Chobe Holdings, the company that benefited from the Pula devaluation

Good morning, let’s get into it!

The economic narrative of Botswana has historically been dominated by the twin pillars of diamond mining and high-value, low-volume ecotourism. In recent fiscal cycles, however, the interplay between global commodity volatility and domestic monetary policy has created a unique environment for the nation’s premier listed tourism entity, Chobe Holdings Limited. As the Botswana Pula (BWP) has undergone a strategic and market-driven devaluation, Chobe Holdings has emerged as a quintessential case study in currency-driven margin expansion and strategic resilience. This analysis examines the multi-faceted benefits the company has derived from the weakening of the Pula, contextualized within the broader framework of Botswana’s crawling peg exchange rate mechanism and the structural realities of the international tourism market.

The Architecture of the Pula and the Crawling Peg Mechanism

To understand the benefits accrued by Chobe Holdings, one must first dissect the sophisticated exchange rate framework managed by the Bank of Botswana. Unlike freely floating currencies, the Pula is pegged to a basket consisting of the South African Rand and the International Monetary Fund’s (IMF) Special Drawing Rights (SDR).¹ The SDR component includes the US Dollar, Euro, British Pound, Japanese Yen, and Chinese Renminbi, reflecting Botswana’s primary international trading patterns.¹

The primary objective of this exchange rate policy is to maintain the international price competitiveness of domestic producers.¹ In July 2025, the Bank of Botswana, under the guidance of the Ministry of Finance, implemented significant changes to the Pula's parameters, increasing the annual downward rate of crawl from 1.51 percent to 2.76 percent.¹ This move was a direct response to a contraction in GDP during 2024 and 2025, a sharp decline in mining output, and a depletion of foreign exchange reserves.¹

For an export-oriented entity like Chobe Holdings, which sells tourism services to a global clientele but operates primarily within the domestic cost environment of Botswana, this devaluation acts as a potent revenue multiplier. As the Pula weakens against the US Dollar—the primary currency of international tourism invoicing—every dollar of revenue translates into a greater number of Pula upon repatriation.⁴

Strategic Exchange Rate Parameters (2025 Revision)

The widening of the Pula trading margin to +/- 7.5 percent is particularly noteworthy. It aims to promote the development of an interbank foreign exchange market and moderate the reliance of commercial banks on the central bank.¹ For Chobe Holdings, this increased volatility requires more sophisticated treasury management, but the fundamental downward crawl provides a predictable tailwind for its Pula-denominated financial reporting.⁵

Chobe Holdings: A Structural Overview of a Tourism Giant

Incorporated in May 1983, Chobe Holdings Limited has grown into an ecotourism conglomerate that manages a sophisticated portfolio of fourteen lodges and camps across Northern Botswana and the Caprivi Strip in Namibia.⁴ Its operations are vertically integrated, encompassing hospitality, aviation, and logistics, which allows the group to capture a significant portion of the tourism value chain.⁷

The group's hospitality brands—Desert & Delta Safaris, Ker & Downey Botswana, and Chobe Game Lodge—represent the pinnacle of the high-value ecotourism model.⁴ With a combined capacity of 349 beds, Chobe Holdings caters to a demographic that is largely insulated from local economic downturns, as its guests are primarily high-net-worth individuals from North America and Europe.⁴

Subsidiary Ecosystem and Functional Roles

This vertical integration is a critical component of how the company manages currency risk. By controlling the entire guest experience—from the initial booking through the African Booking Company to the aerial transfer via Safari Air and the stay at a Desert & Delta lodge—Chobe Holdings ensures that it can price its services in US Dollars while managing its internal cost transfers in a way that optimizes the Pula-denominated bottom line.⁵

The Mechanics of Currency Benefit: Revenue vs. Expenditure

The most direct benefit Chobe Holdings receives from the Pula devaluation stems from the currency mismatch between its revenue and its cost base. Approximately 88% of the group's total revenue is either denominated in or directly linked to the US Dollar.⁴ In contrast, approximately 70% of its operating costs are denominated in Botswana Pula.⁴

When the Pula devalues, the company experiences an immediate expansion in its gross margins. For instance, if a lodge stay is priced at $1,000 USD, and the exchange rate moves from 11 BWP/USD to 13 BWP/USD, the revenue increases from P11,000 to P13,000 without the company having to increase its prices in the international market. Because the local costs—such as staff salaries, lease rentals to the government, and local food supplies—do not rise in direct proportion to the currency move, the additional P2,000 largely flows to the operating profit.⁴

