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IFA Mauritius – May 2012. Luc Merven - Financial Manager Offshore. 1. Overview. Shoprite operations Strategy Challenges of doing business in Non-RSA. 2. Operations. Size of Operation. December 2011. 4. Store Portfolio. 5. Africa Presence. Forex. Exchange rate differences

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ifa mauritius may 2012

IFA Mauritius – May 2012

Luc Merven - Financial Manager Offshore

1

slide2
Overview
  • Shoprite operations
  • Strategy
  • Challenges of doing business in Non-RSA

2

slide4
Size of Operation

December 2011

4

slide7
Forex
  • 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

7

operations
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

strategy1
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

strategy2
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

strategy3
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

slide15
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

slide16
Trends & Challenges
  • Political unrest :
    • Madagascar – coup
    • Zimbabwe – hyper inflation
    • Uganda – strikes
  • Administrative challenges :
    • Processes to register agreements
    • Embassy’s
    • Translators

16

slide17
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

slide18
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

slide20
Luanda Port Congestion

Vessels waiting to berth

Find your container

Off-loading

20

slide21
Nigeria Port Congestion

Trucks waiting to enter Appa Port

21

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