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Choppies complies with Zimbabwe’s indigenization law

Choppies CEO Ramachandran Ottapathu

One of the major Botswana companies trading in Zimbabwe, Choppies Enterprises has confirmed to this publication that it is fully compliant with Zimbabwe’s Indigenization and Economic Empowerment Act. “Yes, Choppies is fully compliant,” the company’s Regional Marketing & Communications Manager, Otsile Marole responded to The Weekend Post questionnaire.

The law, which bill was passed through Zimbabwe’s parliament in September 2007 by ZANU PF, was signed into law on March 9, 2008 by   Zimbabwe's President,   Robert Mugabe. The purpose of the law was to give indigenous Zimbabweans the right to take over and control foreign owned companies operating in Zimbabwe. The act defines an indigenous Zimbabwean as “any person who before the 18th of April 1980 was disadvantaged by unfair discrimination on the grounds of his or her race, and any descendant of such person.”

The Zimbabwe government had set the deadline for compliance with the law for Wednesday March 31st.  In weeks prior to the deadline date, the Zimbabwean media quoted tough talking government ministers who threatened harsh measures against foreign companies which fail to comply. In late March, Zimbabwe’s Minister of Youth, Indigenisation and Economic Empowerment, Patrick Zhuwao told the media that few days before the deadline, many foreign firms had not complied with the law. These, the minister said, included large Johannesburg Stock Exchange (JSE) listed South African companies such as Tongaat Hulett, PPC, Standard Bank, Impala Platinum and Aquarius Platinum.
"It is 23 March 2016, three months into 2016 and businesses have continued to disregard Zimbabwe's indigenisation laws. Cabinet has directed that on April 1 2016, all line ministers invoke Section 5 of the Indigenisation and Economic Empowerment Act against all non-compliant businesses in their sector," Minister Zhuwao was quoted as saying.

Further, the minister explained that under the process, the minister of the sector in question would issue an order to a licensing authority to cancel licenses of non-compliant businesses, notifying these firms in writing of the intention to cancel the license. “Each company is allowed to give reasons why the license should not be cancelled. The minister will then direct the non-compliant businesses to toe the line. If this does not happen, the minister will notify third parties likely to be affected by cancellation of the license.

The licensing authority will, without notice, cancel the license if a business remains non-compliant after a grace period of 30 days,” said Minister Zhuwao
Choppies, however, complied with the law from the word go. The company owns Zimbabwe operations through its subsidiary, Nanavac Investments. The subsidiary is owned 51% by   Siqokoqela Mphoko, son of Zimbabwe’s former vice president Phekezela Mphoko. However, according to Choppies Group’s annual report for 2015, “Aalthough the group has only 49% of the shares, management has determined that the group controls Nanavac Investments. This is on the basis that the shareholders holding the balance of the shares have agreed to allow the group to manage the company as it deems fit and the success of its operations are dependent on the investment of the group.”

Choppies, which started operations in Zimbabwe in July 2014 with 13 stores, now operates 21 Stores and 2 distribution centres. In his statement in the group’s annual report for 2015, the group’s CEO, Ramachandran Ottapathu, says sales in Zimbabwe have improved over time resulting in revenue of BWP863 million and EBITDA of BWP30 million. However, he observed that margins have dropped significantly due to shrinkage in consumer buying power, which he attributed to the macroeconomic slowdown in Zimbabwe. He also observed that revenue from non-essential food lines also dropped sharply due to the fall in disposable income.

Despite this, the Choppies CEO sees Zimbabwe as the most underserved market in their portfolio with very little competitive pressure from branded convenience offerings. “We successfully realised our strategy of expanding from our Harare distribution centre with a total of 20 well supported stores at year end. The Harare stores continue to perform well and additional stores are planned in this area during FY2016, with a total of 11 new stores expected,” he said.

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Botswana on high red alert as AML joins Covid-19 to plague mankind

21st September 2020
Botswana-on-high-alert-as-AML-joins-Covid-19-to-plague-mankind-

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.

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Finance Committee cautions Gov’t against imprudent raising of debt levels

21st September 2020
Finance Committe Chairman: Thapelo Letsholo

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.

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Gov’t Investment Account drying up fast!  

21st September 2020
Dr Matsheka

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”

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