Analysis of Foreign Exchange Gains

In the financial year ended February 29, 2024, Chobe Holdings reported a net foreign exchange gain of P33.2 million, a figure that significantly bolstered its profit after tax.⁵ In 2025, while the net foreign exchange gain moderated to P19.9 million due to the timing of currency movements and internal translations, it remained a vital pillar of the group's financial health.⁴ These gains are categorized under "Other Operating Income" in the consolidated statement of comprehensive income, distinguishing them from the core hospitality revenue but highlighting their role in the overall earnings power of the group.⁷

The 2024 gain was particularly substantial, representing over 6% of total revenue. This period coincided with a notable weakening of the Pula against the US Dollar as the central bank adjusted the crawl rate to compensate for falling diamond receipts.¹ The moderation in 2025, despite an 18% increase in top-line revenue, suggests that while the devaluation continues to provide a tailwind, other operational factors—such as increased salary costs and heavy capital expenditure—are beginning to exert a more significant influence on the net margin.¹⁰

Capital Reinvestment and the "USD-Powered" Asset Upgrade

A secondary, but arguably more strategic, benefit of the Pula devaluation is the ability it grants Chobe Holdings to fund massive capital improvements using "expensive" foreign currency to pay for "cheaper" local assets and labor. During periods of currency favorability, the group has aggressively reinvested its surplus liquidity into its property portfolio, ensuring that its assets remain at the forefront of global luxury standards.

Major Capital Expenditure Projects (2024-2025)

The 2025 financial year was marked by intense investment activity, fueled by the strong cash flows generated from the post-pandemic travel rebound and the favorable currency environment.

1. Savute Safari Lodge Reconstruction: At a cost of P36 million, the group completely rebuilt this lodge to elevate its luxury offering.¹⁰

2. Kanana Camp Upgrade: Similarly, Kanana Camp underwent full reconstruction, reflecting the group’s commitment to maintaining its premium pricing power in the Okavango Delta.¹⁰

3. Aviation Fleet Expansion: To mitigate constraints in guest transport, Chobe Holdings acquired Caravan Ex for P35 million for its subsidiary, Safari Air.¹⁰

4. Nxamaseri Island Lodge and Okuti Camp: Both properties received major upgrades to maintain their competitiveness.¹⁰

These investments have led to a significant increase in depreciation and amortization charges, which rose following the completion of these projects.¹⁰ While this exerts short-term pressure on net profit, it builds long-term shareholder value by entrenching the group’s competitive moat. By using USD-denominated earnings to pay for these BWP-denominated construction projects, Chobe effectively "locks in" the benefits of the devaluation into tangible, long-term assets.⁷

Geographic Diversification and Regional Footprint

The strength of Chobe’s balance sheet, bolstered by currency gains, has enabled it to look beyond the borders of Botswana. The incorporation of Ker and Downey (2024) Zambia Limited and the construction of Maxa Camp signal an intention to diversify the group's geographic footprint.⁴ This regional expansion serves as a hedge against any potential instability in Botswana's own economic or regulatory environment. Furthermore, the group's presence in Namibia through Caprivi Fly Fishing Safaris provides exposure to the Namibian Dollar, which is pegged to the South African Rand, offering a different currency dynamic to the SDR-linked Pula.⁴

Operational Challenges in an Inflationary Environment

It would be an oversimplification to view the Pula devaluation as an unalloyed positive. In an economy as import-dependent as Botswana’s, a weaker currency inevitably leads to domestic inflation. For Chobe Holdings, this manifests primarily in the cost of consumables, fuel, and labor.⁸

The Impact of Imported Inflation

Botswana imports a vast majority of its goods from South Africa. As the Pula weakens against the Rand, the cost of food, beverages, and construction materials increases.² This is particularly relevant for the tourism sector, which requires high-quality, often specialized, imports to meet the expectations of international guests.

