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Famous Brands Acquires 51% of Retail Group


Famous Brands, the leading Franchisor in Africa has bought a 51% controlling stake in Retail Group. Famous Brands is the holding company for reputable franchised brands such as Mug & Bean, Wimpy, Steers, Milky Lane and Debonairs Pizza. 



Retail Group is currently owned by a consortium of investors, with the majority stake held by Craig Mackenzie, a long-standing business partner of Famous Brands and founder of Debonairs Pizza in 1991.

Established in 2000, Retail Group comprises 19 company-owned restaurants and manages nine franchised restaurants across Botswana. 

Famous Brands Limited is a public company listed on the Johannesburg Stock Exchange (JSE) in South Africa. Its head offices are in Midrand, Johannesburg. The company is Africa's leading quick-service and casual dining restaurant franchisor.

The company's global footprint of franchised stores spreads across the world, totalling 2,163 stores (2013): South Africa 1,881, rest of Africa 172, United Kingdom 110 (2013). Besides its core business activities of quick service and casual dining, the company is also involved in manufacturing and logistics. 



Group Chief Executive, Kevin Hedderwick, explains, “This transaction aligns with our deliberate approach to either acquire or take a controlling stake in existing Master License territories in neighbouring countries whereby we can exercise complete influence over our brands. In addition, we want to test our mettle in company-owned stores in advance of a potential broader foray into that arena.

This transaction provides us with the opportunity to achieve both goals at minimum risk.”

“Famous Brands continues to set itself ambitious growth targets,” adds Hedderwick, “and this strategy affords us a strong new avenue for expansion.Given the Group’s critical mass in the region, opportunities will be investigated to provide the business with in-house logistics and manufacturing services, which are currently outsourced.

The operation will also benefit from Famous Brands’ expanding brand portfolio. 

Hedderwick notes, “Retail Group is very well managed and a role model Master License business. The management and operational team, which are being retained, are exceptional and central to facilitating a seamless integration of the business into Famous Brands’ structure.

Mackenzie comments, “This transaction fully aligns Retail Group with Famous Brands, thereby providing the business with more effective access to the extensive resources afforded by Africa’s leading franchise group. We believe that the resulting blend of skills and experience will culminate in strong growth opportunities for the operation in Botswana and beyond.

”

Illustrating the compelling rationale for the transaction, Hedderwick says, “The food services sector in Botswana is growing rapidly, reflected by the 44% increase in franchised food service outlets industry-wide in the past five years.

Per capita GDP of US$16,400 is the third highest in Africa, ahead of Mauritius and South Africa.” He adds, “Political and economic stability have resulted in a stable labour market, while relatively lower tax and VAT rates compared to South Africa offer a further incentive for investment.”

Hedderwick elaborates, “The opportunity exists to grow Famous Brands’ share of this market through the existing brand portfolio and additional and/or new brands.

While Wimpy is the leading Casual Dining restaurant brand in Botswana, and Debonairs Pizza the entrenched preferred pizza brand, the recently opened maiden Steers and a second Mugg & Bean restaurant in Gaborone have delivered beyond our expectation and illustrate the potential to grow these offerings into other cities and towns.”

As at 28 February 2015, the contribution from Famous Brands’ Rest of Africa business comprised 8.9% of total system-wide franchise sales.

Hedderwick concludes, “We have stated frequently that we have ambitious and deliberate plans to grow our business outside of South Africa, and we foresee our operations in the Rest of Africa becoming increasingly significant to the Group over time. This acquisition advances our stated strategy to continue to build on existing momentum in the region in line with our first-to-market and narrow-and-deep strategy.”


The purchase consideration falls below the threshold of a categorised transaction in terms of the Listings Requirements of the JSE Limited and will be settled from cash reserves. The transaction is subject to approval from the Competition Authority of Botswana.


A business analyst who preferred anonymity said that this transaction will be given the green light  by the Competition Authority. He cautioned that in this instance the franchisor will compete with other franchisees who buy the franchise from Famous Brands. He explained that there will be no value addition to Botswana and Batswana as Famous Brands will be suppliers, franchisor, franchisee and competitors to other franchisees of their brands.


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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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