Feared spillover effect on SA milk giant takeover Clover
Business
Local antitrust body Competition Authority had a big decision to make this week following approval of a huge takeover of Clover Botswana by South African giant diary producer Milco SA.
This week Competition Authority gave Milco SA thumbs up for the proposed acquisition of 100 percent shareholding in Clover Industries, a development which will see the South African entity owning Clover Botswana. But this decision did not come without a headache for the local antitrust body which moved to give Milco SA strict conditions for the takeover. This is because, according to Competition Authority, this merger might come with underlying economic effects that can affect the local diary industry or local business operations of Clover Botswana. According to Competition Authority this merger gives rise to public interest concerns, resulting in a fear of infringement of the Competition Act.
“It is noted that the proposed acquisition gives rise to public interest concerns under section 59(2)(b) of the Competition Act in that there may be spillover effects on the Botswana market as a result of subsequent changes emanating from the proposed merger,” said Competition Authority on its approval notice this week.
This spillover effects may mean the South African economic effects may rub into the local economy. This suggests that whatever economic decision taken by the acquiring enterprise will resultantly rub into the local diary industry or Clover Botswana which is the targeted entity in this case. Therefore the merger will not come without conditions according to Competition Authority.
Competition Authority, in pursuant to the provisions of section 60 of the Competition Act of Botswana approved the proposed acquisition with conditions that there shall be no retrenchment of any employee as a result of the proposed merger. During the public hearing of the proposed merger in June this year both the two companies, Milco and Clover, promised that the proposed transaction will also have no adverse impact on the public as there will be no retrenchments.
“The merged entity shall use all its powers to ensure that the business of Clover Botswana is maintained in Botswana to retain business continuity with the local based dairy input suppliers,” said Competition Authority. According to the anti-trust body, in the event that the merged entity is compelled to change the Botswana business model, such intentions should be communicated to the Competition Authority with a clear justification for the decision.
During the public hearing of the proposed acquisition of Clover by Milco which was held in June this year, Competition Authority CEO Tebelelo Pule said Clover should always have the growth of the local Small, Medium and Micro Enterprises (SMMEs) in mind in any decision they make.
For his part, Clover Botswana Managing Director Mike Joyner stated the transaction has the possibility to bring capital investment that can help diversify local economy. “It is going to allow us to play a bigger role is diversifying local economy through job creation that contributes to the wellbeing of the economy,” he said.
“If we look at the developed nations, the SMMEs play very critical roles in sustaining their economies. I always will look at the dominant players in the any industry of any sector and say if at all you want to survive, help grow the SMMEs as much as you can as they can help you survive when they ships are down,” said Pule. Milco representative in the public hearing Kristy Van Der Bergh promised that the merger will come with positive impacts to Botswana as it has possibilities of promoting technical and economic progress locally.
“We want to bring additional funding and expertise as well as help upgrade skills of the already employed personnel. We also intend to introduce new products that will result in expansion and growth of the dairy sector in Botswana,” she told the audience who were listening to the development of a big merger which would have possibilities of changing the local diary industry.
During the same June public hearing, the targeted party Clover, represented by Clover Botswana managing Mike Joyner could only laud the transaction as “coming with possibility to bring capital investment that can help diversify local economy.” According to Joyner the transaction is going to allow Clover to play a bigger role in diversifying local economy through job creation that contributes to the wellbeing of the economy.
Milco SA, is a special purpose vehicle (SPV) registered in the South Africa company laws jurisdiction and it is controlled by Milco Mauritius International Ltd (“MMI”) another SPV incorporated in Mauritius. According to Competition Authority the two SPVs were formed for the purposes of the proposed transaction between Milco SA and Clover Industries. Milco’s subsidiaries serve over 160 million consumers worldwide and it has presence in more than 70 countries including Turkey and Romania.
Milco Mauritius is owned by International Beer Breweries Ltd(“IBBL”) a company registered in the Middle East, Israel. IBBL is the manufacturer and marketer of beer brands Carlsberg, Tuborg, Holsten and Stella Artois as well as non-alcoholic beer brand Malty and juice brands Prigat and Ocean Spray. Before the approval of the merger the directors of Milco SA were Aran Ernest Oelsner; Joav Asher Nachson (both Israelis) and Andrew Stuart McLeod (South Africans).
Clover Industries or Clover which is the target enterprise is registered in South African. The Johannesburg Stock Exchange (JSE) listed Clover is a branded consumer goods company in the food and beverage industry that is focused on the supply of dairy products, soy products, olive oil, and olives, and the supply of non-alcoholic beverages as well as sales, merchandising and distribution of consumer goods. Before being taken over by Milco, Clover is not controlled by any single shareholder or a group of shareholders.
