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By Ravi Ladduwahetty

The Government will shortly divest 40 percent of the equity stake in Sathosa Retailers Ltd, a wholly owned subsidiary of the giant Cooperative Wholesale Establishment (CWE) in a bid to raise over Rs. 500 million while providing a state-of- the- art user friendly customer service.

The CWE subsidiary which was floated during the tenure of the present Government for a retailing facility will be run on a professional basis without venture collaboration which will increase the present 157 countrywide outlets to over 300, CWE General Manager Vimal Perera told the Daily News in an interview.

There will be new vistas for the investor who will avail himself of the facility of 157 retail outlets which include self service and counter services retail outlets of which 47 outlets are in the Western Province with the added advantage of the highest population density and many of them are equipped with modern equipment and facilities , Perera said.

The CWE has initiated a 100 super mall project and the pilot project which commenced at Welisara in March 2002 was so successful that it retails over 3,000 products and these are the positive factors that the potential investor should take cognisance of, Perera said.

In addition to the acquisition of shares, the potential investor will also be required to enter into a management contract which would revolve round:

* To unreservedly agree the nature and content of the business of Sathosa Retailers Ltd. would be maintained and any subsidiary activities of the company would be co-related to its core business and objectives.

* To expand, modernise and develop where necessary, to rationalise the existing retail network of the company. It is also envisages that the retail network would be expanded to 300 outlets which would include a target of 100 A grade outlets and 200 normal outlets by the year 2005. These A grade outlets are expected to have the operational dimensions of those such as at Rajagiriya.

* The prospective buyer of the 40 percent stake will also be required to carry out all aspects of financial management such as accounts, budgeting, planning and carry out bank transactions in keeping with the regulations and the provisions of the Companies' Act No: 17 of 1982 on the rights of the shareholders and the directors.

The CWE General Manager also said that the fixed assets which have been hitherto under the direct ownership of the CWE, will be leased to Sathosa Retailers Ltd. in order to carry out its retail activities.

Perera said that a definite and protracted plan for the development of the retail business of SRL with the intention of improvement of sales, profitability and quality of service, investors whose proposals reveal a degree of social responsibility will receive due weightage during the appraisal.

The estimated financial commitment during the next five years to carry out the retail activities has also been given due consideration by the prospective invitation for bids.

Meanwhile, the Daily News Business pages on July 4 reported that the multi-national supermarket giant TESCO of the United Kingdom had also expressed interest in the proposed divestiture.

The Public Enterprises Reform Commission (PERC) has also advertised the proposed divestiture in the international media.

Meanwhile, the Multilateral Investment Guarantee Agency (MIGA), an arm of the World Bank has submitted a proposal to the Government about a restructuring plan for the debt ridden CWE which has been hitherto debilitated to the tune of Rs.5.5 billion and also to ensure that the Government retains the ownership of the CWE.

Conditions of the facility also entail the consortium led by MIGA to appoint a competent representative to manage the CWE for 30 years which is the estimated pay back period of the facility.

Treasury sources told the Daily News yesterday that the papers outlining the proposals have been forwarded to the Treasury for scrutiny and approval and that a nod from the Treasury before end October could see the CWE under a new management before the end of the year.

The CWE was also coming under the purview of a proposed Government plan of establishing a Mandatory Code of Best Practices in corporate governance as part of a program in establishing financial disciplines into 75 state owned commercial enterprises in a bid to create efficiency, transparency and accountability.

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Copyright 2001 The Associated Newspapers of Ceylon Ltd.
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