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.”
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Grit divests from Letlole La Rona
Grit Services Limited, a member of the pan African real estate group, London Stock Exchange listed Grit Real Estate Income Group is divesting from Letlole La Rona Limited (LLR), a local real estate company established by government investment arm Botswana Development Corporation over a decade ago.
The Board of Directors of Letlole La Rona Limited this week announced in a statement to Unitholders that Grit Services Limited (‘Grit’) has informed them of its intention to exit its investment in the company.
Grit has been a material shareholder in LLR since 2019. On 07 March 2023, Grit sold 6 421 000 linked units, representing 2.29% of the Company’s total securities in issue, at a market value of BWP 22 537 710.
This trade follows previous sales of 6.79% in December 2022, as communicated to Unitholders on 10 January 2023, as well as a further sale of 4.78% (representing 13 347 068 linked units) on 24 February 2023 to various shareholders.
In aggregate, Grit has sold 13.9% shareholding in the Letlole La Rona between December 2022 and March 2023, resulting in current shareholding of 11.25% in the Company.
Letlole La Rona said in the statement that the exit process will take place in an orderly manner so as to maintain stability of the Company’s share price.
The statement explained that Grit’s sale of its entire shareholding in LLR is in line with its decision to exit investments where it does not have majority control, or where it has significant exposure to currencies other than US dollar, Euro or hard-currency-pegged revenue streams.
“Grit has announced similar decisions pertaining to certain of its hospitality assets in Mauritius recently. The Company would like to advise Unitholders that it remains focused on long-term value delivery to all stakeholders” LLR said
In July last year as part of their Go-to-Africa strategy Letlole La Rona acquired an initial 30% equity stake in Orbit Africa Logistics, with an option to increase this investment to 50%. OAL is a special purpose vehicle incorporated in Mauritius, owning an industrial asset in a prime industrial node in Nairobi, Kenya.
The co-investment was done alongside a wholly owned subsidiary of London listed Grit. The Orbit facility is situated on a prime industrial site on Mombasa Road, the principal route south of Nairobi center, serving the main industrial node, the port of Mombasa and the industrial town of Athi River and is strategically located 11 kilometers south of the international airport and 9.6 kilometers from the Inland Container Depot.
Grit shareholding in Letlole La Rona was seen as strategic for LLR, for the company to leverage on Grit’s already existing continental presence and expand its wings beyond Botswana borders as already delivered by Kenya transaction.
Media reports have however suggested that LLR and Grit have since late last year had fundamental disagreements on how to go about the Go-to-Africa strategy amongst other things, fuelled by alleged Botswana government interference on the affairs of LLR.
Government through LLR founding shareholder – Botswana Development Corporation has a controlling stake of around 40 percent in the company. Government is the sole shareholder of Botswana Development Corporation.
Letlole La Rona recently released their financial results for the six months ended December 2022, revenue increased by 4% to P50.2 million from P48.4 million in the prior comparative six months, whilst operating profit was up 8% to P36.5 million. Profit before tax of P49.7 million was reported, an increase of 8% on the prior comparative six months.
“We are encouraged by the strong results, notwithstanding a challenging economic environment. Our performance was mainly underpinned by annual lease escalations, our quality tenant base and below average market vacancy levels, especially in our warehouse portfolio,” Kamogelo Mowaneng, Letlole La Rona Chief Executive Officer commented.
LLR reported a weighted average lease expiry period of 3.3 years and escalation rates averaging 6.8% per annum for the period ended 31 December 2022.Its investment portfolio value increased by 14% year-on-year to close the period at P1.4 billion, mainly driven by the acquisition of a 30% stake in OAL in July 2022.
The Company also recorded a significant increase in other income, predominantly due to foreign exchange gains on the OAL shareholder loan. “We continue to explore pipeline opportunities locally, and regionally in line with our Go-to-Africa strategy and our interest remains on value-accretive investments,” Mowaneng said.
An interim distribution of 9.11 thebe per linked unit was declared on the 6th of February 2023 for the half-year period to 31 December 2022, comprising of a dividend of 0.05 thebe and debenture interest of 9.06 thebe per linked unit which will be paid to linked unit holders registered in the books of the Company at the close of business on 24 February 2023.
Stargems Group establishes Training Center in BW
Internationally-acclaimed diamond manufacturing company StarGems Group has established the Stargems Diamond Training Center which will be providing specialized training in diamond manufacturing and evaluation.
The Stargems Diamond Training Institute is located at the Stargems Group Botswana Unit in Gaborone.
“In accordance with the National Human Resource Development Strategy (NHRDS) which holds the principle that through education and skills development as well as the strategic alignment between national ambitions and individual capabilities, Botswana will become a prosperous, productive and innovative nation due to the quality and efficacy of its citizenry. The Training Centre will provide a range of modules in theory and in practice; from rough diamond evaluation to diamond grading and polishing for Batswana, at no cost for eight weeks. The internationally- recognized certificate offered in partnership with Harry Oppenheimer Diamond Training School presents invaluable opportunities for Batswana to access in the diamond industry locally and internationally. The initiative is an extension of our Corporate Social Investment to the community in which we operate,” said Vishal Shah, Stargems Group Managing Director, during the launch of the Stargems Diamond Training Center.
In order to participate in this rare opportunity, interested candidates are invited to submit a police clearance certificate and a BGCSE certificate only to the Stargems offices. Students who excel in these programs will have the chance to be onboarded by the Stargems Group. This serves as motivation for them to go through this training with a high level of seriousness.
“Community empowerment is one of our CSR principles. We believe that businesses can only thrive when their communities are well taken of. We are hoping that our presence will be impactful to various communities and economies. In the six countries that we are operating in, we have contributed through dedicating 10% of our revenues during COVID-19 to facilitate education, donating to hospitals and also to NGOs committed to supporting women and children living with HIV. One key issue that we are targeting in Botswana is the rate of unemployment amongst the youth. We are looking forward to working closely with the government and other relevant authorities to curb unemployment,” said Shah.
Currently, Stargems Group has employed 117 Batswana and they are looking forward to growing the numbers to 500 as the company grows. Majority of the employees will be graduates from the Stargems Diamond Training Center. This initiation has been received with open arms by the general public and stakeholders. During the launch, the Minister of Minerals and Energy, Honorable Lefoko Moagi, stated that the ministry fully endorses Stargems Diamond Training and will work closely with the Group to support and grow the initiative.
“As a ministry, we see this as an game changer that is aligned with one of the United Nations’ Six Priority Sustainable Development Goals, which is to Advance Opportunity and Impact for Diversity, Equity, and Inclusion (DEI). What Stargems Group is launching today will have a huge impact on the creation of employment in Botswana. An economy’s productivity rises as the number of educated workers increases as its skilled workmanship increases. It is not a secret that low skills perpetuate poverty and widen the inequality gap, therefore the development of skills has the potential to contribute significantly to structural transformation and economic growth by enhancing employability and helping the country become more competitive. We are grateful to see the emergence of industry players such as Stargems Group who have strived to create such opportunities that mitigate the negative effects of COVID-19 on the economy,” said the Minister of Minerals and Energy.
Food import bill slightly declines
The latest figures released by Statistics Botswana this week shows that food import bill for Botswana slightly declined from around P1.1 billion in November 2022 to around P981 million in December during the same year.
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