ensuring readiness of the school’s infrastructure and necessary security.”