Last week, shares of Botswana-based, pan-African discount retailer Choppies Enterprises Limited began trading on South Africa’s JSE. The listing adds new sources of equity financing and brand visibility for the company, which has traded on the Botswana Stock Exchange since 2012. The transaction saw the company raise approximately $50m in new money, to support an audacious pan-African growth strategy.
The company isn’t wasting any time putting its new resources to work! On 1 June, Choppies notified its shareholders of its intention to acquire a 75% stake in a Kenyan supermarket chain, Ukwala, in a $10m joint bid with a local partner.
This week, Ramachandran Ottapath, the company’s CEO, was kind enough to share some insights with the ALN team. Here are the highlights:
Doing business as a foreigner in Africa requires total commitment. The founders of Choppies are Indian-born, but they see themselves as fully Botswanan and fully African. Key staff have naturalized as Botswana nationals, which even cost them their Indian citizenship. If you’re looking for a quick buck, stay away: being credible with local stakeholders means showing an unwavering, total commitment to the futures of the communities in which you operate.
When entering new markets, local partnerships take time to build. To enter any new African country, Ramachandran and his team first select a local operating partner, as well as a local real-estate investment partner — since Choppies typically doesn’t own the buildings where it trades. It took 18 months of discussions to solidify the operating partnership that led to the Ukwala transaction in Kenya. And when it comes to Tanzania, the company’s next exciting launch market, Choppies management has already been visiting the country regularly for three years. Trust relationships are key, and they take time to build.
Tanzania shows huge promise. Choppies stores operate as stand-alone buildings, as compared to many African supermarkets that prefer to locate in shopping malls. This is a strategic advantage in the Tanzanian market especially. While competitors may prefer to wait for mall infrastructure to be built, Choppies can hit the ground running and roll out a formal retail offering in this country of 49m people — which today counts just 30 formal retail establishments.
Grow the pie. Kenya has approximately 200 formal establishments, compared to approximately 2,000 in South Africa, with comparably-sized populations. Choppies anticipates that the Kenyan figure will increase to at least 1,000 in the near future. But with a differentiated brand proposition and strategy, Ramachandran thinks there’s room in the broader East African market for a number of players. With the likes of Nakumatt, Tuskys, Naivas and Uchumi well-entrenched in the region… we think this plucky upstart from Botswana has its work cut out for it — and we’re excited to watch them grow!
Choppies won ALN’s Africa Awards for Entrepreneurship (AAE), in the Transformational Business category, in 2014. Our AAE Gala Dinner takes place each year at the ALN Annual Gathering. This year’s Gathering, #ALN2015, will take place in Morocco in November. If you’re an African leader and would like to attend — whether or not you are currently an ALN member — please apply here.
Source: Figures and estimates are per Choppies management.