‘Home made’ Botswana companies aim to compete successfully in the domestic market and do not harbour ambitions of growing beyond the borders and compete in African markets, which is vise versa with large conglomerates from other parts of the continent.
Successful top brands like Spar, Pick N Pay, Game and Woolworths make a list of some of blue chip companies that have moved outside South Africa to compete in regional markets that include Botswana. They have even become popular because of the quality of their products and closed out traditional Setswana supermarkets.
A list of successful companies made in Botswana that have crossed the borders is still small, including names like Furniture Mart (Home Corp) that has presence in the South African market and Bifm that targets investment in the region.
However, local chain store giants, Choppies, wants to hoist the country’s flag higher in the region by expanding across the continent after making its mark in the domestic market where they have secured 34 percent market share.
This week, the Chief Executive Officer of the outfit, Ram Ottapath, explained that Choppies was not only established to be a domestic company, but also to be a multi-national company.
“The strategy was that the company should grow into the SADC region and beyond”, he said.
True to their word, the label is now painted in Setswana speaking provinces of South Africa. Ottapath revealed that they entered the market in Africa’s largest economy in June 2008 initially with one shop in Zeerust.
The number has since grown to 6 with Choppies’ projections being to open 10 shops in 2009.
“The choice of South Africa has been deliberate. South Africa has the strongest economy in Africa and is our biggest trading partner. It is also a free market economy with a strong currency.”
The story of Choppies is the one of the tired phrase of ‘from rags to riches’. The outfit started two decades ago in a quiet beef producing town of Lobatse with a filling station and a corner retail shop.
Today, it has overgrown the domestic market boosting of over 40 retail shops and employing over 2000 people and selling foodstuffs, furniture and mulling over ideas of going into food canning.
When other local companies are not settled by Economic Partnership Agreements (EPAs) that were initialed at the end of 2007, Choppies is seeing opportunities in the agreements that will start a new trade epoch between Europe and Africa, Caribbean and the Pacific (ACP) countries.
The Choppies CEO said that the effect of the free trade area means that all barriers of trade have to be removed by member states.
“The removal of barriers of and to trade will see a lot of economic inflow and outflow and the entrance of bigger players in the market,” explained Ottapath. “In regard to our expansion, the most important first point of entry has been South Africa”.
In a revelation that will surprise the Botswana business community, Ottapath parried fears that South Africa protects its companies. There is a perception that South Africa, through its Black Economic Empowerment (BEE) charter, is closing other foreign companies out to protect its industries.
“We have been welcomed with open arms by the South African government and the South Africans themselves. The perception that the South African market is protectionist is not correct,” he revealed.
For the SADC region, the Choppies CEO revealed that with the economies of nations permitting, “we intend to open in Zimbabwe, Zambia, and Namibia in the near future. We are already in South Africa, which will probably represent our potential growth area”.
From the dusty streets of Lobatse, Choppies is the main foodstuffs address for consumers mainly those in the lower bracket and those who are down-grading under the current financial crisis.
Currently, the company has 42 stores across the country with more being planned. Ottapath revealed that by the end of 2009, the total number of stores should be 46 spread geographically.
Where is Choppies citizen empowerment?
Seeing its popularity growing, Choppies in 2007 offered Batswana a chance to own the franchise, but the idea got into difficulties. Ottapath revealed that although franchises were offered only a few were taken up. Choppies attributes this to the high cost of setting up a store than what most financial houses are willing to finance. “In a few cases, we had a management crisis as well.”
As the company grew in assets base and popularity, concerns started to emanate from Batswana who wanted a slice of the cake. At first, there were three options: one was to list the company on the Botswana Stock Exchange (BSE), sell franchises to citizens and the most popular one is outsourcing of services.
Ottapath has revealed that butcheries, security and cleaning have been outsourced. He added that Choppies has a deliberate policy of buying produce from locals only, although some producers still doubt this.
For example, some vegetable farmers have claimed to have stockpiles because local chain stores are refusing to purchase from them because of quality.
Ottapath said: “Only when such is not available do we go outside the country. In this regard, most farmers have benefited from this generous policy which has, in some instances, seen us giving grants to some citizens some of our very successful operations”.
He said that two citizens were helped to establish the biggest sorghum milling plant in Botswana, producing lemephe, a product, he said is well received in the market.
Also Choppies executives have been talking about making the company a public entity, but with little patience from the monied institutions.
Ottapath noted that as to when the company will formally list will depend on the state of the economy at the time and the advice from consultants.
“Various consultants are working around the clock to meet the formalities needed to be complied with before listing can be done.”
Analysts believe that Choppies is suitable for listing, looking at its annual turnover that exceeds over P1 billion and its plans to go regional.
With a market share of 34 percent, Ottapath said they think they have competed well with the South African chains.
The giant retailer also responded to calls for localisation by unveiling 100 graduate trainee managers that will replace foreigners, mostly of Indian origin at Choppies stores across the country.
The retailer has employed over 100 graduates and is being trained in all areas of store management.
So far, 6 stores are being run by citizens, with more expected to take over as they complete their training.