Botswana’s Transactional Presidency
The new liquor laws favour retail giants like Liquorama, which is owned by President Mokgweetsi Masisi’s business partner, Ramachandran Ottapathu. However, the President’s decision to open up the market for his business friend is not anything new. The Mogae and Khama administrations were characterised by expansive business networks that often favoured buddies, writes TSHIRELETSO MOTLOGELWA
When the time came for government to announce the unbanning of alcohol consumption as part of the slow loosening of lockdown conditions, it had to summon the highest officer to do it, The President. The entire two months of lockdown had led to a constant complaint by many citizens that the banning of alcohol rendered the lockdown unbearable. Therefore, the release of citizens to be able to imbibe came to be delivered last Saturday by none other than the President Mokgweetsi Masisi himself, prompting a nationwide excitement.
However, the President warned that it would only be the next day Sunday that the specifics of the unbanning would be released by the Minister of Trade and Investment, Peggy Serame. Indeed the minister announced Sunday afternoon that on Wednesday of the following week alcoholic beverages would be allowed under limited times and only at a select number of places. These will include bottle stores and restaurants and will only be open between 10am and 6pm from Wednesday to Friday and on Saturdays from 10am to 4pm.
However, a very important part of the alcohol selling industry was not unbanned – the home brewers and small scale traditional sellers. Those will have to wait. In fact, for those, as Minister Serame put it, consultations over whether to unban them and how, were still yet to be done. She said she would have to meet the traditional leadership to consult with them extensively and then make a determination over whether to release the locks. Significantly, the minister only mentioned this after being specifically asked about this sector. It is a rather cavalier attitude by the minister to forget to conduct all consultations covering all subsections of the sector and so as to produce a well rounded programme that incorporates the poorest of the poor in this lucrative trade, the traditional home brewers.
Critics have come out to point out that infact this reopening of alcohol sellers only favours the big retailers. Restaurants will find that the time for selling alcohol on their premises is cut off immediately at the moment their clients arrive at the restaurant. After all, restaurants receive business from people who are engaged in work during the day. If the cut-off time is 6pm, that gives the client an hour between the time s/he knocks off and the time s/he should be at the restaurant seated and to be served both food and alcohol. Secondly, the bar owners also depend on customers who come late at night after the restaurants and bottle stores have closed at 6pm because they do not sell at a retail price to make a profit until 11pm, as was the case before now. The decision would seem to have been made without including the specific needs of restaurant owners. If the new alcohol rules were for anyone, it is the big retailers, the biggest of whom is liquor sales giant, Liquorama, for whom the new rules will work neatly.
It turns out only a few days later that the President is a business partner to troubled retail magnate, Ramchandran Ottapattu, who owns Choppies. The two co-own Arcee, one of a myriad companies in which the retail man has a finger. Ram owns 90 percent while Masisi has 10 percent. It just turns out that Arcee is one of many enterprises that the President co-owns with various businessmen of Indian origin, according to media reports. Gazette investigations reveal that Arcee hurriedly registered a number of subsidiaries before the declaration of the state of emergency for COVID-19. It is those financial relations that tie Masisi and his business partner’s interests into one. It is in light of that relationship that Masisi government’s alcohol policy on Covid-19 should be seen.
But it is not the first time that Ram – or Liquorama, for that matter – is the recipient of favours from government relating to access to the lucrative alcohol sales market. In 2016, Liquorama had a problem surrounding the designation of liquor trading as an exclusively citizen owned business. Liquor trading was an area reserved for citizens while Liquorama was majority owned by foreigners. It is not as if the partners were about to dump their foray into the multi-billion pula alcohol industry. They couldn’t sell their stake to locals, of course, but they wanted in on the action. What was to be done?
The Trade and Liquor Act of Botswana was explicit on the issue that the liquor business is among “certain trades and businesses to be reserved for citizens”. But Ram was never far from a solution because the then Minister of Investment, Trade and Industry, Vincent Seretse, soon came to the rescue. Seretse wrote Ram an exemption to the rule and the India-born man of retail could proceed. Ram was given the special permission to sell alcohol, albeit being the minority owner of a business whose majority shareholding belonged overseas.
