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.”
Botswana has recorded its first trade surplus for 2021 since the only one for the year in January.
The country’s exports for the month of July surpassed the value of imports, Statistics Botswana’s July International Merchandise Trade data reveals.
Released last Friday, the monthly trade digest reports a positive jump in the trade balance graph against the backdrop of a series of trade deficits in the preceding months since January this year.
According to the country’s significant data body, imports for the month were valued at P7.232 billion, reflecting a decline of 6.6 percent from the revised June 2021 value of P7.739 billion.
Total exports during the same month amounted to P7.605 billion, showing an increase of 6.1 percent over the revised June 2021 value of P7.170 billion.
A trade surplus of P373.2 million was recorded in July 2021. This follows a revised trade deficit of P568.7 million for June 2021.
For the total exports value of P7.605 billion, the Diamonds group accounted for 91.2 percent (P6.936 billion), followed by Machinery & Electrical Equipment and Salt & Soda Ash with 2.2 percent (P169.7 million) and 1.3 percent (P100.9 million) respectively.
Asia was the leading destination for Botswana exports, receiving 65.2 percent (P4.96 billion) of total exports during July 2021.
These exports mostly went to the UAE and India, having received 26.3 percent (P1. 99 billion) and 18.7 percent (P1.422 billion) of total exports, respectively. The top most exported commodity to the regional block was Diamonds.
Exports destined to the European Union amounted to P1.64 billion, accounting for 21.6 percent of total exports.
Belgium received almost all exports destined to the regional union, acquiring 21.5 percent (P1.6337 billion) of total exports during the reporting period.
The Diamonds group was the leading commodity group exported to the EU. The SACU region received exports valued at P790.7 million, representing 10.4 percent of total exports.
Diamonds and Salt & Soda Ash commodity groups accounted for 37.8 percent (P298.6 million) and 6.2 percent (P48.7 million) of total exports to the customs union.
South Africa received 9.8 percent (P745.0 million) of total exports during the month under review. The Diamonds group contributed 39.9 percent (P297.4 million) to all goods destined for the country.
In terms of imports, the SACU region contributed 62.7 percent (P4.534 billion) to total imports during July.
The topmost imported commodity groups from the SACU region were Fuel; Food, Beverages & Tobacco, and Machinery & Electrical Equipment with contributions of 33.3 percent (P1.510 billion), 17.4 percent (P789.4 million) and 12.7 percent (P576.7 million) to total imports from the region, respectively.
South Africa contributed 60.1 percent (P4.3497 billion) to total imports during July 2021.
Fuel accounted for 32.1 percent (P1.394 billion) of imports from that country. Food, Beverages & Tobacco contributed 17.7 percent (P772.0 million) to imports from South Africa.
Namibia contributed 2.0 percent (P141.1 million) to the overall imports during the period under review. Fuel was the main commodity imported from that country at 82.1 percent (P115.8 million).
During the months, imports representing 63.5 percent (P4.5904 billion) were transported into the country by Road.
Transportation of imports by Rail and Air accounted for 22.7 percent (P1.645 billion) and 13.8 percent (P996.2 million), respectively.
During the month, goods exported by Air amounted to P6, 999.2 million, accounting for 92.0 percent of total exports, while those leaving the country by Road were valued at P594.2 million (7.8 percent).
Founders from twenty companies have been accepted into the program from Botswana, Namibia, and South Africa
The 4th Cohort of the Stanford Seed Transformation Program – Southern Africa (STP), a collaboration between Stanford Graduate School of Business and De Beers Group commenced classes on 20 September 2021. According to Otsile Mabeo, Vice President Corporate Affairs, De Beers Global Sightholder Sales: “We are excited to confirm that 20 companies have been accepted into the 4th Seed Transformation Programme from Botswana, Namibia, and South Africa. The STP is an important part of the De Beers Group Building Forever sustainability strategy and demonstrates our commitment to the ‘Partnering for Thriving Communities’ pillar that aims at enhancing enterprise development in countries where we operate in the Southern African region”. Jeffrey Prickett, Global Director of Stanford Seed: “Business owners and their key management team members undertake a 12-month intensive leadership program that includes sessions on strategy and finance, business ethics, and design thinking, all taught by world-renowned Stanford faculty and local business practitioners. The program is exclusively for business owners and teams of for-profit companies or for-profit social enterprises with annual company revenues of US$300,000 – US$15million.” The programme will be delivered fully virtually to comply with COVID 19 protocols. Out of the 20 companies, 6 are from Botswana, 1 Namibia, and 13 South Africa. Since the partnership’s inception, De Beers Group and Stanford Seed have supported 74 companies, 89 founders/CEOs, and approximately 750 senior-level managers to undertake the program in Southern Africa.
