IFA Mauritius – May 2012

IFA Mauritius – May 2012

IFA Mauritius – May 2012

Luc Merven - Financial Manager Offshore1

OverviewOverview

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• Shoprite operations • Strategy

• Challenges of doing business in Non-RSA

OperationsOperations

Turnover R41 bn (USD 5.5bn)

Owned Outlets 1,303

Franchise Outlets 427

Countries 16

Employees >99,000

Market Capitalisation >R65 bn (USD 8.5bn)

Size of OperationSize of Operation

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December 2011

Store PortfolioStore Portfolio

Supermarkets RSA 683 51 (5) 729

Supermarkets Non RSA 112 12 (1) 123

Hungry Lion 132 15 (4) 143

Furniture 298 16 (6) 308

Owned Stores 1,225 94 (16) 1,303

Franchise 280 170 (23) 427

Total Stores 1,505 264 (39) 1,730

Pharmacies 113 17 - 130

Liquor Stores 102 51 - 153

Dec 2010 Opened Closed Dec

2011

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Africa PresenceAfrica Presence

ForexForex

Exchange rate differences• Dec 2010: USD 1.7 million loss

• Dec 2011: 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: R 8.23

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OperationsOperations

• 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

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StrategyStrategy

StrategyStrategy

• Corporations structure their group companies • Shoprite started in 1995 in Zambia

• Considered:– Guernsey– United Arab Emirates– Malta– Luxembourg– Mauritius– Others

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StrategyStrategy

• 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

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StrategyStrategy

• 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

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StrategyStrategy

• 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

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ChallengesChallenges

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Trends & ChallengesTrends & 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

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Trends & ChallengesTrends & Challenges

• Political unrest :• Madagascar – coup • Zimbabwe – hyper inflation• Uganda – strikes

• Administrative challenges :• Processes to register agreements• Embassy’s• Translators

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Trends & ChallengesTrends & 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

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Trends & ChallengesTrends & Challenges

“It’s easier for Africa to trade with the rest of the world than with itself”

Times of Zambia – 14/02/12

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ExamplesExamples

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Luanda Port CongestionLuanda Port Congestion

Vessels waiting to berth

Find your containerOff-loading

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Nigeria Port CongestionNigeria Port Congestion

Trucks waiting to enter Appa Port

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Road ConditionsRoad Conditions

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TrafficTraffic

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Questions…Questions…