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Choppies revenue up to P5.4 billion amid new strategy

CHOPPIES

Choppies Enterprises Chief Executive Officer (CEO) Ramachandran Ottapathu has said the retail giant is regaining its feet after tumultuous spell which saw the company being suspended on the stock exchange as well poor performance of its operations in some countries.

Choppies returned to trading on the Botswana Stock Exchange (BSE), where it is primarily listed, on the 27th of July 2020 subsequent to release of its 2018 and 2019 financial results which have been backlogging for the past two successive financial years.

BSE suspended Choppies in 2018 after the company failed to publish its financial results pending “changes in auditors as well as the legal and forensic investigations” hence a subsequent boardroom fracas played before the media.

For the same reason, Choppies shares were also suspended in its secondary market, the Johannesburg Stock Exchange (JSE). Choppies remains suspended on JSE.

Speaking to WeekendPost on Thursday, the Choppies supremo said they have learnt numerous lessons over the past few years relating to operations expansion, expressing confidence that the strong financial performance that the company posted recently is a testament to creation of a new path.

“The company had few loss making units that have been disposed of. The remaining places where we operate [Botswana, Zimbabwe, Zambia and Namibia] are solid performers from all the four regions in spite of high inflation in Zimbabwe, we still continue to make money. Zambia is growing well and Namibia is also in strong footing,” Ottapathu said.

Choppies recently decided to cease its operations in South Africa, Mozambique, Kenya and Tanzania owing to poor performance. Despite this divesture Ottapathu is confident other regions will be key in the growth of Choppies in the next few years.

“We will get some growth in Zambia, Namibia and Zimbabwe depending on what the country is going through. We are not going to be in a hurry to expand in Zimbabwe but other countries we will do expansion in a phased manner,’’ he said.

Asked on what went wrong in other regions Ottapathu said: “It was too new in those countries. Nobody had the patience to wait, we had to go with a new tide that people have to make money immediately.”

Ottapathu could not rule out the possibility of returning to the markets where they exited, indicating that only time will tell.

“It is too early for me to make a comment on that. We will be expanding in a cautious manner and we will do an expansion programme in a very thoughtful process,” he said.

In the latest financial results, Choppies indicated that it is in the process of restructuring its debt. The Debt Restructuring Plan will allow the Company to repay the lenders in smaller tranches than the previous structure which will release some cash to the Company and improve the cash flow going forward, the statement stated.

The Choppies board is of the view that the buffer that has been provided by lenders coupled with improved profitability levels will go a long way in keeping the Company as a going concern for the short, medium to long term.

“That is one of the lessons we learn in the whole thing, debt is a killer. We want to reduce the debt. We will repay the debt even if dividends are delayed by a year, we will rather pay the debt,” Ottapathu said.

Despite events of the past few years, Ottapathu is self-assured that shareholders are confident about the future of the company.

At the height of Choppies saga, Ottapathu was suspended as the CEO of the company pending investigations resulting from allegation of wrong doing that have been raised by one of the previous auditing team members.

“Majority of them are confident, that is why they put us back in the driving seat. We brought in new board members and they are working well with us,” said Ottapathu.

As he previously indicated, Ottapathu said his suspension followed his proposal to the then board led by former President Festus Mogae to have the company board “refreshed” to bring in people with relevant experience in the retail business.

After garnering support from majority shareholders, the board was refreshed, with Mogae and other board members comprising of Dorcas Kgosietsile, Heinrich Stander, Ronald Tamale and Wilfred Mpai resigning their seats in September 2019.

During the year under review there has been changes in the Board of Directors of Choppies and the current board, which is led by Uttum Corea and comprises of among others; Farouk Essop Ismail, Ramachandran Ottapathu, Carol Jean Harward, and Tom Pritchard.

CHOPPIES FINANCIAL PERFORMANCE

Choppies negative equity increased from P80.1 million at June 2019 to P467.1 million as at June 2020. The main contributor for the increased negative equity is the P469.6 million loss from discontinued operations.

