Retailer Choppies, based in Botswana, suffered a blow in the six months to December, with the weak pula and subdued trading conditions in Botswana pulling it down.
Group results showed that Botswana was no longer a key driver of revenue as its contribution fell below 50% on a weak performance in the country and poor economic conditions.
"Profits in Botswana were materially impacted by the strengthening of the rand against the pula that resulted in a foreign-exchange transaction gain lower than expected compared to December 31 2015," the company said.
While Botswana remains the retailer's largest market by store footprint, Choppies is finding growth in other markets.
Choppies CEO Ramachandran Ottapathu said this week: "It was a reasonably good result.
"My mandate is to grow the company and our revenue from Botswana has gone down below 50%.
"So we can't say that it's a Bostwana-based company any more; it's becoming an international company."
During the period, retail space expanded 37%, through the group's expansion in South Africa and establishing a presence in new markets in Zambia, Kenya and Tanzania. The group has 202 stores in its portfolio.
Although there is no available revenue breakdown of the group's new markets, Ottapathu said: "In Tanzania, the store sales are improving, with the one store having broken even already."
"In Kenya, we are operating 10 stores. These stores were re-branded from former Ukwala stores into Choppies. We are slowly putting our systems in place."
Ottapathu said he expected Kenya to be profitable once the group had expanded to more than 15 stores.
Since Choppies's secondary listing on the JSE in May 2015, the stock has declined about 37.5%. The company has a primary listing on Botswana's stock exchange.
Anthea Alexander, who is an associate director of equity research at Exotix Partners, estimated in a research note that with the company's expansion into new countries the contribution of new markets to group revenue would currently be about 5%.
Alexander said Choppies expanding beyond its home market was justifiable, given diminishing growth prospects in Botswana.
"While the current retail environment in Africa is challenging, I think longer term growth prospects are attractive and that is what they are focusing on," said Alexander.
She said that it would take time to achieve scale in new markets given that capital is being spread across numerous countries rather than a select few.
"I think lower profitability in these markets will dilute group margins and return on equity for an extended period," said Alexander.
Revenue for the South African business increased 122%, while earnings before interest, tax, depreciation and amortisation (EBITDA) were positive for the first time since the first half of 2015.
However, EBITDA for the Botswana operations declined by 23%.
Ottapathu said the investment in expansion plans in South Africa is an opportunity to grow within the market.
"If we hold back for the right moment, then the investment value will go from R500-million to R900-million." Despite this, Alexandra said, the expansion was good only if it was going to translate into growth in profits and better returns for shareholders.
Ottapathu said the Choppies balance sheet allowed for more expansion and acquisition activities. "If you look at the balance sheet of the company, it's got a limited amount of debt, but if you look at the cash flow, there is sufficient cash flow to plough back into the business."