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Choppies posts impressive 2020 results

Choppies Ramachandaran Ottapathu

Last year was a brutal one for businesses due to the coronavirus pandemic and related restrictions and safety concerns. But with the vaccine slowly rolling out throughout 2021, many companies are optimistic of a rebound soon – retail giant, Choppies would want to do so on the backdrop of impressive financials from the torrid year.

The food retailer Choppies released its Reviewed Interim Financial Statements for the six months ended 31 December 2020, and the numbers are quite remarkable, as compared to the previous half year ended 30 June 2020. In 2018, Choppies results were delayed by more than a year and a forensic investigation uncovered accounting irregularities. New auditors PwC, who had replaced KPMG, refused to sign them off.  Its 2017 results were also restated, moving from a profit to a loss.

Nonetheless, Choppies reported its first profit since 2016 of P37.7 million (2019: Loss of P139.2 million), as the benefits from restructuring the business following the exit from underperforming investments, were realized. The 2019 loss was perpetuated by the strain of the COVID-19.

The group said in its financial report last year that the pandemic had negative impacts on sales and production, supply-chain, customers, equity and revenue. Choppies suffered from donations made towards the State COVID-19 Relief Fund and other devastating economic consequences.

During the year ended 31 December 2020, the group’s revenue decreased by 8.7% to P2 711 million (2019: P2 969 million). This decrease was a result of negative volume growth due to the impact of the Covid-19 pandemic and currency weaknesses in Zimbabwe and Zambia. Choppies has approximately five stores in Zambia.

Choppies has sold its stores and distribution centres in South Africa to King Investments for R1, due to huge losses incurred over the years. The losses were worsened by the “lack of cash flow (that) resulted in trade creditor suppliers not being paid on their applicable due date and hence refusing to supply stock, causing stores in South Africa to become understocked and lose market share.”

The group said it was not able to continue to fund the losses of the South Africa subsidiaries from Botswana. It said the continued failure to service debt exposed it to threats of application for the winding up of the South Africa subsidiaries.

In spite of the lock downs implemented in the group’s largest operations, being Botswana and Zimbabwe, coupled with the currency depreciation in Zambia and Zimbabwe, the group did well to reduce the possible huge revenue losses which resulted in a reduced impact on the gross profit.

Consequently, gross profit margins reduced slightly to 22.0% (2019: 22.9%). In response to lower volumes, the group managed costs aggressively by reducing its total expenditure by 14.3% resulting in a 4.7% decline in EBIT as the drop in gross profit was offset by lower expenditure.

During FY2020, the board decided to discontinue its operations in Kenya, Tanzania, and Mozambique. Accordingly, the results of these operations are disclosed with effect from 1 July 2019 in terms of IFRS 5 “Non-current Assets Held for Sale and Discontinued Operations”. As a result, total assets for the period under review are significantly lower than the December 2019 levels.

The Botswana business continued to show strong resilience in an increasingly competitive operating environment and poor trading conditions. Revenue declined by 4.6% despite volumes reducing by 6.4%. The gross profit margin, albeit lower at 22.3% (2019: 24.5%) remains relatively healthy despite the extremely challenging trading conditions. Expenditure was well controlled with total expenditure reducing by 15.6% negating some of the decline in gross profit. One additional store was opened bringing the total number of stores in Botswana to 91 stores (2019: 90 stores).

The Namibian operation continued to show improvement in gross profit even though it still has a very small footprint. Revenue for this segment increased by 3.2% with gross profit margins improving to 19.3% (2019: 17.9%). EBIT losses reduced by 95% due to improved gross profit margins coupled with an 8.2% reduction in expenditure.

The Zambia operation also showed an improvement in gross profit but the continued weakness of the Kwacha against the Pula had a very significant impact on the trading results and expenses. Even though the Pula revenue declined by 28.5%, revenue in Kwacha grew by 2.4% despite volumes reducing by 8.9%, gross profit margins improved to 18.9% (2019: 16.5%) driven by price inflation.  EBIT losses reduced by 33% due to effective cost control. The Zambian segment consists of 25 stores (2019: 21).