Clover’s shareholding composition included Clover Milk Producers Trust which owned 12.42 percent while Allen Gray had 7.87 percent. Government Employees Pension Fund garnered 6.04 percent while Lekto Brosseau 5.79 percent and JH Vorster held 4.50 percent. Before the proposed merger which has just been approved by the local antitrust body HSBC held 4.09 percent.
Clover wholly owns Clover Botswana which is based in Botswana and it was the reason for Competition Authority involvement in Clover and Milco merge. Before this huge takeover, directors of Clover were JW Basson, SF Booysen, WI Buchner, NV Mokhesi, JFM Morgan, B Ngonyama, FFF Scheepers, NA Smith, and JH Vorster. All these directors are South Africans.
Business
Gambling Authority expects bumper attendance at IAGR conference
With just four weeks to go, the Gambling Authority of Botswana has revealed that it is expecting a record attendance at the much anticipated International Association of Gambling Regulators (IAGR) Conference, which will be held in Botswana from 16 – 19 October 2023.
According to a communique from the IAGR, the Gambling Authority will most probably break the record in the number of accredited countries that will attend the conference in Botswana.
“We are on track to match and potentially exceed the incredible delegate turnout we saw in Melbourne last year,” read a statement from IAGR’s.
In its global reach alert, IAGR revealed a glimpse of jurisdictions that will be represented at the conference, among them Australia, Canada, Denmark, Japan, Jersey, Mauritius, United Kingdom, United States and Netherlands. African countries that have so far confirmed attendance include Zimbabwe, South Africa, Nigeria, Tanzania, Kenya and Burundi.
Commenting on the expected bumper attendance, IAGR said the amazing diversity elevates the conference to a whole new level, which will enrich discussions with a tapestry of regulatory perspectives and insights.
Botswana won the bid to host this year’s conference last year in Melbourne, Australia. The IAGR consists of representatives from gaming and gambling regulatory organizations from around the world; with a common mission to advance the effectiveness and efficiency of gaming regulation.
According to Gambling Authority Chief Executive Officer (CEO) Peter Kesitilwe, the Authority is a member of the IAGR by dictates of the Gambling Act; which compels it to align with international organizations whose objectives are to regulate gambling, and build collaboration among regulators.
“The IAGR conference is held annually and hosted by different member jurisdictions. It provides opportunities for gambling and gaming regulators from around the world to engage, learn and network with industry peers through events, workshops, research, information sharing, and the development of best practices,” explained Kesitilwe.
Funding requirements for the conference are shared between IAGR, the host country and conference participants. The government of Botswana has reaffirmed its commitment to supporting the Gambling Authority to host IAGR; as it is in line with its objectives of promoting the country as a Meetings, Incentives, Conferences, and Exhibitions (MICE) tourism destination.
According to Kesitilwe, the conference is coordinated by a Technical Committee of IAGR; together with a Local Organizing Committee (LOC) that comprises of representatives from the Ministries of Trade, Tourism, Foreign Affairs, Botswana Police Service and other stakeholders.
“We promise to deliver this hugely important event and showcase the best that Botswana has to offer. In addition to the exchange of ideas and culture capital, the Organizing Committee will also ensure maximum benefits for the tourism, hotel and hospitality industry, entertainment, transport, telecommunications, vendors, hawkers of cultural artifacts,” said Kesitilwe.
As part of preparations to host IAGR2023, the Gambling Authority recently went on a benchmarking mission to Great Britain.
“What we learnt there can assist the Gambling Authority as we enter a new era of growth and expansion. The meeting also provided a timely opportunity to catch up on preparations for IAGR2023. We are ready to host the conference and we look forward to meeting other regulators from across the world to share best practice, discuss common challenges and tackle illegal gambling,” concluded Kesitilwe.
Business
BDC on Diversity and Inclusion in the Corporate Sector and Workplace
In recent years, diversity and inclusion have emerged as crucial aspects of the corporate sector. Recognising the importance of inclusivity, the Botswana Development Corporation (BDC) has taken significant steps to signal its commitment to the inclusion of all regardless of age, gender, background. By implementing a comprehensive Diversity and Inclusion policy, BDC aims to create an environment that fosters equality, attracts top talent, and promotes creativity and innovation.
BDC has demonstrated its commitment to inclusion by crafting and implementing a bespoke Diversity and Inclusion policy. This policy recognises and values the differences within its workforce, striving to create a culture of equality. By fostering an environment where all employees feel respected and supported, BDC aims to attract and retain top talent, which in turn contributes to the organisation’s overall success.
