Southern African spread Fast Moving Consumer Good (FMCG) distribution outfit CA Sales continued on its growth trajectory amid unfavorable trading conditions and increasing competition during the first half of 2019.
The Botswana Stock Exchange (BSE) listed sales outfit posted an impressive set of financial results for their six month period ended 30 June 2019. According to the report released this week, the group revenue increased by 20.6% to end the period at a staggering plus R2.9 billion building up on R2.4 billion gathered in the prior interim period. This according to CA Sales is predominantly attributable to organic growth and strong business windows.
“In a challenging operating environment, we continue to focus on building capacity amongst our employees, systems, delivering operational excellence, efficient stock management, dynamic service levels and continual cost efficiencies,” said DS Lewis Chief Executive Officer of CA Sales. Lewis says this resulted in a corresponding increase in gross profit which expanded by 18.0% to end the half year period at R451.2 million compared to R382.4 million recorded at end of 2018 H1.
There was also a significant upswing movement in headline earnings bolstered by exceptional stock management efficiencies birthing a robust 60.4% increase to a half year end of R73.3 million from R45.7 million headline earning figure recorded at 2018 half year end. Headline earnings per share went up 59.3% to 16.33 cents per share, picking up from 10.25 cent per share recorded during 2018 1st half year. “Despite head winds in some of the territories in which the business operate, the group produced pleasing results,” reiterated Lewis.
CA Sales Exco further says growth on prior year was underpinned by a good overall performance from all the major operations for the first six months of the year. Total assets increased by 14.6% to R2.6 billion due to the increase in right of use assets in accordance with IFRS 16, as well as a significant increase in working capital mainly due to the increased revenue.
With its original roots in Botswana CA Sales which has grown to a regional distribution powerhouse specializes in the fast-moving consumer goods industry and delivers route to market services to manufacturers and owners of some of the world’s leading and most prominent brands. The service offering includes warehousing, distribution, selling, merchandising, shopper marketing, training and debtor’s administration. The group has a varied geographical presence across Southern Africa operating in Botswana, Lesotho, Mozambique, Namibia, South Africa, Swaziland, Zambia and Zimbabwe.
CA Sales listed on the main board of Botswana Stock Exchange on the 13th November 2017. During this watershed listing 376 IPO applications totaling to 146 191 572 shares were received from invited investors and the public for the available 136 112 994 ordinary shares going at P3.45 each on offer.
The group distributes products from companies such as Tiger Brands, Unilever SA, Nestle, Kellogg’s, Nampak, Aspen, Colgate Palmolive, Pioneer Foods and South African Breweries across Southern Africa. CA Sales started operating almost 3 decade ago in Botswana as CA Enterprises founded by businessman, Jag dish Sha. The now nationalized Motswana went on to acquire then competitors Dafin Sales and Kalahari sales to birth CA Sales & Distribution. In 2011 CA Sales was incorporated as a private company under South African laws.
CA Boss Lewis says going into the last quarter of 2019 and beginning of 2019 the group will continue its expansion by growing its principal and customer networks and making value-adding acquisitions, broadening its footprint further across the African continent. “We expect the challenging economic environment and difficult trading conditions to continue in the midterm, but the group is well positioned with a strong balance sheet and a diverse geographical presence across Southern Africa to cushion subdued markets”. Lewis says their diversified portfolio should enable it to deliver sustainable results for the remainder of the year.
This century is always looking at improving new super high speed technology to make life easier. On the other hand, beckoning as an emerging fierce reversal force to equally match or dominate this life enhancing super new tech, comes swift human adversaries which seem to have come to make living on earth even more difficult.
The recent discovery of a pandemic, Covid-19, which moves at a pace of unimaginable and unpredictable proportions; locking people inside homes and barring human interactions with its dreaded death threat, is currently being felt.
Member of Parliament for Kanye North, Thapelo Letsholo has cautioned Government against excessive borrowing and poorly managed debt levels.
He was speaking in Parliament on Tuesday delivering Parliament’s Finance Committee report after assessing a motion that sought to raise Government Bond program ceiling to P30 billion, a big jump from the initial P15 Billion.
