BOTSWANA – Choppies Enterprises, hurt by a commodity-price slump that has led to customers in mining towns being fired, plans to expand its number of stores in southern Africa by almost 25% over the next two years as it seeks to lure business in different locations.
Botswana’s biggest supermarket chain was planning to increase outlets to 250 from 203 at the end of last year, said CEO Ram Ottapathu.
“We are trying to move away from that reliance” on mining towns, Ottapathu said in an interview this week at the company’s head office in Gaborone. “As the footprint grows, it will not be an issue.”
The price of platinum, which is mainly mined in SA, slumped 28% in 2015 before only a slight gain, hurting Choppies’ business in towns such as Rustenburg.
That has been compounded by soaring food prices following the worst drought since at least 1904.
In Botswana, state-owned mining company BCL closed its unprofitable copper and nickel operation in Selebi Phikwe last year, reducing the settlement of 50,000 to a virtual ghost town. Choppies has two stores in the area.
The grocer planned to open 26 supermarkets this year at a cost of about R300m, Ottapathu said. This will include growth in KwaZulu-Natal, which is not mining focused.
Ten of the new stores will be in Zambia and one or two stores are planned for Zimbabwe.
Funding will come from its own cash reserves and a potential extension of the date of maturity on its short-term debt.
With almost 500-million pula ($47.9m) in existing borrowings, any additional debt taken would be negligible, the CEO said.
In 2018, Choppies would aim to reach the 250-supermarket target before pausing the growth initiative, he said.
Choppies shares have dropped 53% in on the JSE since the beginning of last year, the second worst performer on 162-member JSE All Share index. Net income in the year to end-June 30 declined 52% to 88.5-million pula.
With outlets also in Zimbabwe, Zambia, Tanzania, Kenya and Mozambique, it had no plans to enter more countries this year, Ottapathu said.
The company was also investing in its distribution system, he said, while declining to specify the amount set aside for that project.