The Corporation has implemented policies and strategies that promote diversity and inclusivity in the workplace. The Diversity and Inclusion policy emphasises the value and respect for employees from diverse backgrounds, creating an inclusive environment where everyone can thrive. By having this policy in place, BDC ensures that all employees are treated fairly and have equal opportunities for growth and development within the organisation.
In the realm of inclusivity, leading firms and companies have emerged as trailblazers, championing diversity and equity by implementing progressive policies and initiatives. These organisations have made significant strides in demonstrating their commitment to inclusivity through actions that support individuals with disabilities and foster work-life balance for all employees.
Microsoft actively recruits individuals with disabilities and fosters an inclusive workplace through accommodations and a dedicated resource group. Netflix offers generous paternity leave, Unilever supports surrogate parenthood and gender-neutral caregiver benefits, while IBM provides comprehensive adoption support. Companies like Google, Apple, and Facebook establish employee resource groups to amplify underrepresented voices. Adobe prioritises inclusive workplace design, and Accenture and Deloitte focus on diverse leadership representation. These companies set a powerful example, demonstrating the value of diversity and fostering a more inclusive corporate landscape.
Rising to the challenge, BDC has also taken several measures to respond to the different needs of its work force. These measures include fostering open and respectful communication, encouraging the formation of employee resource groups or affinity networks, and promoting diverse perspectives and contributions. The Corporation has also shown its commitment to inclusivity by recruiting persons with disabilities, providing paternity leave benefits, and recognising and supporting surrogate parenthood, primary caregiver benefits regardless of gender, as well as the adoption of children. These efforts demonstrate BDC’s progressive approach to embracing diversity and supporting employees in all aspects of their lives.
By so doing, The Corporation exemplifies the essence of progressiveness, embracing inclusivity as a core value. By championing diverse talent, providing supportive benefits, and fostering inclusive cultures, BDC is part of a movement that is shaping a future where every individual is valued and empowered.
Inclusion and diversity are not only moral imperatives but also strategic investments for success. BDC’s commitment to fostering diversity and inclusion, sets an example for other organisations in Botswana and beyond. By implementing policies and strategies that create an inclusive environment, celebrating diversity, and supporting employees from all walks of life, BDC paves the way for a more equitable and inclusive corporate sector in Botswana. Embracing diversity is not only the right thing to do; it also drives innovation, boosts employee morale, and contributes to the overall success of organisations.
Business
Sales, Profit up as Choppies new strategy pays off
Choppies Enterprises Limited, a supermarket chain led by Botswana businessman Ramachandran Ottapathu, reported an increase in profit after tax which is up 3.4%, hence improving from P145 million realized in 2022, to P150 million in 2023.
The results demonstrate sustained increases in consumer demand, improved operational flexibility, efficiency, cost-effectiveness and despite stiff competition, the Group managed reduce its debt levels by paying off P263 million debt from the previous fiscal year.
The chain supermarket realized growth in Group retail sales which went up 6.5% to BWP6 433 million compared to P6 042 recorded in 2022. The growth is attributed to a broad presence across Botswana and a growing footprint in three other African countries, being South Africa, Zambia and Zimbabwe, according to a recently financial results statement.
In Pula terms, gross profit grew by 4.0% to BWP 1 359 million (2022: BWP 1 307 million) despite the challenging economic environment. Botswana and Namibia marginally grew gross profit rates while rates in Zambia and Zimbabwe declined.
During the period under review, the group’s Group net cash generated from operating activities rose by 4.5% to P484 million, this is a significant improvement when compared to P463 million recorded in 2022. This segment was boosted by strong showing from Botswana and Namibia, which performed exceptionally despite the challenging trading conditions. Furthermore, it was driven by sixteen new stores coupled with price growth of 6.8%.
As a result of the robust financial performance, the group’s total assets increased from P1 886 million to P2 177 million, while retained losses decreased from P811 million to P664 million.
Meanwhile, the Group faced a demanding economic environment characterised by stubbornly high inflation, higher interest rates and unemployment, all of which continue to constrain consumer spending and the consumer’s ability to digest higher prices. Sales volumes were lower in many categories, exacerbated by competitor discounting, with cost pressures only partly recovered through price increases.
According to the audited results, the gross profit margin accordingly reduced to 21.1% from last year’s 21.6% due to higher supply chain costs, including fuel and managing prices in response to higher cost inflation and competitor discounting.
Furthermore, while expenses increased 5.1% excluding the depreciation restatement, expenses grew 9.8% partly due to new stores and inflation. Foreign exchange losses on lease liabilities of P31 million (against a gain of P28 million last year) were partly offset by foreign exchange gains on Zimbabwean legacy debt receipts of P18 million (2022: BWP15 million).
