BOTSWANA retailer, Choppies Enterprise Limited, is mulling pulling out of Zimbabwe as its local subsidiary has become a stress on the group’s financials, NewsDay Business can report.
The stress is caused by instability of the Zimbabwe Gold (ZiG) currency that was introduced in April to replace the Zimbabwe dollar as the official domestic currency.
Choppies has a 100% stake in local company Nanavac Investments (Pvt) Limited, trading as Choppies Zimbabwe.
“Operations in Zambia remain fairly stable and should improve significantly, following the ending of the drought and El Niño conditions which affected hydroelectric generation resulting in power cuts. Once Namibia reaches critical mass, we believe the business will be profitable. Zimbabwe, however, continues to be a challenging environment,” Choppies said in its annual report for the period ended June 30, 2024.
“The new ZiG currency, which replaced the Zimbabwean dollar, has not as yet helped to stabilise the economy, and consequently the Zimbabwean operation has experienced a decline in performance. We are evaluating our operations in the country and will address the situation.”
Choppies has 11 388 employees (10 289 Choppies, 1 099 Kamoso) in 287 stores (185 grocery retail, 75 liquor stores, 27 hardware stores) across Botswana, Namibia, Zambia and Zimbabwe.
Within these markets, Choppies has 10 distribution centres and has market capitalisation of BWP949 million.
Locally, Choppies has 30 stores and employs 1 051 (567 male and 484 female), who could end up losing their jobs if the retailer pulls out of the country.
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“The long-term focus of our strategy is to reduce debt. We have exited all loss-making areas apart from Zimbabwe which is something we are currently considering. We are also looking into expansion plans throughout the group,” Choppies chief executive officer Ramachandran Ottapathu said.
“The economic challenges in Zimbabwe including high inflation, high unemployment levels and a shortage of foreign currency continued to impact our operations. Due to the continued risk posed to the group, the company is weighing various options in Zimbabwe given the stress on the group’s financials.”
Choppies had BWP128 million worth of assets as at June 30, 2024, and liabilities worth BWP122 million.
This scenario indicates that the company’s resources are mostly financed by debt or other obligations, leaving little cushion or safety net in its financial structure.
“Real GDP [gross domestic product] growth in Zimbabwe is 1,9% in 2024, down from an estimated 5,0% in 2023, largely due to declining agricultural output, ongoing exchange rate instability and persistent power cuts. Agricultural import requirements will likely increase, weighing on net exports. Ongoing exchange rate instability and persistent power outages will dampen private consumption,” Choppies said.
“Household spending is expected to stagnate with drought conditions having proved to be more severe than previously expected. Authorities have stated that maize output for 2024 is likely to be 77% down when compared to 2023 levels. This will reduce the incomes of farmers, which make up 53% of Zimbabwe’s workforce, with knock-on impacts on the economy.”
Choppies said with 45,3% of the population needing food assistance, including in urban areas, resulting in food supply falls and prices increases, this will squeeze consumer spending.
“This will squeeze household finances and room for discretionary spending . . . Real government consumption is expected to increase by 4,7%, adding 2,0% to GDP growth,” Choppies said.
“However, this is below growth rates of 31,3% in 2022 and an estimated 5,4% in 2023, as headwinds to revenues and higher interest payments limit space to boost consumption expenditure.”
