Connect with us
Advertisement

New wholesale price trick headache hit Competition Authority

It is apparent that the anti-trust body, Competition Authority (CA), dealt with a first of its kind issue in the local antitrust organs altogether in this current period; where wholesalers were caught with the conduct of resale price maintenance (vertical agreements).

According to competition laws, resale price maintenance is an agreement between a wholesaler and a retailer not to sell a commodity or product below a specified price. “Compared to the previous year where no cases were prosecuted, there have been four cases of resale price maintenance and exclusive dealing that were brought before the Commission,” said Tebelelo Pule CEO and Secretary to the Competition Commission.

So loud is the concern of resale price maintenance that CA Chairperson Onkemetse Tshosa, in the latest annual report echoed Pule’s grave concerns, saying the number of cases relating to the conduct of resale price maintenance is heartening. According to the Competition Authority, in its 2018/19 annual report, the antitrust body had in 2017 had four cases of resale price maintenance. According to the authority, the referred cases were against four (4) wholesalers namely; Metro Sefalana Cash and Carry Limited, Trident Holdings (Pty) Ltd, Trans Africa (Pty) Ltd and Trade World (Pty) Ltd.

While acknowledging that this was the first time that such a conduct was investigated by the authority, Tshosa said the implication of such a feat is that businesses are increasingly becoming aware of the offence of resale price maintenance and, most importantly, prosecutors, investigators and the Commission have broadened the horizons of competition law practice in Botswana, particularly in relation to resale price maintenance.

The resale price maintenance case was referred to the Competition Commission led by Tshosa in August 2017, and it was last year successfully “finalized” with court settlement agreements according to the CA annual report. CA says all the four wholesalers caught with resale price maintenance are currently in compliance with the agreed conditions.

An example of resale price maintenance

A classic case of resale price maintenance investigated by CA in the current period is the one where the authority engaged the Trident Banner Group, following concerns that through the use of monthly promotion pamphlets, Trident engaged in anti-competitive conduct in the form of resale price maintenance in contravention of section 26(1) of the Competition Act (CAP 46:09).

“The authority carried out a number of competition analyses involving Trident Wholesalers. An important tool of the Banner Group model involves the use of monthly promotions in which Trident and Banner Group members jointly advertise promotional products in promotional pamphlets produced by Trident at a nominal cost to the members.

Trident acts as a wholesaler of grocery products and general merchandise to independent retailers throughout Botswana. It operates Banner Groups under the trade brand names Big 11, Fair Price and Saverite, in which Banner Group members participate on a voluntary basis in monthly promotional activities undertaken under each Banner Group.

In addition to the extensive trade and retail support that Trident offers to about 500 independent retailers on its Banner Group member base, it has been able to offer highly competitive prices to these local retailers throughout Botswana by means of group purchasing power and supply chain management,” says CA in its assessment which was cited as an example of resale price maintenance in the 2018/2019 annual report.

CA had an extensive engagement with Trident and further assessment of the complaint, the authority concluded that whilst the Trident Banner Group model does not strictly comply with the provisions of section 26(1) of the Competition Act, it serves a useful purpose to support the growth of local small independent retailers so that they are able to compete with large corporate retailers. According to CA the support from Trident, the Banner Group Members would perish because they face competition from retailers from other banner groups.

The authority directed Trident to undertake remedial steps in relation to future conduct, this is to ensure strict compliance with the Competition Act. Measures include Trident’s undertaking increase the awareness of Banner Group Members in relation to their rights and obligations under the banner group arrangement leveraging the monthly members meetings and annual satisfaction survey, and through regular training on competition law.

Another measure for Trident is to ensure that printed promotional pamphlets for Banner Group members bear the words “recommended price” on every page of the pamphlet. The other measure is for Trident to provide a clear written communication to every existing and new Banner Group Member of the flexibility to sell products at any other price besides the minimum recommended price.

Trident is also expected to ensure that there is no perceived or actual threat of expulsion from the Banner Group, or termination of the agreement where a Banner Group Member chooses to sell at any price other than the recommended price. Also, Trident should introduce regular and increased levels of communication to both Banner Group Members and customers, informing them of the Trident banner group promotions of select products/ commodities at recommended discounted prices.

According to CA Trident should also “Formalize Banner Group Member engagement through a structured programme including but not limited to initiatives that provide training, merchandising, marketing and store support. In order to enhance understanding and promote compliance, the Authority subsequently made presentations to Trident Banner Groups in Gaborone, Mahalapye, Palapye, Selebi-Phikwe, Francistown and Maun in the month of July 2018.”

Continue Reading

Business

Botswana on high red alert as AML joins Covid-19 to plague mankind

21st September 2020
Botswana-on-high-alert-as-AML-joins-Covid-19-to-plague-mankind-

This century is always looking at improving new super high speed technology to make life easier. On the other hand, beckoning as an emerging fierce reversal force to equally match or dominate this life enhancing super new tech, comes swift human adversaries which seem to have come to make living on earth even more difficult.

