Chairman & CEO's Review

Chairman Sven Thieme and CEO Peter Gruttemeyer

Developing countries faced a series of tough challenges in 2015, including the looming prospect of higher borrowing costs in a new era of low prices for oil and other key commodities. According to the World Bank’s 2015 Global Economic Prospects report, this will result in a fourth consecutive year of disappointing economic growth as developing countries have been projected to grow by 4.4% in 2015, with a likely rise to 5.2% in 2016 and 5.4% in 2017.

Although developing countries were an engine of global growth following the financial crisis, they now face a more difficult economic environment. The World Bank believes that countries that invest in people’s education and health, improve the business environment and create jobs through upgrades in infrastructure will emerge much stronger in the years ahead. These kinds of investments will help hundreds of millions of people lift themselves out of poverty.*

The International Monetary Fund also projects sub-Saharan Africa’s economic growth to slow down in 2015 to below the 4.4% annual average growth rate of the past two decades. Slower expansion of economic activity largely reflects the impact of the fall in oil prices and other commodities on the region’s economies, even though net oil importers would see gains. Commodity prices and foreign investment are expected to provide less economic support; subdued demand and economic activity in emerging markets will weigh on the region’s growth as well.*

In maintaining our track record of consistent economic growth, the emergence of global value chains (GVCs) is perceived as an opportunity for Namibia - especially in view of our abundant natural resources - as there is an urgent need to implement innovative measures to enable the country to make the most of her comparative and competitive advantages, including policies to reduce the high cost of doing business, removing various bottlenecks in infrastructure and investing in skills as part of a broader diversification strategy.

The past financial year marks 12 months of major transformations, including changes to the political environment which have been very positive indeed. Many initiatives undertaken by government to improve the socio-economic wellbeing have created an optimistic atmosphere of hope, while on the economic front we have experienced less turmoil than in previous years.

The last financial year has seen a great performance by the O&L Group with special mention given to our Property Portfolio, Broll Namibia; Namibia Breweries Limited (NBL); and Namibia Dairies, which recovered significantly despite the import restrictions being lifted. All in all we showed good overall growth in these sectors, which we believe will accelerate significantly in the years to come.

When taking financial performance into consideration however, we must always remember that a portfolio of investments such as that of the O&L Group is always impacted by very well-performing businesses but also those that go through a development phase. A great example here is the Pick n Pay portfolio, which embarked on a major investment programme in building new stores and revamping existing stores, that will continue into the new year. The return on these stores has not been immediately forthcoming but we believe that they will do well in the coming years.

Equally, some great improvements will be offset by investment in the forthcoming year, thereafter the situation will start to reverse, namely with the Leisure Portfolio becoming profitable within two to three years.

The fishing industry was impacted by international fish prices as well as diminished fishing quotas. Other principal challenges to come will include the successful opening of Chobe Water Villas and the Strand Hotel Swakopmund by our operating company O&L Leisure, while a further test will be the successful turnaround of Pick n Pay in order to resume previous profit levels with both new and revamped stores.

Although the above factors have had an impact on the return for shareholders, we believe that the future looks bright. As employer of choice, we have made significant progress in the latter half of the financial year by increasing our total number of employees to 5,568. In addition to its contributions to the economy and to enhancing the lives of its people through its role as an employer of choice, O&L has also continued to enhance the lives of the communities in which we operate through our Corporate Social Investment Portfolio which supports, inter alia, health, education and environmental protection.

O&L embraces its obligations as a responsible and caring corporate citizen - which is why it not only manages its environmental and social impacts and invests heavily in mitigating its effects on externalities, but also continues to contribute significantly to enhancing the lives of the people within local communities. 

Please download the PDF for the full review.