Traditional hospitality giant Cresta Marakanelo Group which operates hotels and lodges in Botswana & Zambia continues to be negatively affected by the increasing hospitality industry competition.
As signaled by the Group at half year ended June 2017 results presentation, the chain hotel outfit collectively registered shrunk profits for the complete 2017 trading year ended December last year. According to the annual report released last week the Botswana Stock Exchange (BSE) listed hotels Group performance was subdued, with depressed overall financial performance compared to the prior year.
The prior year also recorded lapses in governance processes within the Group, which resulted in a restructuring of the leadership and a complete review of the internal control system, which was completed in 2017. Cresta Marakanelo Limited Chairman of Board of Directors Moatlhodi Lekaukau explains that the overall decline in profitability was by in large attributed to increased competition in the markets the Group operates in, coupled with significant reduction in Government spending.
Cresta has been predominantly a household name in the hospitality and related industries such as conferencing for several years; however of recent the Botswana market which is Cresta’s main operating space has been receiving new entrants who bring to the game exciting and diversified products, amongst other elite’s hospitality outfits internationally reputable market nectarines.
This has in turn taken the competition to Crestar’s door step. The Group also takes blows from reduced government spending from time to time. Government business especially civil servant’s official trips hospitality contributes significantly to Cresta’s bed occupancy. During the year under review the company recorded an overall profit before tax of P26.2 million mirroring a 29 percent decline from the result recorded for the previous year.
The Group recorded a marginal 1 percent increase in revenue to P 337 million. Total overheads decreased marginally, despite the inclusion of the costs related to the new hotel in Maun for the second half of the year. Lekaukau notes that the reduction was as a result of cost rationalization measures across the Group.
Despite shrunk profits as compared to the previous year, Cresta’s total assets for the year under review climbed by 2 percent, while equity increased by 4 percent compared to the same period last year. According to Lekaukau the Group continued to be cash generative despite downward trajectory on profitability, a total 6% increase in net cash generated from operating activities compared to the year ended December 2016.
Net cash generated from operating activities was P65.3 million compared to P61.8 million in 2016. “The Group has a robust and stable base, with cash resources of P65.3 million more that the P61.8 million in 2016, this is satisfactory going forward, the cash will be utilized to fund the payment of dividends to shareholders, refurbishments and expansion activities,” explained Lekaukau.
The group’s operating profit decline of 26 percent comes about from P33 million raked in during the 2017 trading year compared to P44.9 million in 2016. Earnings per share also registered a decline of 29 percent from 20.32 thebe in 2016 to 14.47 thebe in 2017, while the total dividend of 14 thebe per share for the 2017 financial year represents an 8 percent growth on the prior year.
The dividend yield for 2017 of 13 percent compares favourably to the average dividend yield of approximately 5.5% for counters listed on the Botswana Stock Exchange. At year end, the Group had negligible debt amounting to P8.4 million, a significant reduction from the over 12 million debt registered at the end of 2016.
Cresta Marakanelo Managing Director Mokwena Morulane notes that his company‘s declined performance is attributable to sluggish economy and contracted expansion opportunities due competition brought about by new entrant in the market. He however submits that Cresta Marakanelo Group is able to generate cash flows from operations of approximately P65 million per year.
“The Group is adequately positioned for ongoing operations and macro-economic shocks that may occur, we have debt carrying capacity and we are also able to take advantage of significant expansion opportunities,” he said. Amongst the two operation markets for Cresta, Botswana operations were significantly affected by the increased competition. According to the report Botswana’s overall occupancy declined from 63 percent in 2016 to 57 percent in 2017, also weighed down by the low occupancies of the new Cresta Maun Hotel, which opened in May 2017.
Three of the 11 Cresta hotels in Botswana incurred losses for the year as a result of flat revenue growth in a competitive environment. However on the Zambian Market the group performed satisfactorily with the division raking in operating profit of P987 million for the year, compared to a loss of P57 million in the previous year. “This was achieved in spite of the subdued business environment in Lusaka during the first half of 2017” observes Morulane.
The Cresta MD notes that cost optimization for the Zambian operations beard fruits as division’s revenue increased by 2 percent in Kwacha compared to the prior year, with the overall increase in profitability. To emerge from the declined profitability and remain the leading hotel Group predominantly in Botswana Cresta Marakanelo commenced the implementation of its new strategic plan aimed at repositioning the group and revamping its performance.
