Botswana tycoon Chandra Chauhan's Sefalana cuts dividend 60% as diamond slump hits profit

Sefalana Holding Company has cut its dividend by 60% after posting the first decline in profitability in nine years, even as revenue reached the highest level in the group's 52-year history.

The Botswanan retailer declared a final gross dividend of 20 thebe a share for the year to April 26, against 50 thebe in total the previous year. No interim dividend was paid at all. The board said it had weighed the economic environment, the group's capital requirements and the need to reinvest before deciding.

Group managing director Chandra Chauhan and chair JM Marinelli signed the audited accounts in Gaborone on July 31.

Profit before tax fell 40% to P331 million, about $24.4 million, from P550 million, or $40.5 million. Profit for the year came in at P234 million, roughly $17.2 million, against P426 million, or $31.3 million. Earnings per share dropped to 93 thebe from 169 thebe.

Revenue rose 9% to P12.13 billion, about $892 million, the most the group has ever reported. The gap between those two figures is the story.

What went wrong

Gross margin fell to 5.8% from 7.1%, cutting absolute gross profit 12% to P701 million, or $51.6 million, despite the higher turnover. Sefalana sold more and kept less of it.

The company set out five drivers. Two were one-off items worth P118 million, about $8.7 million. The prior year had included a fair value gain of P102 million, or $7.5 million, on a South African investment bought below its worth, which did not repeat. And the Bank of Botswana devalued the pula by roughly 8% against the South African rand in July 2025, adding about P16 million, or $1.2 million, in unexpected cost when trade payables were settled. Most goods sold in Botswana are imported from South Africa, so the adjustment fed straight into purchase costs.

Stripping those out, underlying profit before tax still fell 19%.

The largest operating hit was manufacturing, down P72 million, or $5.3 million. Foods Botswana supplies government feeding schemes for schoolchildren, and a seven-month gap opened between tenders. The company had already bought about P130 million, roughly $9.6 million, of grain in anticipation of tenders issued in late 2025 that were then revoked, and manufactured nothing for government across the entire second half of the year. An interim three-month contract was awarded in June.

Electricity tariffs rose about 24%, costing a further P25 million, or $1.8 million. A wage increase of up to 23% for the lowest-paid staff in Botswana added P14 million, about $1 million.

The diamond economy

Behind all of it is Botswana's dependence on a single commodity.

The country is among the world's largest diamond producers, and the collapse in global demand has drained liquidity from its economy, raised borrowing costs for consumers and cut disposable income. Sefalana reported at the half year that three of six months had been affected. Conditions did not improve, leaving nine months of difficult trading across the full year.

Consumer behaviour shifted accordingly. Customers visit stores more often but spend less per visit, concentrating on value packs, necessities and private label products rather than higher-margin discretionary goods. That change in mix diluted margins across most of the business.

Botswana generated P186 million, about $13.7 million, of group profit before tax against P339 million, or $24.9 million, a year earlier, falling to 56% of the total from 62%.

Namibia carries the group

Metro Namibia has become the largest profit centre. It contributed 36% of revenue and 39% of profit before tax, with turnover up 16% to P4.42 billion, roughly $325 million, and profit of P129 million, about $9.5 million.

Sefalana Lesotho grew turnover 24% in pula terms to P1.25 billion, or $92 million, though profit slipped to P24 million, about $1.8 million, from P28 million. The business remains in discussions with the Revenue Service Lesotho over outstanding VAT, a matter the group expects to resolve by late 2026 and which has constrained its cash flow.

The most valuable move was in South Africa. Sefalana converted a preference share investment into a 30% equity stake in UIH South Africa on November 1, at a strike price matching the original R275 million. The holding was fair valued at R415 million, a 51% uplift, and the group expects it to contribute around 10% of profit. UIH is a buying group in the fast-moving consumer goods sector and owns several South African supermarkets.

Balance sheet and shares

Net assets grew to P3.20 billion, about $235 million, from P2.83 billion. Cash reached P664 million, or $48.9 million, and cash generated from operations more than doubled to P592 million, roughly $43.6 million, from P280 million.

Total comprehensive income rose 6% to P469 million, about $34.5 million, lifted by a P218 million currency translation gain on the rand-denominated Namibian and Lesotho businesses as the rand strengthened against the pula.

The shares closed the year at P16.00, up 7%, giving a market capitalisation of P4.0 billion, roughly $294 million, and making Sefalana the largest company in the retail and wholesale sector on the Botswana Stock Exchange. Total shareholder return was 8%, against 31% the previous year. Return on capital employed was 9.4%.

The group opened 12 stores during the year, taking Botswana to 146 outlets across hypermarkets, cash and carry warehouses, supermarkets, liquor stores, convenience shops and fuel stations. It added 100 staff to reach 8,272 employees, with fewer than 1% non-citizens across its markets.

PwC audited the accounts. The final dividend is payable on or about August 27 to shareholders on the register at the close of business on August 17, with an ex-dividend date of August 13.