Transcript The Shoprite Group

Luc Merven - Financial Manager Offshore
1
IFA Mauritius – May 2012
Overview
• Shoprite operations
• Strategy
• Challenges of doing business in
Non-RSA
2
Operations
Size of Operation
December 2011
Turnover
Owned Outlets
Franchise Outlets
Countries
Employees
Market Capitalisation
4
R41 bn (USD 5.5bn)
1,303
427
16
>99,000
>R65 bn (USD 8.5bn)
Store Portfolio
Dec
2010
Dec
2011
Closed
Supermarkets RSA
683
51
(5)
729
Supermarkets Non RSA
112
12
(1)
123
Hungry Lion
132
15
(4)
143
Furniture
298
16
(6)
308
1,225
94
(16)
1,303
280
170
(23)
427
Total Stores
1,505
264
(39)
1,730
Pharmacies
113
17
-
130
Liquor Stores
102
51
-
153
Owned Stores
Franchise
5
Opened
Africa Presence
Forex
Exchange rate differences
• Dec 2010:
• Dec 2011:
USD 1.7 million loss
USD 3.5 million gain
Rand to US Dollar exchange rates (R:$)
• Dec 2008:
R 9.66
• Dec 2009:
R 7.60
• Dec 2010:
R 6.63
• Dec 2011:
7
R 8.23
Operations
• 21.2% Sales growth (16.9% constant currency)
• 10 new stores
• Close to reaching 100 000 000 customers for a 12 month
cycle
• 8.7% customer growth in the 6 month period
• Mauritius Freeport being used more extensively
8
Strategy
Strategy
• Corporations structure their group companies
• Shoprite started in 1995 in Zambia
• Considered:
– Guernsey
– United Arab Emirates
– Malta
– Luxembourg
– Mauritius
– Others
10
Strategy
• Principle features when deciding on a beneficial
intermediate holding company jurisdiction:
–
–
–
–
Favorable network of tax treaties / DTA’s
Nil or low tax on dividend & other income
Nil or low withholding tax on dividends declared
Absence of capital gains taxes on profit arising on disposal
/ deemed disposal of an investment
– Nil or reduced tax on share capital introduction
– Absence of a controlled foreign company regime
– Absence of exchange controls
11
Strategy
• Other
– Proximity to core business:
• Mauritius / Africa
• Board meetings
• Personnel, know-how & effective management
– Ease of doing business in offshore jurisdiction
• Banking sector
– Reliable banks & banking system
– Availability of foreign exchange
12
Strategy
• South Africa could not offer the above & Shoprite chose
Mauritius as its offshore base
• SARS investigations on FBE’s in Mauritius has resulted in
confidence
• Sound business environment and working relationship
between countries
• Mauritius is gaining as an established & transparent
offshore platform
• Independence of Offshore entity – SARS scrutiny since
1998, we have proven track record
13
Challenges
Trends & Challenges
• Need to consider the home country impact on all
transactions
• Good for the group?
• Africa or SA tax consequences
• Need closer working relations between Mauritian
and African Banks
• Need more DTA’s –
• < ½ of Shoprite’s operating divisions have established DTA
with Mauritius
15
Trends & Challenges
• Political unrest :
• Madagascar – coup
• Zimbabwe – hyper inflation
• Uganda – strikes
• Administrative challenges :
• Processes to register agreements
• Embassy’s
• Translators
16
Trends & Challenges
• Repatriation of funds to Mauritius:
• Paper work requirements very onerous
• Shortage of foreign currency –
banks are not moving away from risk & additional
capital requirements have put banks under pressure
• Rating of banks – tendency of banks not being rated
• Low returns on local currency funds
• Strict enforcement of foreign exchange regulations
making it sometimes impossible to trade
17
Trends & Challenges
“It’s easier for Africa to trade with
the rest of the world than with
itself”
Times of Zambia
– 14/02/12
18
Examples
19
Luanda Port Congestion
Vessels waiting to berth
Off-loading
20
Find your
container
Nigeria Port Congestion
Trucks waiting to enter Appa Port
21
Road Conditions
22
Traffic
23
Questions…
24