The changes and volatility of the Zimbabwean currency makes operating in this market extremely difficult, as gains obtained at country level gets eliminated when converted at group level due to the weak currency when compared to the Botswana Pula.

Revenue declined by 21.3% to P211.4 million (2019: P268.6 million) resulting from a weakening of the local currency against the Pula during the previous 6 months. Gross profit margins improved to 24.1% (2019: 18.3%). EBIT reduced to P7.9 million (2019: P10.2 million).

Even though this business remains self-sustaining without any cash flow constraints, repatriation of profits to Botswana will continue to be difficult until the economy undergoes a structural change. The segment consists of 32 stores (2019: 32). The Board has considered it prudent not to declare a dividend for the period under review.

Business

The  Bulb World CEO selected for Africa’s prestigious award

22nd July 2021

The Bulb World Chief Executive Officer (CEO) and entrepreneur, Ketshephaone Jacob has been selected as a 2021 Top 50 Africa’s Business Hero.

Jacob was chosen from a pool of 12,000 applicants – many of whom are highly-skilled and accomplished entrepreneurs.

Africa’s Business Hero, sponsored by technology entrepreneur, Jack Ma, aims to identify, support and inspire the next generation of African entrepreneurs who are making a difference in their local communities, working to solve the most pressing problems, and building a more sustainable and inclusive economy for the future.

The initiative is as inclusive as possible and applications were open in English and French to entrepreneurs from all African countries, all sectors, and all ages who operate businesses formally registered and headquartered in an African country, and that have a 3 year-track record.

Every year, finalists are selected to compete in the ABH finale pitch competition and participate in a TV Show that will be broadcast online and across the continent.

The finalists will compete for a share of US $1.5 million in grant money.

The Bulb World, is home grown LED light manufacturing company, which was partly funded by Citizen Entrepreneurial Development Agency (CEDA) at the tune of P4 million, to manufacture LED lighting bulbs for both commercial and residential use in 2017.

The Bulb World operate from the Special Economic Zone of Selibe Phikwe. Early this year, The BulB World announced its expansion to South Africa, setting in motion its ambitious Africa expansion plan.

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Business

Mining production down 12 % IN Q1 2021

14th July 2021

During the first quarter of 2021, production in Botswana’s economic nucleus- the mining sector contracted by 12 percent. This is according to Mining Production Index released by Statistics Botswana this week.

The country’s central data body revealed that Index of Mining production stood at 74.4 during the first quarter of 2021, showing a negative year on-year growth of 12.0 percent, from 84.6 registered during the first quarter of 2020.

The main contributor to the decline in mining production came from the Diamonds sector, which contributed negative 11.7 percentage points. Soda Ash was the only positive contributor in the mining production, contributing 0.1 of a percentage point. However Soda Ash’s contribution was insignificant to offset the negative contribution made by Diamonds.

The quarter-on-quarter analysis by Statistics Botswana experts shows an increase of 16.3 percent from the index of 64.0 during the fourth quarter of 2020 to 74.4 observed during the period under review.

Diamond production decreased by 12.1 percent during the first quarter of 2021 compared to the same quarter of the previous year. The decrease was as a result of planned strategy to align production with weaker trading conditions mostly linked to Covid-19 protocols restrictions.

Botswana’s diamond sector is underpinned by Debswana, the country’s flagship rough producer- a 50-50 joint venture between government and global mining giant De Beers Group. The other producer is Canadian based Lucara Diamond Corp through its wholly owned Karowe Mine which is a relatively small but significant production that has made a name for itself worldwide with rare diamond recoveries of unprecedented carat size.

On the other hand, quarter-on quarter analysis shows that production has improved, registering a positive growth of 17.5 percent during the first quarter of 2021 compared to the preceding quarter – 2020 Q4.

