IFA Mauritius – May 2012

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 • 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 • 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

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

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

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

Challenges

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

Trends & Challenges • Political unrest : • Madagascar – coup • Zimbabwe – hyper inflation • Uganda – strikes • Administrative challenges : • Processes to register agreements • Embassy’s • Translators 16

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

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

Examples 19

Luanda Port Congestion Vessels waiting to berth Find your container Off-loading 20

Nigeria Port Congestion Trucks waiting to enter Appa Port 21

Road Conditions 22

Traffic 23

Questions… 24

IFA Mauritius – May 2012