Group revenue, for the year ended June 2020 comprising of sale of goods, from the continuing operations, increased by 1.1 percent to P5 421 million (2019: P5 359 million).

This increase was inflation driven in Botswana and Zimbabwe against a backdrop of negative sale volumes in Botswana and Zimbabwe due to the impact of the Covid-19 pandemic.

The impact of the COVID-19 pandemic on the Group’s continuing operations revenue is estimated at P190 million.

The Board has considered it prudent to not declare a dividend for the period under review.

Botswana

The Botswana business continued to show strong resilience in an increasingly competitive and disruptive market due to Covid-19. This year was a period of consolidation, rationalising and balance sheet management with only 3 new stores opened totalling 91 stores.

Revenue grew by 2.7 percent to P4 260.1 million (2019: P4 147.2 million) despite sale volumes reducing by 4.7 percent. The gross profit margin improved to an impressive 24.4 percent (2019: 24.1 percent) with increased consumer demand in an economic environment of low interest rates and a weak Rand. In addition, improved buying and further addition of house brands contributed to profitability.

Financial services and value-added segments contributed well to the bottom line with significant effort and resources placed behind these to improve the service delivery and profitability.

EBITDA (i.e. before accounting for IFRS 16) grew by P58.2 million or 22.5 percent to P316.6 million (2019: P258.3 million).

Zambia

Choppies is becoming a significant player in the Zambian market and is currently number 2 in its market segment with a total of 21 stores (2019: 21). Revenue grew by 3.5 percent to P604.1 million (2019: P583.5 million) and the gross profit margin to 17.6 percent (2019: 17.2 percent). In the rapid declining currency situation, input costs are not sufficiently recovered by sales proceeds in Kwacha. This situation is made worse by some overheads like rent which are normally fixed in US dollars, a situation currently been re-negotiated.

EBITDA losses (i.e. before accounting for IFRS 16) reduced significantly by P33.6 million to a P4.4 million loss (2019: P38.0 million loss).

Zimbabwe

Zimbabwe is one of the most challenging markets to operate in, with hyperinflation in three digits, concerns surrounding the economy, changes in the money market and public disturbances. Revenue declined by 18.6 percent to P414.1 million (2019: P508.5 million) resulting from an 87.5percent weakening of the local currency against the Pula during the previous 12 months.

Gross profit margins improved slightly to 19.0 percent (2019: 18.8percent) with EBITDA on a comparable basis (i.e. before accounting for IFRS 16) at P15.7 million (2019: P15.1 million). The abrupt changes and volatility in the currency makes operating in Zimbabwe extremely difficult. This resulted in all the gains obtained at country level getting eliminated when converted at group level due to the weak currency when compared to the Botswana Pula.

Despite all these issues, the business remains self-sustaining without any cash flow constraints. However, repatriation of profits to Botswana will continue to be difficult until the economy undergoes a structural change.

Namibia

The Namibian operation is still relatively small, with five stores (2019:5), and is yet to reach a critical mass needed to generate sustainable profitability levels. Revenue increased by 18.7 percent to P142.1 million (2019: P119.7 million) with gross profit margins improving to 18.3 percent (2019: 16.6 percent).

The trends in sales growth and substantial improvement in gross profit levels are indicative of the future potential of the region. Based on the trends and similarities this market has to Botswana, the Namibian operation is expected to be a substantial contributor to the profitability of the Group in the longer term.

EBITDA losses (i.e. before accounting for IFRS 16) increased to P11.3 million (2019: loss P9.2 million) due to the rental payment of three non-operational stores.

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Gov’t ignored 2 million doses COVID-19 vaccine pledge 

4th August 2021
DIKOLOTI

The government has reportedly missed out on an opportunity to secure 2 million doses of AstraZeneca, following efforts made by Batswana living in the diaspora to negotiate the deal for their besieged nation. 

The humanitarian gesture spearheaded by Batswana in the diaspora — who say they are concerned by the high mortality rate locally — has not been warmly welcomed at the government enclave.