In a letter written by the Department of Trade and Consumer Affairs on 27 September 2016, Liquarama which then was registered as ZCX Investment, was made immune to the law that bars non-citizens from operating bottle stores. At that time Liquorama owned 46 bottle stores across the country. Minister Seretse exempted the Ram-owned venture from Regulation 5 of Liquor Regulations 2008 which stipulate that “bottle store businesses shall be reserved for citizens of Botswana or companies wholly owned by citizens of Botswana”.
According to Section 18 (1) of the Liquor Act, “The Minister may make regulations providing that licences to carry on a reserved trade or business in liquor shall be issued only to citizens of Botswana or to companies wholly owned by citizens of Botswana.” In the case of Ram, Seretse crucially made a special directive to exempt Liquorama from Section 18(1).
Section 18 further states that “(3) A joint venture of a medium business enterprise between a citizen and a non-citizen may be granted a licence in a reserved liquor trade or business where a citizen has a minimum beneficial ownership of 51 percent of the joint venture; Provided that a citizen partner may, with the approval of the Minister, hold less than 51 per cent shares in a joint venture arrangement.” But in the case of Liquorama, it was not a “medium business enterprise” according to the definition applied in Section 18 (4) which says, “for the purposes of this section, “medium business enterprise” means a business that employs less than 100 people and which has an annual sales turnover of between P1,500,000 and P5,000,000. Liquorama, even at that time, was a multimillion business running about 46 stores across Botswana and employing hundreds of people.
It appeared the letter from the Department of Trade and Consumer Affairs came after Ram and Co. had requested for exemption from Regulation 5. This was also at the time when ZCX was being sold to Spark Capital. Lawyer and Ram’s business associate then, Rizwan Desai, was the addressee of the letter. Desai, together with his then partner at Collins Newman, Parks Tafa, then owned Chalk Farm Investment, a company which had a stake in the liquor company. Tafa is known for his connections in former president Ian Khama’s regime where he was the president’s personal lawyer, business partner and political adviser most of the time.
At that time in 2016, Ram had 14.99 percent of Spark Capital while the Botswana-registered Chalk Farm Investment had 5.20 percent in its pocket. The majority owner of the company that controlled Liquorama in 2016 was Standard Chartered Private Equity from Mauritius with a stake of 53.82 percent. Liquorama then got into the hands of Choppies distributor Kamoso. In this deal, when Kabomo purchased Spark Capital, Ottapathu and his long time business partner, Farouk Ismail, pocketed P452 million when they sold the companies to Standard Chartered Private Equity and Development Capital Partners. Kamoso, the company which now controls Liquorama, in 2017 sold 72 percent shares owned by Standard Chartered Private Equity and Development Capital Partners to Investec Asset Management and RMB Ventures. Kamoso was formed in 2015 as part of an investment by Development Capital Partners, a New York investment firm, and Standard Chartered Private Equity. After the P452 million big money deal of Kamoso, Ram – now with his politically influential partner former President Festus Mogae – went on to list Choppies on the Johannesburg Stock Exchange in a deal in which the duo are said to have pocketed over P600 million when they sold shares on the South African bourse.
Mogae who has now resigned as Choppies Chairman, a position he assumed after he left the presidency, is reported to have at the time walked home with almost P300 million from the JSE deal.
Former President Mogae himself jumped into the Choppies bandwagon earlier, having been part of its founding. But Mogae had other friends who under him came to enjoy the largesse of government policy making. When government made a decision to establish a pension fund, his business associates who came to dominate the multi-billion pula asset management industry that emerged out of that indirectly through the corporate giant, 21St Century, which consisted of some of the most powerful men in Botswana society, 21st Century came to own a big chunk of the businesses utilizing some of the strategic access in political circles. The conglomerate had a specific advantage over other companies because of the network connected to it and the resultant connections relating to those who were within the circles occupied by the shareholders both personally and professionally. As a result, it often found itself front-row in any potential deals.
On the other hand, those close to Khama during his term, especially those associated with Wilderness Safaris, gained from their association with the president. His tourism strategies, and policies, were positioned to bring as much benefit to his friends and business associates as he could muster, from directing how concessions would be allocated to attempting to grant the tourism outfit ownership of the national flag carrier at a nominal fee. Some rules were bent by the administration to accommodate the interests of Khama’s tourist operator business associates.
It is therefore little surprising to find that Masisi, the self-styled champion of citizen economic empowerment, disempowered the most powerless of his citizenry to accommodate the financial interests of his business partners.