Cresta MD quits as investigations unravel
After a month of silence after dismissing the Chief Financial Officer (CFO), Cresta Marakanelo is back at it again, this time with the announcement that the suspended managing director has tendered his resignation.
It is almost two months since Cresta suspended its top two executives following allegations of impropriety. While the saga plays out, shareholders have been treated to terse statements from the Botswana Stock Exchange (BSE) listed tourism and leisure company, advising them to exercise caution in dealing with the company’s securities. Despite the cautionary statements, the company is yet to announce exactly what triggered the suspension of the two executives who have been with the company prior to its listing.
In the latest statement, the company says shareholders are advised that investigations regarding the irregularity involving the former CFO of the company have progressed significantly and are expected to be completed soon. The statement also added that shareholders will be apprised of the outcome of the investigations as soon as possible following completion thereof.
In a shocking twist since the dismissal of the CFO, Cresta announced that “Shareholders are also advised that the Managing Director, Mr Tawanda Makaya, has tendered his resignation with immediate effect. The process of identifying a new Managing Director and Chief Financial Officer to lead the business will commence shortly. In the meanwhile, Glenn Stutchbury and Chipo Mandela will continue to act as Managing Director and Chief Finance Officer respectively.”
The resignation of the suspended managing director raises more questions than answers especially considering that the investigations seem to be centred on Mr. Valentine Mganga, the ousted CFO, than on the managing director. The scandal came to the fore in early October when the company announced that investigations are underway regarding a potential irregularity involving the company CFO, and also announcing that both the managing director and the CFO have been suspended from work with immediate effect.
A month later after breaking the story, the company released another statement, revealing that investigations are still ongoing regarding the irregularity involving the company’s CFO, before dropping a bombshell that the Board has commissioned a full investigation and a report has been made to the police. The company ended the statement by announcing that the CFO has been dismissed from work while the managing director remains on suspension pending the outcome of the investigation.
While the shareholders and the public at large is still in the dark as to what could have transpired, the only thing certain is the dismissal and resignation of the two executives mark end to scandal that has been hovering over the company for the past two months. Mr. Tawanda Makaya joined Cresta as the Group Financial Controller in 1996 before rising through the ranks to become CFO and eventually Managing Director in 2007.
The ousted CFO, Mr. Valentine Mganga, joined Cresta as the finance manager in 2007. The two men have been at the helm of the company for 9 years in which the company has grown from being privately owned to being publicly listed in the Botswana Stock Exchange (BSE). Cresta Marakanelo is the operating company for the 10 Cresta Hotels in Botswana.
The company was established in 1987, when Cresta Hospitality was awarded the Management contract for the Marakanelo Hotels in Botswana by the Botswana Development Corporation (BDC). Prior to the listing, Cresta Marakanelo was jointly owned by the Botswana Government, through BDC, and TA Botswana. TA Botswana is ultimately owned by TA Holdings Limited, a company that was once listed on the Zimbabwe Stock Exchange, with an investment portfolio that extends from Zimbabwe to Botswana, South Africa, Uganda and Nigeria.
The Group's portfolio spans the Hospitality, Insurance, Investment Management and Agrochemical sectors. Its hospitality arm, Cresta Hospitality Holdings, is one of Southern Africa's largest hotel management groups, managing or operating 16 hotels in Zimbabwe(5), Botswana(10) and Zambia(1). The company listed on the BSE in 2010 after BDC, the main shareholder, put up 62.9 million shares in an Initial Public Offering (IPO). The IPO was made up of 40.7 million shares offered to the public at P1.45 per share, while 18.5 million was sold through private placement.
The remaining 3.7 million was bought by the company on behalf of its employees. The IPO which was 94% subscribed managed to raise P55.4 million, a record for the BSE at that time. The listing of the company resulted in a new shareholding structure, with BDC now holding 26% of the total issued shares, leaving TA Botswana as the single largest shareholder at 40% while the public holds 34%.
