Weather-beaten silo turns 40
Mbongeni Mguni | Friday August 15, 2014 14:31
Shareholders at Sefalana have every reason to smile. Pre-tax profits have more than doubled in three years, revenues are up 25 percent over the same period, the group’s retail and wholesale footprint has expanded beyond Botswana and its other subsidiaries have strong growth prospects.
The rosy prospects include an estimated P800 million contribution to group turnover from the 13 new Namibian stores in the first 10 months of trading, a P150 million order from government to the Commercial Motors subsidiary, forecast low grain prices for the Foods Botswana subsidiary, rising soap orders in Zimbabwe and a robust outlook for its property portfolio locally and in Zambia. The group has secured P100 million loan funding for the development of several properties in Botswana, including its new multimillion headquarters in Broadhurst and it also plans to develop its 42,000 square metre holding in Setlhoa village near the Airport turnoff, into a mega retail centre.
Sefalana is also finalising a joint venture with a South African company for the supply of 99 fruit and vegetable lines for Shoppers retail stores and 38 lines for its hyperstores, with a distribution centre to be established in Gaborone North.
Not only do they have reason to smile, but Sefalana shareholders will also have that opportunity, as several high profile launches are scheduled within weeks, for the state of the art Tlokweng Shoppers as well as the 13 Namibian stores acquired this year.
However, it was not always sunshine, rainbows and dolphins at Sefalana. In fact, rheumy-eyed investors who have stayed loyal to the group in its 40-year history will have colourful tales to tell at the forthcoming launches. “Sefalana sa Botswana”, as the company was known at its establishment in 1974, started with six wholesale units and a maize mill bought from its parent group Bechmalt Holdings Limited, a South African entity based in Vryburg.
With its name coined by revered local poet, MLA Kgasa, Sefalana further embedded itself into the local psyche by becoming the first company to offer its shares to the public, 20 years before the Botswana Stock Exchange (BSE) would officially be established.
At least 23.1 percent of the company’s shares were offered to the general public and in 1986, Sefalana Holding Company as it is known today, was formed to buy the shares remaining from Bechmalt Holdings.
With a wholesale operation spreading across the country even up to Kasane and diversification into business lines such as property, Sefalana was a citizen entrepreneurial dream come true; a majority-citizen owned company breaking away from Big Brother South Africa and succeeding through Batswana for Batswana.
From a company, Sefalana transformed into a group, with the blossoming entity snapping up shareholding in various targets, thus adding to its portfolio and widening its ambit to include manufacturing and distribution.
On June 19, 1989 when the BSE’s predecessor, the Botswana Share Market, was launched, Sefalana was the first and only listed company, marking a major milestone for the group.
The 1990s were equally gainful for Sefalana as it acquired Foods Botswana, pumped equity into Dafin Sales a distribution giant merged with Metro to produce Metro Sefalana (Metsef), established the Trade Centre in Gaborone and was employing 1,600 workers by the turn of the century.
Shareholders were ecstatic, unaware that the next decade would bring at least four cataclysmic events that would eat away at the value of their investment, rock their faith in their trusted group and bring them back to earth with a shuddering jolt.
In 2000, cyclical global economic events associated with the boom and bust of the commodities sector saw the local mining-dependent economy swing down from 7.7 percent growth in 1999, to 5.8 in 2000 and 3.4 in 2001.
The impact on Sefalana was immediate, in line with the associated impact on consumer spending and government procurement. In 2000, Sefalana witnessed a contraction for the first time in its history, forcing it to dispose of its milling operations.
Three years later, the first shots in what would later become a protracted and bitter three-year-old boardroom battle, were fired. Having withstood the economic maelstrom of 2000, Sefalana faced its biggest test with internal strife between local and South African shareholders, the latter represented by Metro, which equally held 40 percent equity in Metsef.
The battle over Metsef, the then flagship business in the group with 16 stores, was essentially over “the efficient and profitable management” of Metsef in the face of flagging fortunes, with friction between Metro, which held the management contract, and Sefalana.
In 2006, Sefalana won an acrimonious court battle to cut ties with Metro and, led by its Group Managing Director, Chandra Chauhan, began charting a new era for the group with the confidence of the backing of both Batswana and government.
“While we were working on the turnaround of Foods Botswana, we also set about regaining control of our wholesale operations (Metsef) which were wilting under what we believed were extremely unfavourable conditions as a result of the control by the South African-based shareholder, Metro. “So we fought a protracted legal battle with Metro for three years and eventually managed to buy them out and Sefcash has never looked back,” Chauhan told journalists and analysts at the time. Two years later, however, the group was again gasping for breath in choppy waters as the global recession reached local shores, deflating disposable incomes, slashing government spending and turning wine into water for most retailers.
Sefalana was not immune and suffered depressed figures across its stable, particularly in the rebranded Sefcash, Foods Botswana, Mechanised Farming and Commercial Motors.
Added to this, the rise of Fast Moving Consumer Goods’ supergroup, Choppies, hung over Sefalana’s plans to bolster revenues by diversifying into the same arena. Unfazed, Chauhan and his battle-scarred shareholders took the leap and in 2010, the Shoppers brand was launched with a target of 40 stores around the country. Four years later, the leap of faith in 2010 and the trust major shareholders such as the Botswana Public Officers Pension Fund (BPOPF), Debswana Pension Fund and Motor Vehicle Accident Fund (MVAF) had, is paying off. Between 2008 and 2013, the BPOPF increased the number of its Sefalana shares by 107 percent to 76.2 million, while MVAF’s rose nearly 11-fold to 11.2 million and Debswana Pension Fund’s equity rose eight percent to 20 million shares over the same period. The three funds, predominantly resourced by Batswana, represent Sefalana’s top three shareholders with a collective 57.4 percent equity in the group.
“If we can keep the momentum going, if we build on our culture of discipline and professionalism, and if we remain focused on our strengths, I am confident that Sefalana will achieve its goals and remain a role model for businesses in Botswana and further afield,” Chauhan said prophetically two years into the recession.
The recent expansion into Namibia, the inroads towards the target of 40 Shoppers’ stores and the healthy prospects across the group suggest life has just begun for the weather-beaten 40-year-old.