Johannesburg - Choppies Enterprises, hurt by a
commodity-price slump that’s led to customers in mining towns being fired,
plans to expand its number of stores in southern Africa by almost 25 percent
over the next two years as it seeks to lure business in different locations.
Botswana’s biggest supermarket chain is planning to
increase outlets to 250 from 203 at the end of last year, according to 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, the capital of Botswana. “As the footprint grows, it will not be an
issue.”
The price of platinum, which is mainly mined in South
Africa, slumped 28 percent in 2015 before only a slight gain, hurting Choppies’
business in towns such as Rustenburg. That’s 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 plans to open 26 supermarkets this year at a
cost of about R300 million ($22.6 million), Ottapathu said. This will
include growth in the South African province of 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 ($47.9 million) in existing borrowings, any additional debt
taken will be negligible, the CEO said. In 2018, Choppies will aim to reach the
250-supermarket target before pausing the growth initiative, he said.
Read also: Choppies: 21 Jwayelani outlets acquired
Choppies shares have dropped 53 percent in Johannesburg
since the beginning of last year, the second worst performer on 162-member
FTSE/JSE Africa All Shares Index. Net income in the year through June 30
declined 52 percent to 88.5 million pula.
With outlets also in Zimbabwe, Zambia, Tanzania,
Kenya and Mozambique, it has no plans to enter more countries this year,
Ottapathu said. The company is also investing in its distribution system, he
said, while declining to specify the amount set aside for that project.