The stock which is currently trading below its IPO price has been gaining momentum this year, with the share price appreciating by 19.6% to trade at P1.28, making Cresta the best performing stock so far in the BSE’s domestic company index. The gain in share price follows an impressive run that began in 2015 when the company’s share price went up by 20%. For the year ended 2015, the group’s revenue was up by 5%, delivering a profit before tax of P36.2 million, a 12% increase from the previous year.
In its latest half year results, the group has impressed after profit before tax increased by 48% to from P12.3 million to P18.2 million. The group’s assets currently stand at P248 million, up by 7% from previous corresponding period. With a cash balance of P58.9 million, Cresta says part of the funds will be used to finance a new hotel project in Maun.
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Grit divests from Letlole La Rona
Grit Services Limited, a member of the pan African real estate group, London Stock Exchange listed Grit Real Estate Income Group is divesting from Letlole La Rona Limited (LLR), a local real estate company established by government investment arm Botswana Development Corporation over a decade ago.
The Board of Directors of Letlole La Rona Limited this week announced in a statement to Unitholders that Grit Services Limited (‘Grit’) has informed them of its intention to exit its investment in the company.
Grit has been a material shareholder in LLR since 2019. On 07 March 2023, Grit sold 6 421 000 linked units, representing 2.29% of the Company’s total securities in issue, at a market value of BWP 22 537 710.
This trade follows previous sales of 6.79% in December 2022, as communicated to Unitholders on 10 January 2023, as well as a further sale of 4.78% (representing 13 347 068 linked units) on 24 February 2023 to various shareholders.
In aggregate, Grit has sold 13.9% shareholding in the Letlole La Rona between December 2022 and March 2023, resulting in current shareholding of 11.25% in the Company.
Letlole La Rona said in the statement that the exit process will take place in an orderly manner so as to maintain stability of the Company’s share price.
The statement explained that Grit’s sale of its entire shareholding in LLR is in line with its decision to exit investments where it does not have majority control, or where it has significant exposure to currencies other than US dollar, Euro or hard-currency-pegged revenue streams.
“Grit has announced similar decisions pertaining to certain of its hospitality assets in Mauritius recently. The Company would like to advise Unitholders that it remains focused on long-term value delivery to all stakeholders” LLR said
In July last year as part of their Go-to-Africa strategy Letlole La Rona acquired an initial 30% equity stake in Orbit Africa Logistics, with an option to increase this investment to 50%. OAL is a special purpose vehicle incorporated in Mauritius, owning an industrial asset in a prime industrial node in Nairobi, Kenya.
The co-investment was done alongside a wholly owned subsidiary of London listed Grit. The Orbit facility is situated on a prime industrial site on Mombasa Road, the principal route south of Nairobi center, serving the main industrial node, the port of Mombasa and the industrial town of Athi River and is strategically located 11 kilometers south of the international airport and 9.6 kilometers from the Inland Container Depot.
Grit shareholding in Letlole La Rona was seen as strategic for LLR, for the company to leverage on Grit’s already existing continental presence and expand its wings beyond Botswana borders as already delivered by Kenya transaction.
Media reports have however suggested that LLR and Grit have since late last year had fundamental disagreements on how to go about the Go-to-Africa strategy amongst other things, fuelled by alleged Botswana government interference on the affairs of LLR.
Government through LLR founding shareholder – Botswana Development Corporation has a controlling stake of around 40 percent in the company. Government is the sole shareholder of Botswana Development Corporation.
Letlole La Rona recently released their financial results for the six months ended December 2022, revenue increased by 4% to P50.2 million from P48.4 million in the prior comparative six months, whilst operating profit was up 8% to P36.5 million. Profit before tax of P49.7 million was reported, an increase of 8% on the prior comparative six months.
“We are encouraged by the strong results, notwithstanding a challenging economic environment. Our performance was mainly underpinned by annual lease escalations, our quality tenant base and below average market vacancy levels, especially in our warehouse portfolio,” Kamogelo Mowaneng, Letlole La Rona Chief Executive Officer commented.