To counter these pressures, Chobe Holdings has implemented:

• Salary Adjustments: To maintain market competitiveness and protect employees' purchasing power in an inflationary environment, the group enacted significant salary increases across its operations.¹⁰

• Local Supply Chain Integration: Through investments in Chobe Farms and Chobe Bream, the group has sought to secure local sources of fresh produce and fish, reducing its reliance on expensive imports and supporting the rural economy of Northern Botswana.¹²

• Aviation Fuel Management: Safari Air is highly sensitive to fuel prices, which are globally priced in USD. While the group earns in USD, the local purchase price of fuel in Pula rises as the currency devalues, requiring constant operational efficiency improvements.⁷

Comparative Value Distribution (2023 vs 2025)

The group's "Value Distribution Statement" provides a clear picture of how its economic gains are shared among its stakeholders. Despite the shift in currency values, the distribution ratios have remained remarkably stable, indicating a balanced management approach.⁵

⁵

The slight increase in the employee and government ratios reflects the rising costs of labor and the higher absolute tax and lease payments resulting from increased Pula-denominated revenue.⁵ The decrease in the percentage retained for growth from 34% to 26% suggests that after the massive CAPEX cycle of 2024-2025, the company is shifting more towards rewarding shareholders and stabilizing its operational costs.⁵

Financial Resilience and BSE Performance

On the Botswana Stock Exchange, Chobe Holdings is regarded as a blue-chip entity with an excellent balance sheet and a consistent, if sometimes unstable, dividend track record.⁶ Its performance over the last five years has been characterized by an average annual earnings growth of 54.8%, a figure that would be unattainable without the tailwind provided by the Pula's devaluation.⁶

Key Investment Metrics (As of late 2025)

While the company has underperformed the broader BW Hospitality industry—which saw a 52% return over the past year—this is largely due to the massive valuation re-ratings seen in other, more volatile stocks.⁶ Chobe’s low debt-to-equity ratio of 0.5% is particularly significant; it indicates that the company’s expansion is almost entirely self-funded through its operational cash flows, which are, as established, amplified by currency translation gains.⁶

Dividend Policy and Cash Management

The group's dividend policy is designed to balance shareholder returns with the need for capital retention. The board typically pays a dividend that is at least twice covered by attributable fully taxed earnings.⁷ A crucial nuance of this policy is the treatment of "Advanced Travel Receipts." The group segments these receipts and does not pay them out as dividends, a prudent measure that ensures the company has sufficient liquidity to fulfill future guest obligations even if market conditions change.⁴

In 2025, the group declared a net dividend of 60 thebe per share, totaling P71.6 million.⁵ This commitment to shareholder returns is made possible by the healthy cash balances the group maintains in US Dollars, which serve as a "natural hedge" against Pula volatility.⁵

The Macroeconomic Context: Why the Pula Devaluation Persists

The benefits Chobe Holdings derives from the Pula devaluation are intertwined with the broader economic challenges facing Botswana. The nation’s heavy reliance on natural diamonds has become a vulnerability as global demand softens and lab-grown diamonds gain market share.¹³

The Diamond Sector Crisis and Foreign Reserves

As of early 2025, Botswana's foreign exchange reserves had fallen to historic lows, reaching just 5.2 months of import cover.¹³ This is significantly below the Bank of Botswana’s preferred cushion of 10 months. The decline has been driven by:

• Weakened Diamond Exports: De Beers confirmed an 8.0 percent contraction in Botswana's diamond production in the first quarter of 2025.¹³

• Current Account Deficits: Chronic deficits since 2018 have depleted the Liquidity Portfolio, forcing the central bank to tap into the Pula Fund (the nation’s sovereign wealth fund) to meet forex obligations.¹³

• Interest Rate Differentials: While the US and South Africa raised interest rates to combat inflation, Botswana maintained relatively low rates, leading to capital flight as investors sought higher yields elsewhere.¹³

In this context, the devaluation of the Pula is a necessary tool for the government. It discourages imports by making them more expensive and encourages exports like tourism by making them more lucrative in local terms.¹ Chobe Holdings, as the only listed ecotourism firm on the BSE, is the primary institutional beneficiary of this structural adjustment.¹⁰

Risk Management and the "Natural Hedge"

To navigate this volatile environment, Chobe Holdings employs a "natural hedging" strategy. This involves maintaining cash resources in both US Dollars and Botswana Pula.⁵ By holding USD receipts in Foreign Currency Accounts (FCAs), the group can settle its international obligations—such as marketing fees, specialized technical services, and aircraft parts—without the need for currency conversion.⁵

