Sunday, March 7, 2021

Sefalana entry into Namibia will act as springboard into region – City

Sefalana Holding Company Limited is expected to complete its entry
into the Namibian market by winter and already city analysts see the
move as a springboard for company’s entry into the region.

The diversified company headed by Chandra Chauhan told shareholders
recently that matters pertaining to the acquisition of 12 stores
operating in the neighbouring country continues, warning them to
exercise caution when dealing with company securities on the Botswana
Stock Exchange (BSE).

Chief Investment Officer at Afena Capital Botswana, Alphonse Ndzinge,
sees the deal as a ‘good springboard’ for further growth opportunities
saying Namibia ticks all of the right boxes with very low geopolitical
risk; economic stability; the availability of retail sites; and the
presence of basic logistics infrastructure.

“The market is highly competitive in some urban areas but the
familiarity of running a multi-country retail chain will definitely be
valuable experience in vetting future opportunities in the region,”
said Ndzinge.

He added that the proposed transaction also presents an opportunity to
grow the business in a new market within geographical proximity to
Botswana, and a similar population base.

“There is still a relatively low penetration of established “modern”
retail chains, particularly in the more rural areas of the country
with the most retail activity done with informal or independent
retailers.”

He pointed out the example of domestic furniture retailer, Furnmart
which has already had a reasonably degree of success operating in the
Namibian market with almost 30 stores and plans to increase that
number.

Motswedi Securities analyst Garry Juma said the deal is a major
milestone for Sefalana as it joins other few local companies such as
Letshego and Choppies in conquering new markets outside Botswana.
“Indeed it will go a long way in boosting Sefalana profile. The deal
also gives Sefalana the upper hand with its suppliers in terms of
negotiating for better trading terms,” said Juma.

“The transaction also enables Sefalana to diversify its earnings,”
said Juma. “The deal is also positive for the country as a whole as
it shows that more Botswana companies are able to enter into other
markets and competes effectively,” he added.

The BSE listed consumer lender, Letshego, has already made its
presence felt in markets outside Botswana like, Mozambique, Namibia,
Swaziland, Tanzania, Uganda and Zambia.

Choppies has stores in Botswana, South Africa and has also recently
entered the Zimbabwe market.

In Botswana, Choppies boasts of 60 stores in the country while its
competitor is targeting 40. But analysts argue the two have different
business models.

“For now we cannot compare the two as they have different business
models. Sefalana is more of a conglomerate with interest ranging from
retail, machinery sales, agric equipment merchandising, manufacturing
etc, while Choppies is purely into retail,” said Juma.

“The larger store network for Sefalana should improve efficiencies
within the Group with better suppliers terms and other cost saving
initiatives that they plan on implementing. This should help their
margins and competitive positioning,” added Ndzinge.
Sefalana will acquire 12 stores owned by Metro Namibia (Metro Cash and
Carry Namibia) ÔÇô although the deal has been delayed.

The BSE listed company, which is fighting with Choppies for dominance
in the local market, revealed that a circular incorporating details of
the transaction which was to be issued to shareholders by the end of
March 2014, however is expected to be dispatched on or before 30 April
2014.

Sefalana Managing Director, Chauhan said earlier in the year that he
hoped the multi million Pula transaction would speed up the group’s
entry into the region as well as enable it to be a major player in
that market in a relatively short space of time.

“We reported previously that following our detailed Group strategy
review in early 2013, we were actively looking at entering into
regional markets. We are pleased to notify our shareholders that we
have opened our first store outside Botswana in Katima Mulilo, Namibia
in January 2014, and have entered into an agreement to purchase 12
additional stores across Namibia,” the company said in the statement
accompanying the results.

In Botswana, Sefalana operates Shoppers and Cash and Carry. Shoppers,
Shoppers which was launched in 2009 has been seen as response to
Choppies ÔÇô that has made conquered Botswana and eyeing markets in the
region for expansion.

Ndzinge said after the transaction, Sefalana will be a mid-sized
player as they grow in their core markets, Botswana and Namibia but
much less in a regional context. Local players have really a big
footprint in their respective home markets.

“Regionally, is still
mostly dominated by the big SA retailers, particularly Shoprite and
Spar which both have a strong presence in Namibia too.”

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