Sefalana Group says some of its businesses units in Botswana have generated a lower level profitability than in the previous year blaming this partly on growing job losses and unemployment. Sefalana says government spending in some areas has also declined and therefore affected businesses which mostly rely on government tenders. Fortunately the Namibian business is said to experienced growth which offset the decline experienced locally. Group Managing Director, Chandra Chauhan, said on Friday that some of the challenges they are facing is uncertainty regarding foreign exchange rates as well as fluctuating commodity prices such as maize. Chauhan said the Namibian business, where Sefalana runs 14 stores under the Metro brand, has done well and is optimistic business that side will continue performing well. For the six month period to October, Sefalana made a profit of P81.1 million before tax, a slight increase from P80.4 million for the previous corresponding period. The group, which is mostly into fast moving consumer goods (FMCG), has seen that segment contribute 60 percent and 48 percent to its revenue and profit before tax respectively.
However, given the level of increasing competition and trading conditions, overall profitability of this sector is reported to have fallen by 16 percent as margins are said to have been under pressure since last year. At the moment Sefalana operates 50 stores in Botswana; no new ones were opened under the current period as focus was on re-launching a couple of stores around. Chauhan said they are lining up to open three more stores this year with two upcoming in Mogoditshane while the third one will be opened in Kanye towards then end of the year. In Namibia, the business contributed 32 percent and 22 percent of revenue and profit before tax respectively for the period. The business, according to Chauhan, is proving to be an important part of the group in a period of less than three years and is now a larger contributor to the group earnings. While no new stores were opened under the current period, the group says it is considering a number of potential sites for future openings, as it works towards its medium term target of 20 stores across the country.
Chauhan said they are also looking to expand their footprint in Lesotho after entering the country in November 2016 through acquisition the largest cash and carry outlet which is known as TFS wholesalers. He said they expect Lesotho business to increase group revenue by P150 million and P7 million profit by year end. Sefalana used some of the proceeds from the Rights Issue programme that expired in December to finance Lesotho transaction of P351 million. Chauhan said they will use the larger part of the remaining balance to support their expansion into South Africa with a Memorandum of Understanding having been signed with respective parties. The group has set May 1, this year as the effective date of entry into the South African market, subject to the outcome of Sefalana’s due diligence review.