Several needs are pulling on Sefalana Holdings’ money at the same time. One key factor is the recent changes in foreign exchange rates, which have proven that the company now needs more pulas to pay off suppliers in other currencies.
Finance Director Mohamed Osman explained that after the changes by the government, settling bills to suppliers due within 30 days added an extra P15 to P20 million in costs. This increased demand for cash, especially as the company needs to replace stock that has become more expensive.
Osman said, “We need to replace stock, which now costs more.”
Sefalana is now holding goods worth P1.4 billion, an 8% increase, because it keeps extra “buffer stock” to protect against supply problems. This means that if suppliers have problems, the company has extra stock ready to sell to its customers.
Osman said this buffer is very important, especially since COVID-19, many manufacturers in South Africa have struggled to meet demand. Power shortages and production limits mean South African suppliers often focus on serving their own country first, leaving less for neighboring countries like Botswana.
“You often find that South African suppliers will prioritize supplying into South Africa rather than into neighboring countries,”
Osman said.
Wherever possible, the group procures from local suppliers, but the majority of products on the shelf are manufactured in South Africa. The company then sells to the wholesale sector across its networks of stores and also across the region to other retailers.
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The need for stocking has also created storage challenges. This has prompted the company to plan a new large warehouse in Gaborone North to help manage stock better and support buying activities. The project will cost about P65 million and would be paid for with both borrowing and the company’s own cash, the group said.
However, the group has put these plans on hold due to current cash constraints. Osman noted that borrowing now would be too expensive because of high market costs for new loans.
“It’s not the right time to borrow. because otherwise it costs us too much to enter a new debt facility.”
Adding to the strain, Sefalana is still waiting for VAT refunds owed by the Lesotho Revenue Service. This delay has made cash flow tighter, forcing the group to provide extra support to Lesotho segment during busy times. The company said the process has taken longer than expected but expects to resolve it by late 2025.