The recent discovery of a pandemic, Covid-19, which moves at a pace of unimaginable and unpredictable proportions; locking people inside homes and barring human interactions with its dreaded death threat, is currently being felt.

This content is locked

Login To Unlock The Content!

Continue Reading

Business

Finance Committee cautions Gov’t against imprudent raising of debt levels

21st September 2020
Finance Committe Chairman: Thapelo Letsholo

Member of Parliament for Kanye North, Thapelo Letsholo has cautioned Government against excessive borrowing and poorly managed debt levels.

He was speaking in  Parliament on Tuesday delivering  Parliament’s Finance Committee report after assessing a  motion that sought to raise Government Bond program ceiling to P30 billion, a big jump from the initial P15 Billion.

This content is locked

Login To Unlock The Content!

Continue Reading

Business

Gov’t Investment Account drying up fast!  

21st September 2020
Dr Matsheka

Government Investment Account (GIA) which forms part of the Pula fund has been significantly drawn down to finance Botswana’s budget deficits since 2008/09 Global financial crises.

The 2009 global economic recession triggered the collapse of financial markets in the United States, sending waves of shock across world economies, eroding business sentiment, and causing financiers of trade to excise heightened caution and hold onto their cash.

The ripple effects of this economic catastrophe were mostly felt by low to middle income resource based economies, amplifying their vulnerability to external shocks. The diamond industry which forms the gist of Botswana’s economic make up collapsed to zero trade levels across the entire value chain.

The Upstream, where Botswana gathers much of its diamond revenue was adversely impacted by muted demand in the Midstream. The situation was exacerbated by zero appetite of polished goods by jewelry manufacturers and retail outlets due to lowered tail end consumer demand.

This resulted in sharp decline of Government revenue, ballooned budget deficits and suspension of some developmental projects. To finance the deficit and some prioritized national development projects, government had to dip into cash balances, foreign reserves and borrow both externally and locally.

Much of drawing was from Government Investment Account as opposed to drawing from foreign reserve component of the Pula Fund; the latter was spared as a fiscal buffer for the worst rainy days.

Consequently this resulted in significant decline in funds held in the Government Investment Account (GIA). The account serves as Government’s main savings depository and fund for national policy objectives.

However as the world emerged from the 2009 recession government revenue graph picked up to pre recession levels before going down again around 2016/17 owing to challenges in the diamond industry.

Due to a number of budget surpluses from 2012/13 financial year the Government Investment Account started expanding back to P30 billion levels before a series of budget deficits in the National Development Plan 11 pushed it back to decline a decline wave.

When the National Development Plan 11 commenced three (3) financial years ago, government announced that the first half of the NDP would run at budget deficits.

This  as explained by Minister of Finance in 2017 would be occasioned by decline in diamond revenue mainly due to government forfeiting some of its dividend from Debswana to fund mine expansion projects.

Cumulatively since 2017/18 to 2019/20 financial year the budget deficit totaled to over P16 billion, of which was financed by both external and domestic borrowing and drawing down from government cash balances. Drawing down from government cash balances meant significant withdrawals from the Government Investment Account.

The Government Investment Account (GIA) was established in accordance with Section 35 of the Bank of Botswana Act Cap. 55:01. The Account represents Government’s share of the Botswana‘s foreign exchange reserves, its investment and management strategies are aligned to the Bank of Botswana’s foreign exchange reserves management and investment guidelines.

Government Investment Account, comprises of Pula denominated deposits at the Bank of Botswana and held in the Pula Fund, which is the long-term investment tranche of the foreign exchange reserves.

In June 2017 while answering a question from Bogolo Kenewendo, the then Minister of Finance & Economic Development Kenneth Mathambo told parliament that as of June 30, 2017, the total assets in the Pula Fund was P56.818 billion, of which the balance in the GIA was P30.832 billion.

Kenewendo was still a back bench specially elected Member of Parliament before ascending to cabinet post in 2018. Last week Minister of Finance & Economic Development, Dr Thapelo Matsheka, when presenting a motion to raise government local borrowing ceiling from P15 billion to P30 Billion told parliament that as of December 2019 Government Investment Account amounted to P18.3 billion.

Dr Matsheka further told parliament that prior to financial crisis of 2008/9 the account amounted to P30.5 billion (41 % of GDP) in December of 2008 while as at December 2019 it stood at P18.3 billion (only 9 % of GDP) mirroring a total decline by P11 billion in the entire 11 years.

Back in 2017 Parliament was also told that the Government Investment Account may be drawn-down or added to, in line with actuations in the Government’s expenditure and revenue outturns. “This is intended to provide the Government with appropriate funds to execute its functions and responsibilities effectively and efficiently” said Mathambo, then Minister of Finance.

Acknowledging the need to draw down from GIA no more, current Minister of Finance   Dr Matsheka said “It is under this background that it would be advisable to avoid excessive draw down from this account to preserve it as a financial buffer”

He further cautioned “The danger with substantially reduced financial buffers is that when an economic shock occurs or a disaster descends upon us and adversely affects our economy it becomes very difficult for the country to manage such a shock”

Continue Reading
Do NOT follow this link or you will be banned from the site!