LLR reported a weighted average lease expiry period of 3.3 years and escalation rates averaging 6.8% per annum for the period ended 31 December 2022.Its investment portfolio value increased by 14% year-on-year to close the period at P1.4 billion, mainly driven by the acquisition of a 30% stake in OAL in July 2022.
The Company also recorded a significant increase in other income, predominantly due to foreign exchange gains on the OAL shareholder loan. “We continue to explore pipeline opportunities locally, and regionally in line with our Go-to-Africa strategy and our interest remains on value-accretive investments,” Mowaneng said.
An interim distribution of 9.11 thebe per linked unit was declared on the 6th of February 2023 for the half-year period to 31 December 2022, comprising of a dividend of 0.05 thebe and debenture interest of 9.06 thebe per linked unit which will be paid to linked unit holders registered in the books of the Company at the close of business on 24 February 2023.
Stargems Group establishes Training Center in BW
Internationally-acclaimed diamond manufacturing company StarGems Group has established the Stargems Diamond Training Center which will be providing specialized training in diamond manufacturing and evaluation.
The Stargems Diamond Training Institute is located at the Stargems Group Botswana Unit in Gaborone.
“In accordance with the National Human Resource Development Strategy (NHRDS) which holds the principle that through education and skills development as well as the strategic alignment between national ambitions and individual capabilities, Botswana will become a prosperous, productive and innovative nation due to the quality and efficacy of its citizenry. The Training Centre will provide a range of modules in theory and in practice; from rough diamond evaluation to diamond grading and polishing for Batswana, at no cost for eight weeks. The internationally- recognized certificate offered in partnership with Harry Oppenheimer Diamond Training School presents invaluable opportunities for Batswana to access in the diamond industry locally and internationally. The initiative is an extension of our Corporate Social Investment to the community in which we operate,” said Vishal Shah, Stargems Group Managing Director, during the launch of the Stargems Diamond Training Center.
In order to participate in this rare opportunity, interested candidates are invited to submit a police clearance certificate and a BGCSE certificate only to the Stargems offices. Students who excel in these programs will have the chance to be onboarded by the Stargems Group. This serves as motivation for them to go through this training with a high level of seriousness.
“Community empowerment is one of our CSR principles. We believe that businesses can only thrive when their communities are well taken of. We are hoping that our presence will be impactful to various communities and economies. In the six countries that we are operating in, we have contributed through dedicating 10% of our revenues during COVID-19 to facilitate education, donating to hospitals and also to NGOs committed to supporting women and children living with HIV. One key issue that we are targeting in Botswana is the rate of unemployment amongst the youth. We are looking forward to working closely with the government and other relevant authorities to curb unemployment,” said Shah.
Currently, Stargems Group has employed 117 Batswana and they are looking forward to growing the numbers to 500 as the company grows. Majority of the employees will be graduates from the Stargems Diamond Training Center. This initiation has been received with open arms by the general public and stakeholders. During the launch, the Minister of Minerals and Energy, Honorable Lefoko Moagi, stated that the ministry fully endorses Stargems Diamond Training and will work closely with the Group to support and grow the initiative.
“As a ministry, we see this as an game changer that is aligned with one of the United Nations’ Six Priority Sustainable Development Goals, which is to Advance Opportunity and Impact for Diversity, Equity, and Inclusion (DEI). What Stargems Group is launching today will have a huge impact on the creation of employment in Botswana. An economy’s productivity rises as the number of educated workers increases as its skilled workmanship increases. It is not a secret that low skills perpetuate poverty and widen the inequality gap, therefore the development of skills has the potential to contribute significantly to structural transformation and economic growth by enhancing employability and helping the country become more competitive. We are grateful to see the emergence of industry players such as Stargems Group who have strived to create such opportunities that mitigate the negative effects of COVID-19 on the economy,” said the Minister of Minerals and Energy.
Food import bill slightly declines
The latest figures released by Statistics Botswana this week shows that food import bill for Botswana slightly declined from around P1.1 billion in November 2022 to around P981 million in December during the same year.
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