Sensitivity Analysis of Exchange Rate Fluctuations

The group's management conducts regular sensitivity analyses to understand the impact of currency moves on its profit and equity. For the financial year ended February 28, 2024, the group’s net foreign currency exposure was P195.8 million.⁵ A 10% depreciation of the Pula against the USD would, therefore, result in a significant non-operating gain, further strengthening the group's equity position.⁵

The lower discount rate applied to USD-denominated cash generating units (like Chobe Game Lodge) reflects the lower perceived risk of US Dollar cash flows compared to those in Pula.⁴ This mathematical reality underscores the fundamental advantage of Chobe's business model: it operates in a high-risk emerging market but earns in the world's primary reserve currency.

The Future Outlook: Sustaining Growth in a Post-Devaluation World

Looking ahead to the 2026 financial year and beyond, the management of Chobe Holdings remains optimistic. The reopening of Xugana Island Lodge and the full operationalization of the new Maxa Camp are expected to drive revenue growth.¹⁰ However, the sustainability of the "devaluation benefit" depends on the group's ability to continue managing its domestic cost base.

Strategic Priorities for 2026

• Yield Improvement: Management is focused on improving room yields across its hospitality brands to offset the impact of rising operating costs.¹⁰

• Aviation Efficiency: With the expanded fleet at Safari Air, the group aims to increase the frequency and reliability of its internal transfers, capturing a larger share of the logistics market.¹⁰

• Sustainability and ESG: Chobe Impact, the group’s dedicated sustainability initiative, is increasingly focused on fostering local development.⁴ This is not merely philanthropic; by strengthening local supply chains, the group can further mitigate the impact of imported inflation.¹²

• Technological Integration: Improvements in back-office ICT and reservation systems (through Desert & Delta Safaris SA) are aimed at streamlining the booking process and reducing administrative overhead.⁴

The broader economic environment remains challenging. The IMF projects Botswana's domestic growth at just 1% for 2024, a significant slowdown attributed to the diamond industry's weakness.¹⁵ In such a climate, the role of Chobe Holdings as a generator of foreign currency and a stable employer becomes even more critical for the national economy.

Theoretical Framework: Dutch Disease and Real Exchange Rate Targeting

The benefits observed by Chobe Holdings can be explained through the lens of economic theory regarding Real Exchange Rate (REER) targeting. Resource-rich countries like Botswana often suffer from a chronic "Dutch Disease," where massive inflows of mineral-related foreign currency cause the real exchange rate to appreciate, making other sectors like agriculture and tourism non-competitive.¹⁶

By maintaining an undervalued or competitive REER through a crawling peg, the Bank of Botswana effectively "contains" the Dutch Disease.¹⁶ This policy encourages a reallocation of resources towards the tradable sector—in this case, international tourism services.¹⁶

$$REER = \frac{e \cdot P^*}{P}$$

Where $e$ is the nominal exchange rate (Pula per USD), $P^*$ is the foreign price level (USD prices), and $P$ is the domestic price level (Pula prices). A devaluation (increase in $e$) improves the REER, making Chobe's offerings more attractive to foreigners or more profitable for the company if they maintain high USD prices.¹⁶

Long-term Growth and REER Stability

Empirical evidence suggests that for commodity exporters, achieving a competitive and stable REER is associated with increased investment and growth.¹⁶ While the nominal Pula devaluation provides an immediate financial boost, it is the stability of the crawling peg framework that allows Chobe Holdings to plan its long-term CAPEX cycles with confidence.⁷ The group’s decision to rebuild Savute Safari Lodge for P36 million was not a reactive move but a calculated investment predicated on the long-term competitiveness of the Botswana tourism sector.¹⁰

Socio-Economic Impact and Local Community Strengthening

The benefits Chobe Holdings derives from the currency market are not kept solely within the company's accounts. The "shared value" model ensures that a significant portion of the gains is redistributed within Botswana.