Though production was significantly lower in the first quarter, the two producers ended Q2 with rare diamond recoveries. Debswana early last month found the world’s third largest gem diamond – weighing 1098 carat at Jwaneng Mine, its flagship gem quality diamonds producer, also regarded the world’s richest diamond mine.

A week later Lucara  announced its second biggest recovery, the 1174 carat clivage near-gem dug from its Karowe Mine. The diamond is the world third in carat size after the plus-3000 carat Cullinan found in South Africa back in 1905 and the 1758 carat Sewelo unearthed at its Karowe mine in 2019. Debswana and Lucara are investing billions of pulas in underground mining projects to extend the life of its mines, Jwaneng & Karowe respectively.

In terms of Gold which is produced at Mupani mine near Botswana’s second city of Francistown output decreased by 17.9 percent during the first quarter of 2021 compared to the same quarter of the previous year.

Similarly, quarter-on-quarter analysis reflects that production decreased by 21.4 percent during the first quarter of 2021, compared to the preceding quarter. The decrease was as a result of the deteriorating lifespan of the mine as well as the impact of COVID-19 which slowed down the mining activities.

Soda Ash production increased by 11.1 percent during the first quarter of 2021 compared to the same quarter of the previous year. In terms of quarter-on-quarter Soda Ash production also showed an increase, picking up by 2.1 percent during the period under review. The increase in production is attributable to the effectiveness of the plant following refurbishment which occurred in the third quarter of 2020.

Salt production decreased by 34.0 percent during the first quarter of 2021, compared to the same quarter of the previous year. Similarly, the quarter-on-quarter analysis shows that salt production registered a decrease of 32.9 percent during the period under review. Both salt and Sodash are produced by partly government owned Botswana Ash (BotsAsh) operating from Sowa town near Makgadikgadi pans.

Coal production decreased by 11.2 percent during the first quarter of 2021, compared to the corresponding quarter of the previous year. The decrease was attributed to the reduced demand from Morupule B Power Station following the remedial works being undertaken, as one boiler was in operation during the period under review.

Although production fell, Statistics Botswana says there was no shortfall in supply of coal due to stockpiling. On the other hand, the quarter-on-quarter comparison shows that coal production increased by 20.4 percent compared to the preceding quarter.

Botswana’s flagship coal producer is Morupule Coal Mine; a wholly state owned mining company located in Palapye producing primarily for Botswana Power Corporation (BPC)’s power generation plants Morupule A & B.

The other coal producer is Botswana Stock Exchange listed Minergy which operates a 390 MT Coal Resource mine in Masama near Media in the southwestern edge of the Mmamabula Coalfields.

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Business

Gov’t awards mining licence for Gantsi Copper Mine

14th July 2021
Moagi

Department of Mines in the Ministry of Mineral Resources, Green Technology & Energy Security has awarded mining licence to Tshukudu Metals-a subsidiary of Aussie firm Sandfire Resources ,giving the company a green light to start piecing the ground at its Motheo Copper Project near Gantsi.

Lefoko Moagi, minister in charge of mineral resources in Botswana confirmed to weekendpost on Tuesday. Minister Moagi revealed that “the licence has been approved , but Sandfire Resources as a listed company will report to its shareholders and investors then make an official public statement” he said.

Based on a forecast copper price of US$3.16/lb (reflecting current long-term consensus pricing) the Base Case 3.2Mtpa – Ghantsi copper project is forecast to generate US$664 million (over P7 billion) in pre-tax free cash-flow and US$987 million (over P10 billion) in EBITDA (Earnings Before Interest, Tax, Depreciation and Amortisation), at a forecast all-in sustaining cost of US$1.76/lb over its first 10 years of operations.

In December 2020, the Board of Sandfire Resources approved the commercial development of the Motheo Copper Mine located in the Kalahari Copper Belt in Botswana, marking a key step in its transformation into a global, diversified, and sustainable mining company.