The strategic plan will run for the five year period from 2018 to 2022. The five main pillars of the Strategic Plan covers the broad areas of human resources and capacity building; growth; information communication and technology; marketing; and cost optimization. “We are working on initiatives to drive down costs without compromising the quality of product offering at the hotels, while also improving the value proposition,” explained the Group MD.
The Group has embarked on significant refurbishment projects of properties in 2018 with over P40 million earmarked to be spent on three properties this year. “This drive for product refreshing and improvement will continue into 2019, and we expect improved occupancies across all our properties,” observed Group Chairman. Lekaukau also notes that Cresta Marakanelo continues to explore regional growth opportunities in order to diversify its portfolio and further unlock shareholder value.
Managing Director Mokwena Morulane says the growth prospects of the Global Travel and Tourism industry as well as possible policy review by different stakeholders on the part of local industry sparks growth forecasts for the sector and ultimately profitability for the Cresta Grou. “The renewal and turnaround at Cresta Hotels will be premised on a solid platform of enhanced customer experience and strong commercial delivery. We are therefore on track to transform the Group into a stronger commercial and financially sustainable company whose central focus is the guest,” he said.
Homegrown LED light manufacturing company, The Bulb World, has kick started operations in South Africa, setting in motion the company’s ambitious continental expansion plans.
The Bulb World, which was partly funded by Citizen Entrepreneurial Development Agency (CEDA) at the tune of P4 million, to manufacture LED lighting bulbs for both commercial and residential use in 2017, announced last year that it will enter the South African market in the Special Economic Zone (SEZ) of North West province under the auspices of North West Development Corporation (NWDC).
The company has already secured a deal with South Africa authorities which entails production factory shells and tax incentives arrangements.
The company founder and Chief Executive Officer, Ketshephaone Jacob has also previously stated that the company is looking for just under P50 million to finance its expansion strategy and is reaching out to institutional investors such as Botswana Public Officers Pensioners Fund (BPOPF) and government investment arm, Botswana Development Corporation (BDC).
However, Jacob told WeekendPost that instead of sitting and waiting for expansion funding the company has started hitting the ground running.
“We have decided to get in the streets of SA, start selling lights from door to door, ” said Jacob who is in currently in Rusternburg to oversee the introduction of The Bulb World products in the market.
Jacob explained more brand activations will be undertaken in South Africa. “The plan is to do it the whole of North West and Limpopo province, through hawkers, we give the hawkers the lights to sell at a factory price and they put a mark up and make a living,” he said.
The Bulb World operates from Selibe Phikwe, it currently employees 65 young people, 80 % of which are Phikwe youth. The company plans to add 100 jobs this year alone as it forges ahead with its regional and continental expansion plans.
In July this year Bulb World products will hit South African Shelves: Pick n Pay, Checkers and Africa’s largest retailer Shoprite.
The Bulb World has been registered as a company in South Africa; the company will start producing lights from Mogwasa after striking a special economic zones deal with North West Development Corporation in North West Province South Africa.
“Over the next 10 years we are looking to create over 5,000 jobs in Africa. Through our expansion into all of Africa we will be able to create employment for various individuals in different sectors namely; manufacturing, distribution electronics and retail,” Jacob told this publication earlier this year.
Jacob said if all goes well, the plan is to have taken over Africa or rather penetrated, and have prevalent presence in the African market.
“We are gunning to have at least 30 percent market share by then. According to a 2016 Market Survey, the total valuation of sales for LED Lighting was 57BN, a portion of which we plan to have taken over by then,” he said.
While the company has set its eyes on Africa, Jacob said, the company has not fully exploited its local growth, indicating that there could be strategic factories built to supply neighbouring countries of Angola and Zimbabwe.
“There is potential for further local expansion as well to other areas of Botswana if things run smoothly as anticipated. Hopefully in the long-term if our fellow Africans and all these markets receive us well we are planning to build another factory,” he said.
“We are looking to build another factory in the Chobe/Ngamiland Area that will give priority to markets in Zimbabwe and Angola,” he said
The Maun based Okavango Research Institute (ORI) has downplayed the impacts of oil and gas exploration in part of Okavango delta arguing that given the distance proposed the likelihoods of negative impacts drilling these exploration wells on the surface water systems is likely to be negligible.
The Institution released a position paper titled ‘Proposed Petroleum (Oil and Gas) Exploration Operations in the Petroleum Exploration License (PEL) No. 73,’ with findings stating that, in the event of discovery of economically viable hydrocarbon deposits, much more careful consideration of the impacts and economic benefits of development of the resource will be needed.
For example, the fracking process for gas and oil extraction is known to require large volumes of underground water.
