Retail giant Choppies is set to make an anticipated decision on the date of release of its impending financial results, next week, with financial results expected in the next fortnight.
Investors who have for years been ‘gambling’ with their money to buy shares on the promising and ever expanding Choppies business have their confidence restored early this week after an ‘amicable’ separation between their grocer and Zimbabwe’s Mphoko family. Choppies’ feud with the Mphoko family gave birth to a lot of problems which some market observers believe could be the fall in their share price as some investors were reported to have been selling shares out of panic due to fears that the retailer might lose grip in its expansion appetite.
Choppies currently has 35 outlets across Zimbabwe and the retailer said in a latest statement that it want to become the biggest retail operation in Africa, with, “a strong vision for the Africa of Tomorrow and Zimbabwe forms an integral component of that Vision.” Another offspring that came with Choppies-Mphoko nuptials is the allegations of money-laundering or fraud, a possible huge scare on investors and this might have motivated panic sale of shares.
The allegations of fraud on Choppies management by its Zimbabwe partners came with a complication whereby the retailer failed to release its financial results last year blaming accountancy delays due to a change of auditors his further demotivated investors and this made Choppies price to nosedive even in a shocking manner, falling by about 70 percent. This led to Choppies being investigated by the Botswana Stock Exchange (BSE) with a subsequent sideling of its securities following. Choppies remains suspended by the local bourse.
Latest information is that the Choppies management has been meeting and deciding on releasing financial results which will ease Botswana Stock Exchange sanctions on Choppies. This is because of the new developments on Choppies-Zimbabwe nuptials which is said to have ended “amicably” this week. This week the Mphokos have decided to disinvest on Nanavac Investment Private Limited (PVT) LTD which was once trading as Choppies Supermarket Zimbabwe, meaning the retailer’s Zimbabwe operations are now wholly owned by Choppies Enterprises Limited.
“This is a welcome development for the Choppies family not only in Zimbabwe but the region at large. Now that the matter is out of the way Choppies will continue to explore additional business opportunities in Zimbabwe and where possible increase our foot prints,” said Choppies CEO Ramachandran Otapathu. In a brief interview with Otapathu this week confirmed that Choppies is currently working on the release of financial results in few days.
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”