Tshukudu Metals Botswana (Pty) Limited (Tshukudu) a 100% owned subsidiary will be the owner and operator of the Motheo Copper Mine which is scheduled to produce up to 30,000 tonnes per annum of copper in concentrate over a 12 year mine life.TMB is targeting development of its Motheo Copper Mine in 2021 and 2022, with its first production in 2023.

GOVERNMENT NOT TAKING UP 15 % STAKE ON OFFER

Beginning of this year presentations were made to the Department of Mines as part of the Mining Licence approval process and to the Ghanzi Regional Council, additional information was requested by Department of Mines in April and was duly supplied by the company.

As part of the Mining Licence approval process, the Government of Botswana has a right to acquire up to a 15% fully contributing interest in all mining projects locally. Quizzed on whether government through Mineral Development Corporation Botswana (MDCB) would be taking up stake in the project Minister Moagi said, “No consideration is being made on that regard”.

“Government is not considering taking up a stake in the Ghantsi Copper Mine project, every opportunity is assessed on all risks, but Government makes money all the while from leases, taxes and royalties, remember if you take stake you are liable for liabilities of the project as well,” Moagi said.

MINING CONTRACT

Last month Sandfire announced that it has awarded over P5 billion worth mining contract to African Mining Services (AMS), a subsidiary of Perenti, to deliver the open cast operation.

The contract, which has an estimated value of US$496 million (over 5 billion), is the largest single operational contract for the new Motheo Project covering a period of 7 years and 3 months, with provision for a one-year extension.

The contract according to Sandfire Resources was awarded following a competitive 3-stage tender process which saw a number of key factors taken into consideration when selecting the preferred contractor.

These included Citizen Economic Empowerment, safety culture, equipment suitability and availability, commercial terms and identified improvement opportunities. Under the terms of the contract, AMS has agreed to form a 70:30 Joint Venture with a suitable local Botswana partner or partners.

The JV is expected to be finalized ahead of commencement of mining in early 2022. African Mining Services has been operating in Africa for over 30 years. AMS’ parent company, ASX listed diversified mining services group Perenti, already has a presence in Botswana through Barminco, their underground mining division, at the large-scale Khoemacau Copper Mine located 200km north-east of Motheo.

Last month Sandfire executives said the award of the open pit mining contract represents another key milestone in advancing the Motheo Project towards production, with all components of the contract in line with the key parameters outlined in the December 2020 Definitive Feasibility Study (DFS).

The company said full-scale construction of the US$279 million (over P 3 billion ) mine development is expected to commence immediately upon receipt of the Mining Licence, with mining scheduled to commence in early 2022 ahead of first production in early 2023. This week Sandfire Resources advertised over 10 positions in calling on applications from geologists, mining engineers and geotechnical engineers.

The Motheo mine has an initial mine life of 12.5 years based on production from the T3 pit. The initial development is expected to generate approximately 1,000 jobs during the construction phase and 600 direct full-time jobs during operations, with at least 95% of the total mine workforce expected to be made of up of Botswana citizens.

Later in the week Sandfire Resources announced in the company website that it has received the licence. Sandfire’s Managing Director and CEO, Mr Karl Simich, said the award of the Mining Licence represented a major milestone that would see a significant increase in construction and development activities on site.

“We are absolutely delighted to now be in a position to move to full-scale construction at Motheo, with our construction crews expected to mobilise to site over the next few days. I would like to thank the Government of Botswana for their support throughout the approvals process, which will see Motheo come on-stream in 2023 as one of very few new copper mines commencing production globally.”

Simich said the project is expected to generate approximately 1,000 jobs during construction and 600 full-time jobs during operations, and represents the foundation for Sandfire’s long-term growth plans in Botswana.

“Our vision is that Motheo will form the centre of a new, long-life copper production hub in in the central portion of the world-class Kalahari Copper Belt, where we hold an extensive ground-holding spanning Botswana and Namibia,” he said.

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