Employment and Labor

With employee benefits accounting for 28% of value distribution, Chobe Holdings is a major employer in the rural northern regions.⁵ The salary adjustments made in 2025 to combat inflation were a direct result of the company’s strong USD-driven cash position.¹⁰ Furthermore, by investing in local training and human capital, the group ensures that the quality of its service remains high, justifying its premium international pricing.⁷

Government Revenue and Leases

The government of Botswana is a primary beneficiary of Chobe's success. Beyond the 28% of value distributed in the form of taxes, the company pays substantial lease rentals and resource royalties for its lodge locations in national parks and wildlife management areas.⁴ As Chobe’s Pula-denominated revenue grows, so do these payments, providing the state with a stable source of income that is independent of the volatile diamond sector.¹

Conclusion: The Strategic Beneficiary of Monetary Adjustment

The analysis of Chobe Holdings Limited reveals a company that is expertly positioned to thrive within the specific constraints and opportunities of the Botswana economy. The devaluation of the Pula is not merely a sign of national economic strain; it is a strategic tool that the company has used to expand its margins, upgrade its assets, and diversify its geographic footprint.

Through its USD-dominated revenue model, natural hedging strategies, and vertical integration of aviation and logistics, Chobe Holdings has turned a potential macroeconomic risk into a powerful growth engine. While rising inflationary pressures and global diamond market instability present ongoing challenges, the group’s ultra-low debt levels and strong operational cash flows provide a significant buffer.

As the Botswana Pula continues its downward crawl in response to structural shifts in the global economy, Chobe Holdings is set to remain a primary beneficiary. For investors on the Botswana Stock Exchange, the company represents more than just a tourism stock; it is a vehicle for capturing the resilient growth of a global-facing sector within a strategically managed currency environment. The group’s ability to distribute value to employees, shareholders, and the government while retaining significant capital for future growth underscores its role as a cornerstone of the Botswana private sector.

Comprehensive Financial Comparison (2024-2025)

The following table synthesizes the group's financial performance, highlighting the growth in revenue despite the slight contraction in net profit attributed to the massive CAPEX cycle and inflationary cost adjustments.

The massive increase in "Value Created" in 2025 (from P283.6m to P418.9m) is the most telling indicator of the group's health. It demonstrates that while accounting profits were slightly lower due to depreciation and one-off adjustments, the total economic value generated by Chobe Holdings is at an all-time high, fundamentally underpinned by its ability to arbitrage the difference between global USD demand and local BWP supply.

In conclusion, Chobe Holdings’ relationship with the Pula devaluation is a textbook example of strategic alignment. By understanding and anticipating the trajectory of Botswana’s monetary policy, the group has transitioned from a local lodge operator into a diversified, resilient, and cash-rich regional tourism powerhouse. The Pula’s weakness has not been a hurdle, but rather the catalyst for the group’s most significant period of capital accumulation and asset renewal in its forty-year history.

Sources:

bankofbotswana.bw

Press Release - Pula Exchange Rate Adjustment - Bank of Botswana

Opens in a new window

bankofbotswana.bw

The Pula depreciated by 0.9 percent against the South African rand

Opens in a new window

cnbcafrica.com

Botswana plans to devalue currency again to stimulate exports

Opens in a new window

apis.bse.co.bw

INTEGRATED REPORT 2025 - Botswana Stock Exchange

Opens in a new window

chobeholdings.co.bw

Investor Relations - Chobe Holdings

Opens in a new window

simplywall.st

Chobe Holdings (BSM:CHOB-EQO) - Stock Analysis - Simply Wall St

Opens in a new window

apis.bse.co.bw

chobe holdings limited integrated report 2023

Opens in a new window

thevoicebw.com

Pula Plunge - TheVoiceBW

Opens in a new window

apis.bse.co.bw

INTEGRATED REPORT - Botswana Stock Exchange

Opens in a new window

businessweekly.co.bw

Chobe Holdings beat economic headwinds to post impressive ...

Opens in a new window

mmegi.bw

Chobe Holdings profits shrink despite growing revenues

Opens in a new window

chobeholdings.co.bw

About Us - Chobe Holdings

Opens in a new window

businessweekly.co.bw

BMI warns the Pula's worth could slip - The Business Weekly & Review

Opens in a new window

fitchsolutions.com

Botswana Pula: Devaluation Risk Growing - Fitch Solutions

Opens in a new window

bse.co.bw

2024 annual report - a journey of transformation

Opens in a new window

elibrary.imf.org

Botswana's Real Effective Exchange Rate Targeting Regime

Opens in a new window

scribd.com

RAP 20 Chobe | PDF | Financial Capital | Leverage (Finance) - Scribd

Opens in a new window