Brewers grimace as devaluation bites

In May 2005, Botswana devalued the Pula by 12 percent following another 7.5 percent devaluation in 2004, a thing that hit many companies in the country, which imports up to 80 percent of its goods from South Africa.

Botswana’s beverage manufacturer Sechaba Brewery Holdings Limited, an investment holding company with interests in Kgalagadi Breweries Limited (KBL) and Botswana Breweries Limited (BBL), said its sales volumes took a knock as a result of that.

Clear beer sales volumes shrank by 17.9 percent, carbonated soft drinks were down by 11.6 percent and sales of traditional beer, (chibuku) decreased by 5.7 percent.

As a result, Sechaba, which has a 60 percent stake in KBL and BBL, said the combined turnover of the two companies decreased by 5.8 percent.

Operating profits also decreased by 8.5 percent.

“Regrettably the effects of devaluation of the Pula at the end of May 2005 continued to feed customer inflation throughout the year, weakening consumer spending power,” said the chairman of the company’s Board of Directors, Edward Komanyane.

The company’s net profit before tax fell 8.8 percent with sales amounting to P920.4 million by March 2006, down from P976.5 million by the same period in 2005.

Net profit attributable to shareholders was also down by 7 percent. Earnings per share decreased by 7.0 thebe to 92.3 thebe.

Komanyane said the results reflect the difficult trading conditions in the country. He also pointed to the rapid rise in inflation, which prompted the central bank to raise the bank rate by 50 basis points to 15 percent in February 2006.

“Although inflation averaged 8.6 percent for the year, it continued to climb after the close of the financial year, rising at a faster pace than initially expected,” he said.

Inflation was 13.8 percent in March 2006 compared to 31.1 percent and 12.7 percent in January.

Botswana is one of the countries most afflicted by heavy drinking, a thing that earlier this year saw government move in to cut down on drinking hours in order to control the problem.

However, the new regulations, which would have seen bars open at 11am and close at 5pm during the week, did not go into force on April 1 2006 as planned followed incessant protests from the industry, and a motion for its postponement pending further consultations won the day in Parliament.

Car accidents, largely blamed on drinking and driving, are the second highest killer after HIV and AIDS.

The government announced a P5.8 billion-development budget during the February budget session.

Other major projects in the pipeline include the expansion of Morupule Colliery and the construction of the Mmamabula Export Power Station.

Komanyane also pointed to the competitive exchange rate mechanism now in place saying it will benefit the tourism sector, which in turn supports their industry.

Sechaba holds 60 percent of the shares in KBL and BBL.

SABMiller Botswana, which has management control in the two companies, holds the remaining 40 percent.

But while Sechaba reported a fall in beer and drink sales, SABMiller Plc sold more than 10 million pints of Polish beer Tyskie in the UK and Ireland between may and October, a five-fold increase on the year before.

The leading beer brewer attributed the sales surge to the demand from Polish migrant workers.

The two companies employ 941 people throughout the country and operate four traditional beer breweries (chibuku), a carbonated soft drinks production plant and six sales and distribution depots.

November 2006
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