Botswana’s premier breweries investment company, Sechaba Holding Limited this week reported contracted profits gathered during the trading year ended 31st December 2017. The company operates the country’s main beverages company, Kgalagadi Breweries Limited (KBL) with a 60 % shareholding.
According to the company’s 2017 annual report released on Wednesday, KBL which is the company’s sole investment, experienced significant decline of 4.73 percent in total beverages sales during the 12 month period that ended December 2017. This contraction was driven by poor performance in the company’s major beverages categories being Traditional Alcoholic Beverages, which registered a decline of 7.6 percent; Non Alcoholic brands, which realized a 7.0 percent contraction; while Clear Beer category posted a decline of 2.7%.
Beer – that is both traditional and clear beer had a tough start to the year on the backdrop of a slow economic downturn and unfavorable weather worsened by Tropical Cyclone Dineo which hit Botswana and the region with floods during the months of February and March. This decline in beverage sales volume consequently shrunk KBL cash flow with the company registering a total of 12.2 % decline in Profits for the year as compared to the 12 month period ended 31 December 2016.
Sechaba Board Chairman, Thabo Matthews attributed the decline in the financial performance of the company to the current tough regulatory environment in which the company operates largely driven by the impact of the Alcohol Levy and Traditional Beer Regulations. “The regulatory environment continued to present very real challenges,” he noted. “The levy rate for alcohol content of 5% and less remained at 50%; and for alcohol content of above 5% is as it was at 55% for the year under review,” he said.
Matthews also underscored that changes made on the locally produced alcoholic beverages levy to include duty payable in terms of Customs and Excise Duty Act also impacted KBL business negatively. “This change had a significant impact to the financial results of the company as it was subjected to the industry mid trading year, without prior notification from regulatory authorities,” he said.
Zooming into KBL beverage performance per segment, signals are that the decline in Clear Beer sales of 2.7% was attributed to adverse performance of the Castle Lite 660ml as well as non-performance of convenience packs across all brands which posted results of 12.6% and 11% decreases respectively. Konrad Kaise, Sechaba Finance Director highlighted that the only positive recovery was posted by Carling Black Label brand with a positive result of 3.5% increase in sales compared to the year ended December 2016.
Under the Fruit Alcoholic Beverages category Sechaba reports that positive returns were gathered during the period under review. “This has been our fastest growing segment, consistently posting double-digit growth versus prior year and budget,” observed Johan De kok Group Managing Director.
De Kok noted that key performer brand was driven by Redds Vodka Lemon (RVL) which is gaining the position category captaincy. “This stellar performance placed KBL amongst the best in the region and for the first time within C17 strolling into pole position ahead of competitor brands. We intend and expect more from this category as we are still driving and gaining share in this segment of the market,” he said. The 7.6 % decline in the Traditional Alcoholic Beverages category registered as the most poorly performed segment during the period under review.
Sechaba reports that this subdued performance was further worsened by a much softer December which declined by 4% when compared with prior year. Sechaba MD noted that the pack performance of Traditional Beer category indicates that 1L and 2L packs were the hardest hit posting full year results of 10.1% and 6.6% decrease compared to the previous year. Non-alcoholic Beverages were also the hardest hit resulting in a full year negative outcome of 7.0% versus prior year.
The report indicates that returnable bottles, 300ml and 1250ml were rationed and delisted respectively exiting the year at 73.7% lower than prior year. “The cans had a very tough year as they battled being the least affordable offering with decreased volume of 15.3% when compared with prior year.” Reveals Sechaba
Sechaba Brewery Holdings Limited is an investment company listed on the Botswana Stock Exchange. Sechaba holds a 60% shareholding in its sole investment, Kgalagadi Breweries (Pty) Ltd (KBL), whilst AnheuserBusch InBev (AB InBev) holds 40%. AB InBev holds a further direct stake of 16.84% in Sechaba. AB InBev is the largest brewer in the world, with more than 500 beer brands sold in more than 150 countries and some 200,000 employees in over 50 countries, following a merger with SABMiller Plc in October, 2016.
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 Holdings Limited while Botswana’s largest Pension fund BPOPF holds a significant stake of over 20 % through its different asset managers.
LIQUOR ACT UNDER REVIEW
Meanwhile the beverages and breweries industry parliament this week received a motion that seeks to amend the liquor Act. The Bill was tabled by Minister of Investment, Trade & Industry Honorable Bogolo Kenewendo. The bills seeks to amend amongst others liquor trading hours ,which is one the many changes that were introduced by former President Lt Gen Dr Seretse Khama Ian Khama.
The review of the liquor act is viewed by many as a brain child of Current President Mokgweetsi Masisi who observers note he is on a quest to undo many of Khama’s restrictive regulations. Reports from parliament indicate that the bill is receiving a significant backing from both opposition and ruling party law makers. The Alcohol Levy which companies in the beverages and liquor industry continue to report as a hindrance to business is also expected to be reviewed by parliament and cabinet with possibilities scraping it off or reducing it.
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.”