It further argues that increased extraction of the underground water is likely to affect the water table level and further affect the overall water availability in the river-basin.
“The effect on water availability and use may become worse if surface water is reticulated or sourced by any means from the Kavango River. Should the exploration and fracking for oil and gas expand to Block 1720, 1721 and 1821, the impact on water availability and quality will be significant, especially if the wastewater is not well managed,” said the paper.
The research unit recommends close communication between the relevant Basin State Ministries (Mineral Resources, Environment) and the Permanent Commission on the Okavango River Basin, OKACOM, and other stakeholders must be facilitated.
This will facilitate sharing of the correct information on the desired intentions of the basin states and compromises sought for the sustainability of the ecosystems in the downstream of the Cubango-Okavango river Basin, states the position paper.
ORI as a key stakeholder with scientific information says it is positioned to provide scientific advice and guidance to decision-makers on the potential impacts of both exploration and development and operation activities.
It also recommends that while the impacts might be minimal at the exploration stage, environmental impacts during the development and extraction process are significant.
Findings also state that the SADC Protocol places a mandatory duty to make a notification of planned measures undertaken in any riparian state in cases where such measures hold the potential to cause ‘significant adverse effects.’
It further states that where the planned development is trivial and not expected to cause any significant harm, the development state is not under duty to notify other riparian states.
Given that the drilling in the Kavango Region in Nambia is merely for exploratory purpose and the possibility of harm is minor, it is therefore not surprising that the Namibian government did not inform Botswana.
However, should it be found that the oil can be profitably or economically exploited, the Namibian government would be under a duty to notify both Angola and Botswana.
The institution further states that to ensure sustainable development in the Okavango Delta the following in the context of exploration for and potential development of hydrocarbon deposits within the Cubango-Okavango River Basin, it must be considered that the Okavango Delta is a World Heritage Site listed in 2014 by UNESCO and one of the binding requirements of the listing is the non-permissible commercial mining of any mineral, gas or oil within the World Heritage Site.
It states that the Okavango Delta is also a RAMSAR site in which mining is not allowed.
Should the exploration for minerals, oil and gas be allowed, there is a high chance that a mineral, oil or gas may be found given that the Delta is sitting on karoo sediments and shale rocks which in other parts of the world have been found to be sources of oil and gas deposits. Should oil or gas be discovered, there will be a strong socio-economic pressure to mine oil or gas and create jobs for the masses.
Manufactured in Turkey, Pakmaya Instant Dry Yeast can be used in the production of various fermented products, as it is suited for both traditional and industrial baking processes. All kinds of breads, buns and fermented pastry products are typical examples of applications.
Pakmaya Africa Sales Manager Cem Perdar says Pakmaya has 4 plants in across the world, further indicating that all of the plants have the highest standards of quality certificates and approvals. Regarding raw material, molasses is the main ingredient for yeast. Concerning production activities, yeast manufacturing requires high know-how and capability. Pakmaya has all those capabilities and aspects more than 45 years.
According to Perdar, Pakmaya has been existent in African markets since 30 years. From South to North, Central to East and West, a consumer can find Pakmaya in nearly every part of Africa continent.
“With its high quality, rich product selection and good service, our brand has become the favorite yeast of many Africans. On the other hand, our distributors in African countries are working very hardly and loyally in order to promote our products in their markets. After some time, we are becoming like families with our exclusive distributors in Africa and this enables both parts to work harder and keeps our product sustainable in market,” he said in an interview this week.
The yeast manufacturing giant made its way to Botswana market. The company has been smoothly working with Kamoso Distribution, a local distribution company. Perdar told BusinessPostthat two entities have been working hard to earn is market locally.
“At the moment we have a good market share with them in Botswana market. I’m sure during 2021 long, we will be increasing our sales and market position. Soon we are going to start a marketing campaign in Botswana, so that means Batswana will see and recognize Pakmaya more and more. Pakmaya wants to be the best friend of bakers in bakeries and ladies at homes in Botswana.”
As per global COVID-19 regulations to curb the spread of the COVID-19, Botswana just like other country closed borders. Providentially, the restrictions did not affect the company destructively.
Perdar says “Kamoso Africa is a very important and strong partner in Botswana territory. With Kamoso’s hard work and strict measurements, we have done a very good job. So as Pakmaya, we have not suffered any distribution problem. Our partner is doing the needful at the reaching our products to end users.”
He further said “We are doing well in Botswana market and hoping to make much more. Our aim is to enter every single corner in Botswana territory. With our new marketing campaigns, we are planning to be the most preferred yeast in Botswana market.”