Government Investment Account (GIA) which forms part of the Pula fund has been significantly drawn down to finance Botswana’s budget deficits since 2008/09 Global financial crises.
The 2009 global economic recession triggered the collapse of financial markets in the United States, sending waves of shock across world economies, eroding business sentiment, and causing financiers of trade to excise heightened caution and hold onto their cash.
The ripple effects of this economic catastrophe were mostly felt by low to middle income resource based economies, amplifying their vulnerability to external shocks. The diamond industry which forms the gist of Botswana’s economic make up collapsed to zero trade levels across the entire value chain.
The Upstream, where Botswana gathers much of its diamond revenue was adversely impacted by muted demand in the Midstream. The situation was exacerbated by zero appetite of polished goods by jewelry manufacturers and retail outlets due to lowered tail end consumer demand.
This resulted in sharp decline of Government revenue, ballooned budget deficits and suspension of some developmental projects. To finance the deficit and some prioritized national development projects, government had to dip into cash balances, foreign reserves and borrow both externally and locally.
Much of drawing was from Government Investment Account as opposed to drawing from foreign reserve component of the Pula Fund; the latter was spared as a fiscal buffer for the worst rainy days.
Consequently this resulted in significant decline in funds held in the Government Investment Account (GIA). The account serves as Government’s main savings depository and fund for national policy objectives.
However as the world emerged from the 2009 recession government revenue graph picked up to pre recession levels before going down again around 2016/17 owing to challenges in the diamond industry.
Due to a number of budget surpluses from 2012/13 financial year the Government Investment Account started expanding back to P30 billion levels before a series of budget deficits in the National Development Plan 11 pushed it back to decline a decline wave.
When the National Development Plan 11 commenced three (3) financial years ago, government announced that the first half of the NDP would run at budget deficits.
This as explained by Minister of Finance in 2017 would be occasioned by decline in diamond revenue mainly due to government forfeiting some of its dividend from Debswana to fund mine expansion projects.
Cumulatively since 2017/18 to 2019/20 financial year the budget deficit totaled to over P16 billion, of which was financed by both external and domestic borrowing and drawing down from government cash balances. Drawing down from government cash balances meant significant withdrawals from the Government Investment Account.
The Government Investment Account (GIA) was established in accordance with Section 35 of the Bank of Botswana Act Cap. 55:01. The Account represents Government’s share of the Botswana‘s foreign exchange reserves, its investment and management strategies are aligned to the Bank of Botswana’s foreign exchange reserves management and investment guidelines.
Government Investment Account, comprises of Pula denominated deposits at the Bank of Botswana and held in the Pula Fund, which is the long-term investment tranche of the foreign exchange reserves.
In June 2017 while answering a question from Bogolo Kenewendo, the then Minister of Finance & Economic Development Kenneth Mathambo told parliament that as of June 30, 2017, the total assets in the Pula Fund was P56.818 billion, of which the balance in the GIA was P30.832 billion.
Kenewendo was still a back bench specially elected Member of Parliament before ascending to cabinet post in 2018. Last week Minister of Finance & Economic Development, Dr Thapelo Matsheka, when presenting a motion to raise government local borrowing ceiling from P15 billion to P30 Billion told parliament that as of December 2019 Government Investment Account amounted to P18.3 billion.
Dr Matsheka further told parliament that prior to financial crisis of 2008/9 the account amounted to P30.5 billion (41 % of GDP) in December of 2008 while as at December 2019 it stood at P18.3 billion (only 9 % of GDP) mirroring a total decline by P11 billion in the entire 11 years.
Back in 2017 Parliament was also told that the Government Investment Account may be drawn-down or added to, in line with actuations in the Government’s expenditure and revenue outturns. “This is intended to provide the Government with appropriate funds to execute its functions and responsibilities effectively and efficiently” said Mathambo, then Minister of Finance.
Acknowledging the need to draw down from GIA no more, current Minister of Finance Dr Matsheka said “It is under this background that it would be advisable to avoid excessive draw down from this account to preserve it as a financial buffer”
He further cautioned “The danger with substantially reduced financial buffers is that when an economic shock occurs or a disaster descends upon us and adversely affects our economy it becomes very difficult for the country to manage such a shock”