Operating profit (EBIT) reduced by 1.8% from BWP 279 million to BWP 274 million whilst Adjusted EBIT, which excludes foreign exchange gains and losses on lease liabilities, movements in credit loss allowances, Zimbabwean legacy debt receipts and the reassessment of depreciation, reduced by 7.5% as costs grew faster than gross profit.
CASH MANAGEMENT
According to the Choppies Enterprises financial statement commentary, the Group continues to manage its cash resources and liquidity prudently with a reduction of P132 million in debt with P87 million paid out of internally generated funds and the balance of P45 million paid out of the proceeds of the rights issue.
In addition, capital expenditure increased to P185 million when compared to 2022 fiscal year which had recorded P122 million. This was a result of the Group strategy to invest in new stores and maintaining the distribution fleet.
Choppies Enterprises raised BWP50 million from leases to fund the fleet, an improvement because in 2022 only P36 million was raised.
Despite the growth in sales, inflation and new stores, Choppies Enterprises inventory reduced by P20 million helped by more stable global supply and the benefits of implementing an inventory optimisation system.
Finally, commentary from the Choppies Enterprises Group observes that as the economies in which the Group operates recover and the new stores reach full potential, an improvement in margins is expected. “With a value proposition that resonates with customers and with the cost of everyday items still stubbornly high in too many categories, more customers are choosing Choppies for the value and assortment we are known for. While we have strong and resilient brands, affordability is a growing constraint for consumers, limiting their ability to digest higher prices,” reads a commentary on the Group’s Financial statement.
Choppies Enterprises Limited (“the Company”) is a Botswana-based investment holding company operating in the retail sector in Southern Africa. Dual-listed on the Botswana Stock Exchange (“BSE”) and Johannesburg Stock Exchange (“JSE”), its are food and general merchandise retailing as well as financial service transactions supported by centralised distribution channels through distribution and logistical support centres. Each week, approximately 2.0 million customers visit 177 stores under five formats in four countries. With annual revenue of more than BWP6 billion, Choppies employs 10 000 people and is the largest grocery retailer in Southern Africa, outside of South Africa.
EVENTS AFTER REPORTING DATE
On 19 July 2023, Choppies acquired 76% (seventy-six percent) of the Kamoso Group for BWP2.00 (two Pula) and took cession of shareholders’ loans to the value of BWP22 million. The Botswana Development Corporation (BDC) will retain its 24% stake.
This acquisition will take Choppies to become a P8 billion business in revenue with 11 000 employees and 274 retail stores.
SNEAK VIEW: COUNTRY PERFORMANCES
According to the financial results, Botswana experienced sales growth to BWP4 459 million an improvement from P4 209 million recorded in 2022. This was supported by volume growth from new stores and double-digit price inflation. Sales from Botswana increased by 5.9% and like-for-like sales growth was 2.2%, as the business continued to show strong resilience in an increasingly challenging economic environment. The Botswana economy continues to experience elevated inflation, high unemployment, and low economic growth.
EBITDA grew 5.8% and adjusted EBITDA was flat on last year. The performance for the second half was much stronger than in the first half as our strategies, leadership and inventory optimisation system have started to come to fruition.
As for the Rest of Africa being Namibia, Zambia and Zimbabwe sales increased by 7.7% to P 1 974 million, yet another improvement from 2022, which had realized P1 833 million sales. The increase was driven by the addition of nine new stores, inflationary increases in Zimbabwe and Zambia and volume growth in Namibia and Zambia. “However, this was offset by a very weak Zimbabwean Dollar resulting in Zimbabwe’s Pula sales declining by 48.3%.”
Meanwhile Namibia has successfully turned around with sales growth of 60.0% and like-for-like sales growth of 14.4%. Five new stores were opened during the year. EBITDA grew 140% with EBIT loss reducing from BWP9 million to BWP2 million. Adjusted EBIT, excluding the depreciation reassessment, reduced from BWP9 million to BWP6 million.
Connectedly, Zambia continues to grow with sales up 44.7% and like-for-like sales growth of 33.3%. Three new stores were opened during the year. While EBITDA declined by 26.4% due to the foreign exchange loss on the lease liability, adjusted EBITDA grew 27.1%. Adjusted EBIT declined marginally at 2.6%. Choppies Enterprises Directors are confident that Zambia will generate taxable profits in the foreseeable future.
Lastly in Zimbabwe, the Zimbabwean Dollar (ZWL) has significantly weakened especially in the last two months of the financial year. As a result of the above mentioned factors, Pula sales declined by 48.3%. EBIT and EBITDA declined by 151.6% and 125.5% respectively as cost inflation reduced margins. Adjusted EBIT and adjusted EBITDA declined 133.3% and 108.1% respectively.