“We are losing our relatives, friends, and associates. Based on the network we have cultivated over time, we negotiated an offer for Botswana so that the leadership may be aware of the availability. These samaritans engaged directly with the supplier to buy because you ought to be connected for you to secure vaccines right now. It is not the question of having cash power; the demand is high,” one of the negotiators told this publication.

Information received by WeekendPost shows a country leadership that looks somehow lax in engaging the suppliers and has no pressure to procure vaccines – this is evidenced by several correspondences between some ambassadors and the negotiators seen by this publication.

“I am still trying to get the powers that be at home. HE’s (President Mokgweetsi Masisi) mobile is going unanswered. But usually, he will return the call. Grace Muzila (Permanent Secretary- Ministry of Health and Wellness- MoHW) is also not picking the phone. I will keep on calling. So let me get an indication from home before I talk to Jette (AstraZeneca supplier),” a correspondence from one Ambassador to the concerned connected Motswana reads.

This correspondence was the last time between the Ambassador and the facilitator who did not want to be named – arguing that he does not want to appear to be looking for political mileage on the deal.

As a matter of fact, in another conversation, the facilitator, who at one point was a cabinet minister, is quoted saying, “I have no personal benefit sir, it is information I am giving you freely. Our people are dying. I have done my patriotic duty, sir. Let’s try to source the vaccine to immunize our people.”

Desperate attempts to engage with the Ambassador hit a brick wall, with other information suggesting that the higher-ups were not interested in the deal, despite the dire need for vaccine locally.

At the beginning of the virus in 2020 here in Botswana, the same negotiators are the ones who organized donated masks for some Southern African countries.

Different Ambassadors were asked to collect masks, and the Botswana Ambassador in China organized 10,000 NK95 masks. “We do not have to make noise about it; we all have to contribute to assist our people, no political expediency,” he says.

Both the Health Ministry and OP media liaison offices were yet to respond to this publication’s inquiries on the matter despite numerous attempts to engage them.

According to the Presidential Taskforce report, Botswana has administered at least 318,107 doses of COVID vaccines. Assuming every person needs two doses, Botswana is estimated to have vaccinated about 6.9% of her population. Botswana has a population of around 2.5 million people.

The available AstraZeneca doses negotiated for Botswana have since been offered to other countries that demonstrated a desire to buy.

Botswana is currently struggling to immunize the citizenry as a lack of connection globally to convince the manufacturers to prioritize her. In his tours to various health facilities last week to appreciate the vaccine rollout program, President Masisi said the vaccine is costly and scarce. He also revealed how the COVAX facility failed Botswana.

“As third world nations, we poured money into COVAX to buy only to learn that they are tricking us, there is nothing. We now have to look for funds and buy the available vaccines,” Masisi told residents of Ramotswa.

COVAX is a worldwide initiative aimed at equitable access to COVID-19 vaccines directed by Gavi, the Vaccine Alliance, the Coalition for Epidemic Preparedness Innovations (CEPI), and the World Health Organization (WHO).

COVAX coordinates international resources to enable low-to-middle-income countries equitable access to COVID-19 tests, therapies, and vaccines. By 15 July 2020, 165 countries – representing 60% of the human population – had joined COVAX.

As of 11 April 2021, COVAX has delivered 38.5 million doses, falling well short of 100 million promised doses by the end of March 2021. And as of 6 July 2021, 100 million doses have been delivered.

HEALTH MINISTER SAYS NO TO SPUTNIK

Following the AstraZeneca fiasco, the concerned Batswana once again reached out to the Assistant Minister of Health, Sethomo Lelatisitswe, on the prospects of the Russian medication of Sputnik V. The vaccine is currently used by 70 nations worldwide in the fight against the pandemic, and it is one of the first to trial to fight COVID -19.

Like AstraZeneca, the Minister is not keen on the medication, which he admits in one of the exchanges with the negotiators that WHO has cleared it. The main reason why the Minister threw the Sputnik idea into the dustbin is that it “is not registered as yet by Botswana Medical Regulatory Authority (BOMRA).” Further, even saying the manufactures of the drug should come and convince them as authorities why they should procure the vaccine. The Minister could not respond as to whether BOMRA will evaluate the use of Sputnik in Botswana and whether it is possible for them to carry trials here.

