When news of the BAT extra ordinary meeting (EGM) reached our desks through SENS announcement of 29th September, we were worried that the firm had finally given up and was now considering exit (following recent statements from the firm following their impending loss in excess of K100million, you cannot blame us). However, much to our delight, was the agenda for the EGM. But before we get into that, the signals from the announcement should have had any astute investors or stakeholder anxious with delight. They would be hosting the EGM at their Lusaka South Multi – Facility Economic Zone premise which is poised to be the factory where they will be manufacturing their product. In addition, this EGM comes on the back of the recent budget announcement where there has been adjustments in tax on tobacco products (shareholder take note).
The move to manufacture local was inspired by the high tax on finished imported product. Government is known to give incentives on locally manufactured product hence why the BAT management team opted to “rolled up” local. However, in light of recent performance, it is not surprising that the management team that has clearly read the signals coming from government and wants to continue to be a factor in their game would want to recapitalize and invest in PPE.
In their statement, presented here in verbatim as
“THAT the directors of the Company be and are hereby authorized to obtain, on behalf of the Company, a loan of US$ 15 million from BATIF Dollar Limited (“BATIF”) for the construction of the Company’s manufacturing plant in Zambia;”
They are looking at sourcing the finance from a fellow subsidiary in the group (the joys of a global multinational company).
For competitors of BAT, this should serve as a warning that regardless of what category (be it illicit or real competition), the firm is intent to take the fight back to them. This is typical of extant players because revenue falling over a period of time, does not necessarily mean they are out of business. No. It means it is time to reposition the strategy of the firm in that market.