Alcohol levy brings more job cuts at KBL
88 lose jobs as Lobatse opaque drinks plant closes down
The country’s sole producer of beverages, Kgalagadi Breweries Limited, laid off 88 employees this week following a decision to close down its opaque drinks plant in Lobatse. The development was brought about by an untenable trading environment that has been characterised by an unfriendly and ever increasing alcohol levy, currently standing at 55 percent.
The plant’s closure brought to two the numbers of manufacturing plants shut down in just two years, following the closure of their Chibuku and Mageu manufacturing plants at the KBL Palapye brewery in 2013.
“The step from 50 to 55, we believe, was one too far,” said KBL MD, Johann de Kock at an engagement for media and financial analysts, recently. He added that the levy, for the first time went above the excise rate. The traditional beer regulations introduced in 2012, which bans sale of brews from homesteads has also hit the Chibuku business where it hurts most.
The opaque drinks sector makes an integral portion of the company’s business, contributing between 20 and 25 percent of sales. De Kok said that the number of small traders has decreased from 10 000, across the country, to only 750 depot operators.
December is seemingly the customary increase month as the levy reached 45 percent from the initial 30 percent. In December 2013, it went up to 50 percent after a five percent increase. This week, Government imposed a further 10 percent on the levy, bringing it to 55 percent.
The introduction of the alcohol levy which is directly attributable to President Lt Gen Ian Khama’s disdain for use of alcoholic drinks which he blames for evident social ills. Initially, President Khama had announced a 70 percent levy but settled for 30 percent but the trajectory of the levy suggests that it will reach the intended 70 percent.
In a statement issued by the brewer this week, the company said: “Generally, the entire KBL Opaque Beer portfolio has suffered sustained challenges in its trading environment as a result of the Traditional Beer Regulations that were implemented in July 2012; effectively banning the sale of traditional beer in residential areas that previously represented approximately 80 percent of trading channels for KBL Opaque Beer Division’s traditional heritage product, Chibuku. Other factors that ultimately contributed to this untenable situation relate to licensing issues as well as the unavailability of land to set up Chibuku distribution points.
The company also noted that: “it is increasingly the lower income consumers who have been most affected. Notably, with this reduction in Chibuku outlets, the traditional consumers of the product have turned to potent and often dangerous illicit brews that are produced under poor quality and questionable hygienic standards.”
However, De Kok said that all is not lost as the growth of the drink that is currently driving sales, Black Label, is reflective of the traditional Chibuku drinker who has not upgraded to clear beer or starts off with Chibuku and then takes clear beer.
De Kok, further asserted that Sechaba Brewery Holdings and KBL are still profitable and the business will continue, as evidenced by the capital expenditure of P600 million over the three years, which the company continues to layout. Multinational brewer, SABMiller, owns 40 percent of KBL.
According to De Kok, “water and electricity is a key leverage for us when we engage with Government,” adding that “if they don’t do it (provide electricity) we will most probably have to find a way to do it ourselves.” De Kok said that the company is considering sourcing local coal for electricity generation though it would come at great cost because it needs to be washed to bring it to desirable quality levels, this move being an alternative to sourcing the coal from South Africa, which currently is the case.
Last week in Parliament, Assistant Minister of Health Dr Alfred Madigele revealed that Kgalagadi Breweries Limited (KBL) has paid over P760 million to Botswana government under the Alcohol Levy since the levy was introduced.
Madigele further explained that the money is collected by Botswana Unified Revenue Service (BURS), routed through the Accountant General, who then disburses the funds to respective beneficiaries in the proportions of 85 percent to Government Consolidated funds, 10 percent to Gender Affairs Department and 5 percent to the Alcohol Campaign in the Health Ministry.
The Assistant Minister however expressed ignorance of imminent job losses caused by the alcohol levy. “My ministry is not aware of the impending retrenchment exercise at Kgalagadi Breweries Limited KBL or the number of jobs that are on the line,” as quoted in Parliament.
The company’s financial results, which were released recently saw the company’s profits rise 7,4 percent against volume decreases of 1 percent in clear beer and soft drinks and 11 percent for opaque drinks, respectively.
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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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