SoE IS THE ELEPHANT IN THE ROOM

There is a growing concern from those sourcing assistance from affluent nations, expressing concern over President Masisi’s continued State of public Emergency (SoE). They argue that the Health Ministry’s hands are tied hence unable to make decisions because Masisi is the only man who can take decisions during the State of Emergency. “We can excuse the Health Ministry because decisions are mostly taken at Office of the President (OP). Therefore, if they do not see the need for patriotic assistance, then let it be, but our people are perishing the hurtful thing. We will keep on trying our best from our networks here for our people,” adds the facilitator who is currently in the Middle East.

Last week, Lelatisitswe told parliament that the government expects around 380 000 vaccine doses in the coming months to immunize Batswana. However, the doses are a far cry from what reality dictates on the ground.

 

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Minister Kgafela begs self-exiled brother to return

4th August 2021
Kgafela

A heartfelt message of good wishes from Minister Mmusi Kgafela to his self-exiled brother and Bakgatla paramount chief, Kgafela Kgafela II, this week urged the latter to consider calls for his return to Botswana to visit his tribe and family.

“On behalf of our father’s people, your people, I wish to inform you that Bakgatla are thinking of you, and they miss you dearly. They request that you should find time to visit them. Please come to Botswana to spend some time with them, to see and greet them,” said Mmusi as part of his 50 years birthday message to Kgafela Kgafela II, who has vowed never to set foot in Botswana.

However, Mmusi Kgafela did not shed light on how his brother will deal with the arrest warrant, which triggers once he sets foot in Botswana.

The Bakgatla Kgosikgolo, who went on a self-imposed exile in 2012 to South Africa, faces a decade-old-plus warrant of arrest issued by the Village magistrate court after his non-appearance in Court over criminal charges relating to flogging of his subjects. Kgafela described the charges as ‘political persecution’ before jetting out to his second home in South Africa, Moruleng, where he is also a Chief.

Asked over his views on the complications around the warrant of arrest, Mmusi, a lawyer by training, said, “what people need to understand is that a warrant of arrest is not a prison sentence.”

He continued: “There is a need for reconciliation and discussions to put all these issues behind us. We need to move on. What I have also realized is that the state is not keen on pursuing the matter as they have not sought his extradition,” he said.

In 2017, the then Minister of Defence, Justice, and Security, Shaw Kgathi, told Parliament that the arrest warrant issued against Bakgatla Kgosi-kgolo is still valid.

“….because a Court order once issued remains valid and enforceable unless it is rescinded by the Court that issued it, in this case being Village Magistrate Court. It may also be revoked by a higher court being the High Court or the Court of Appeal,” Kgathi said.

As things stand, the Government will arrest Bakgatla Kgosi Kgafela II if he crosses over to Botswana, Parliament heard.

Kgathi responded to a question by the then Mochudi West Member of Parliament, Gilbert Mangole, who wanted to know if the arrest warrant imposed on Kgafela was still valid.  Further, he wanted clarity on what it would take for the Government to trigger the removal of the warrant to enable Kgosi to visit his tribe in Botswana if he so wishes.

Could Mmusi be under pressure to facilitate Kgafela’s return?

Although Mmusi denies the claim, some royal sources opine that he (Mmusi) is under pressure to help President Dr. Mokgweetsi Masisi fulfill his 2019 electoral campaign pledge to the tribe. The President had pledged that he would “not rest until their chief, Kgosi Kgafela Kgafela II, is back home.”

Mmusi, however, says Masisi has not personally engaged him on Kgafela.

Kgafela’s former lawyer, Advocate Sydney Pilane, has in the past told this publication that he suspects that as the leader of the BDP, President Masisi hopes that if he brings Kgosi Kgafela back, BaKgatla may be grateful to the BDP, and benefits might accrue in consequence.

