Choppies bids to beat mining slump with more stores

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.

Botswana’s biggest supermarket chain was planning to increase outlets to 250 from 203, said CEO Ram Ottapathu.

“We are trying to move away from that reliance” on mining towns, Ottapathu said. “As the footprint grows, it will not be an issue.”

The price of platinum, which is mainly mined in South Africa, 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 R300-million, 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 in 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 (R636-million) in existing borrowings, any additional debt will be negligible, the CEO said.

Choppies shares have dropped 53% in Johannesburg since the beginning of last year, the second-worst performer on the 162-member FTSE/JSE Africa All Share index. — Bloomberg