Sunday, September 24, 2023

The idea of a Choppies Bank: Do not rule it out

It seems rational to anticipate, based on the build-up of strategic moves that the mass grocery retailer Choppies has followed from its period of listing in 2012 to date, that the next lever left for it to pull is that of re-visiting its application to Bank of Botswana of establishing an indigenous bank.

The assumption is supported by the view that an interest could still exist for Choppies given that the collapse of its first attempt was caused by an issue that extended outside its control. Revisiting the past events, Sunday Standard in 2013 turned up information that the rejection of the application submitted by Choppies to BoB to be granted a banking license for its then proposed Tswana Bank was due to the Central Bank uncovering that one of the key promoters had a criminal record. The Central Bank assesses applications, as specified in the licensing policy, ‘on merit, taking into account the likely impact of any new financial institution on the existing domestic financial sector and its potential contribution to Botswana’s development.’ Such a consideration observes general principles which the BoB uses to make a determination on either an approval or disapproval. The information on criminal record could not, as this publication reported, be neglected by the Central Bank.


The starting point in pre-empting Choppies’ next move could perhaps be to compare the nature of business operations as was described in the 2012 listing prospectus which one could identify as the initial strategic move that set the balling rolling to those that ensued overtime. The prospectus which Choppies released when it readied itself for a public listing in the Botswana Stock Exchange (BSE), described the nature of the business as “market leading mass grocery retailer in Botswana, and retails fast moving consumer goods, household goods, fruit and vegetables, meat products, dry, fresh and baked goods through its stores in Botswana and South Africa.” Fast track to 2016, entry into a Choppies hyperstore immediately makes the initial definition insufficient because of the growth of product categories available for sale that extend outside fast moving consumer goods product line. To illustrate this point one could consider the options availed inside the Choppies hyperstore located in West Gate mall. A consumer has a choice ranging from the ordinary FMCG such as fruit and vegetables, meat products, baked goods and toiletries to mention a few, to pharmaceuticals, to house appliances, and recently the mass retailer added clothes to the shop’s aisles. One can also from the same supermarket buy and sell currency through the over the counter bureau de change booths. In addition to that a consumer can buy electricity, airtime and make deposits into network operator money accounts aided by partnerships with third party service providers that offer such services. The dynamism and variation introduced into the shopping experience of a consumer differentiates the Choppies described in 2012 to the present day supermarket edging closer to becoming a departmental store. By definition, a department store refers to a retailer which offers a wide array of different product categories, hence the term departments.  

In determining the possibility of a Choppies bank, the article shall attempt to support the notion using general principles such as competitive advantage, business operating plan and adequate liquidity management to mention but a few that the Central Bank employs as cited in the licensing policy.  According to BoB, a bank is simply “the business of accepting deposits of money repayable on demand or after a fixed period or after notice, as the case may be, by cheques or otherwise.”  

Competitive advantage:

Choppies was incorporated in Botswana on 19 January 2004 under the Registration number 2004/1681. It is today a brand which people commonly identify with. As at 2015 Choppies had a market share of 36 percent which makes it a dominant player in the retailing industry. Its customer base comprises of consumers in the middle to lower segments of the retail market, which had been previously neglected across urban, rural and less formalized settlements. This is a position which Choppies can leverage on to attract its existing wide consumer base to its banking services, particularly given its extensive knowledge on the market it services.

Business Operating Plan

Given the wealth of knowledge it possesses regarding its customers it could from that pursue business strategies related to banking activities that can appropriately respond to the specific needs of its market at the same time ensuring sustainability. In addition to that, it will benefit from its existing wide store network that could serve as bank branches, which might also mean that it includes people historically excluded from the formal banking network due to the lack of bank branches in areas they reside in.  

Adequate Liquidity Management

Choppies, as a strong and dominant player in the market, possess economic power.  It leverages this power from cost savings it derives from its wide supply and distribution network which respond to the retailer’s store demand in timely and uninterrupted manner. The distribution is supported by its fleet of vehicles. This means that it does not have to outsource hence keeping costs low. Furthermore, the economic power comes from its branded product items which contribute to the turnover. The mass retailer’s access to the capital market through its listing in BSE and in Johannesburg Stock Exchange, the retailer could easily access funds should the need be identified. Based on the trend of financial results Choppies has consistently delivered on rising revenue. The Group’s financial results for the year ended 30 June 2016 report a 24 percent rise in revenue. The profit after tax however declined by 48 percent. Choppies traditionally funded its expansion projects from its cash reserves which demonstrates liquidity management, identified by its path of organic growth.


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