While Mmusi says the matter will need to be discussed and dealt with, private attorney Kgosiitsile Ngakaagae who was prosecuting Kgafela, warned that there is nothing to address or facilitate.

“There is no need for political intervention. Kgosi Kgafela is officially a fugitive from Justice. It’s for the Directorate of Public Prosecutions (DPP) to issue a nolle prosequi (we shall no longer prosecute) to enable his return. Constitutionally the DPP cannot be dictated to by politicians. The matter is beyond the President unless he violates the DPP’s constitutional mandate,” charged Ngakaagae.

“An arrest is intended to bring someone to Court. Secondly, a party who has become aware that a warrant has been issued against them can apply to Court before it is implemented for it to be discharged.”

The only option for the state currently, which the state is reluctant to pursue, is to drop the charges and withdraw the warrant of arrest or decide on a deliberate non-enforcement of the warrant, according to lawyers who spoke to this publication.

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The secrecy behind BDF deployment budget

4th August 2021
President Masisi & BDF

In South Africa, President Cyril Ramaphosa recently told his parliament that the deployment of his army to Mozambique had cost close to a billion rand, with the exact figure placed at R984,368, 057. On the other hand, the Botswana government is yet to say a word on their budget concerning the deployment.

In his National Assembly report tabled last week Tuesday, Ramaphosa said:

“This serves to inform the National Assembly that I have authorized the employment of 1,495 members of the South African National Defence Force (SANDF) for service in fulfillment of an international obligation towards SADC, to assist Mozambique combat acts of terrorism and violent extremists in the Caba Delgado province. This deployment had cost close to a billion rand, with the exact figure placed at R984,368,057.”

The soldiers, he said, are expected to remain there for the next three months.

Botswana, however, is yet to publicize its expenditure. Asked by this publication over why they have not and whether they will, the Minister of Defence, Justice, and Security, Kagiso Mmusi, said they would when the time is right.

“As you may be aware, nobody planned for this. It was not budgeted for. We had to take our BDF resources to Mozambique, and we are still doing our calculations. We also need to replace what we took from the BDF to Mozambique,” he said.

This week, President Dr. Mokgweetsi Masisi revealed that the Southern African Development Community (SADC) and the Botswana government would share the sustainment of the Mozambique military combat deployment. SADC has given Botswana its share to use according to its needs.

The costs in such deployments are typically categorized into three parts-boots on the ground or handling the system, equipment, and operational sustenance logistics.

It is unknown how much combat pay, danger pay, or sustenance allowance the soldiers will get upon return. However, President Masisi has assured the soldiers that they will get their money.

Masisi has said deployment comes when the country is faced with economic challenges that have been exacerbated to a great extent by the COVID-19 Pandemic, which is inflicting enormous health, financial, and social damage to all nations.

Botswana has sent 296 soldiers who left on Monday to Mozambique to join the SADC standby force.

Parliament fumes over being snubbed

In the 1994 Lesotho mission, the Botswana Parliament was engaged after the soldiers were long deployed. A repeat of history this week saw members of parliament grilling the executive over snubbing parliament and keeping it in the dark about the Mozambique military deployment.

Zimbabwe pledges 304 soldiers

Meanwhile, Zimbabwe has pledged 304 soldiers to the SADC Standby Force Mission in Mozambique to train an infantry battalion-size unit at a time, Defence and War Veterans Affairs Minister Oppah Muchinguri-Kashiri has said.

In a statement to journalists, Minister Muchinguri-Kashiri said the contingent would consist of 303 instructors and one specialist officer to coordinate the SADC Force Headquarters in Maputo.

Minister Muchinguri-Kashiri said that in terms of Section 214 of the Constitution of Zimbabwe, Parliament would be informed accordingly.

During the Extraordinary Summit of the 16-member regional bloc held in Maputo, Mozambique, last month, member states resolved to deploy a force to help Mozambique contain insurgency in its northern provinces where terrorists have left a trail of destruction that also threatens regional peace.

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