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Choppies expands to Kenya

Retail giant Choppies Group has sealed the acquisition of 10 Ukwala stores, clearing the final obstacle for the supermarket chain to penetrate the Kenyan market.

Choppies in June announced it had reached a deal to buy the 10 Ukwala stores with half of them located in Kisumu, three in Nairobi and a single outlet in Nakuru. The retailer, listed on both the Botswana Stock Exchange and Johannesburg Stock Exchange, becomes the first foreign supermarket to successfully enter Kenya through an acquisition.

The Kenyan Competition Authority said it has sanctioned Choppies to buy the nearly a dozen Ukwala outlets in a deal valued at $10 million (Sh1 billion).

Choppies is attracted by the low development of Kenya’s formal retail market, estimated at about 30 per cent penetration.  “Sustainability can only be achieved through establishing networks outside the country,” said CEO Ramachandran Ottapath.

The deal will see Choppies take over all operations, general trading, importing, exporting, distribution, supply, selling and dealing as retailers of all types of goods carried out by Ukwala Supermarkets.

The Choppies group CEO Ottapathu was quoted by the Daily Nation confirming the buyout adding that they had partnered with a Kenyan company, Shantal Retail holdings Limited, who have contributed 25 per cent in equity and debt proportionately in the new vehicle, Choppies Enterprises Kenya Limited.

Choppies’ said its move to acquire Ukwala and its entire branch network from Kenyan owners  Parin Bharakumar Patel and  Birju Pradipkumar Patel was in line with its strategy to fast track entry into Kenya which will give it a platform to grow its business in Kenya.

Profit in the year through June rose 21% to 202.8 million pula ($19.8 million), Choppies reported on September 22. The stock, which started trading in Johannesburg on May 27, has climbed 16% to R5.70, valuing the company at R7.2 billion.

Choppies trades at 26 times estimated earnings, according to data compiled by Bloomberg. That compares with 18 times estimated earnings at Shoprite, South Africa’s biggest grocer, which has a market value of R89 billion.
So far Choppies has expanded its footprint with a number of store roll-outs in existing markets.

In Botswana, the group has further strengthened its position as the largest retailer increasing its stores from 69 to 73. In South Africa, with a net increase of 10 stores the group has managed to achieve an EBITDA break-even position.

In Zimbabwe the expansion has been focused on the Harare area and other major towns other than Bulawayo. The expansion was supported by the new distribution centre in Harare. Seven new stores were added to take the in-country footprint to 20.

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

21st September 2020

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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