Minergy, the coal mining and trading company with the Masama coal mine, this week released results for the year ended 30 June 2021. The company achieved revenue of P193 million (2020: P81 million) with significant improvement in sales volumes surpassing 415 000 tonnes sold for the year.
The performance was divided into two distinct periods with very different operating environments. The first eight-month period (July 2020 – February 2021), was negatively impacted by delayed funding, COVID-19 impacts and excessive rain; and the last four-month period (March – June 2021), was a more stable production environment moving toward nameplate capacity.
According to Minergy CEO, Morné du Plessis, production and sales initially recovered in July and August 2020 with the easing of COVID-19 restrictions and recoveries were further bolstered by the successful launch of the rail siding. Delays experienced in concluding the funding contributed to contractors limiting operations to manage arrears.
“However, the heavy rains we experienced from December 2020 through February 2021 flooded the mine pit making access difficult and impacting both production and sales. Fortunately, the rain subsided in March 2021, and we entered a more stable environment, with a positive impact on operations. Good recoveries in production and sales were experienced during the last four-month period of the year, with the mine moving closer toward a breakeven position.”
“Despite these operational constraints, including the effects of COVID-19 on logistics and manning of shifts, we expect to reach consistent nameplate capacity in the 2022 financial year,” du Plessis added.
In addition to the revenue reported above, the company incurred costs of sales of P256 million (2020: P150 million) with operating costs of P23 million (2020: P31 million). This effectively resulted in an operating loss of P86 million (2020: P100 million). Finance costs of P51 million (2020: P17 million) were incurred, bringing the net loss before taxation to P136 million (2020: P117 million).
Du Plessis explains that the adverse conditions in the first eight-month period contributed to 86% of the gross loss, while the more stable four-month period alone contributed to 50% of total sales value, helping to decrease monthly gross losses, albeit below breakeven levels.
The company benefited from a strengthening in the South African Rand (“ZAR”) supporting higher back-on- mine sales prices.
“As announced, we’re pleased to have secured P125 million of additional convertible debt funding through the Minerals Development Company Botswana (Proprietary) Limited (“MDCB”). Minergy remains grateful for this support.”
He added that the first tranche of additional funding provided by the MDCB had been received in December 2020, which allowed Minergy to settle the majority of the contractor’s arrears and allowed their teams to be remobilised. The second and final tranche was paid post the financial year-end and will allow the business to reach nameplate capacity in the new financial year.”
COAL SALES AND MINE PERFORMANCE
Sales volumes increased by 110%, supported by increased sales in Botswana and internationally in South Africa and Namibia. Sales for June 2021 exceeded 56 000 tonnes, a record since the inception of the mine, with pricing increasing late in the financial year on the back of buoyant international prices and a strengthening ZAR.
Minergy also concluded a further 12-month off-take agreement to the existing off-take agreement, with a further agreement finalised post year end.
Overburden moved during the reporting period increased by 86% and extracted coal by 50%. Coal mined in June 2021 alone exceeded 100 000 tonnes. “This is a good performance considering the challenges faced such as sacrificing pre-stripping activities for a period to manage arrears, excessive rain and COVID-19,” du Plessis indicated.
“The wash plant was initially starved of coal due to the factors noted already. Despite this, overall plant throughput performance was 37% higher than 2020. Consistent output was supported by the completion of the Stage 2 rigid crushing section as well as the water saving dewatering screen with filter press contributing to a reduction in water usage of 60% per tonne of coal. A record throughput of more than 84 000 tonnes was achieved in March 2021 and this consistency has been maintained.”
According to du Plessis, the completion of Stage 4 of the Processing Plant, the rigid screening and stock handling section, remains a key optimisation step, which has associated benefits. “The completion was unfortunately delayed by a southern African wide shortage of structural steel but was commissioned post year-end.”
Minergy expects the positive momentum in international coal pricing for southern African coal to remain in place. Higher coal prices have resulted in coal being withdrawn from the inland market in favour of lucrative international markets. Du Plessis added that the regional market is currently under- supplied with sized coal, which supports higher pricing and new customer opportunities for Minergy.
“Our objective for the 2022 financial year is to achieve nameplate capacity by completing final ramp-up of operations. This will enable the company to generate sufficient cash flow to stabilise the business at breakeven or better. The bullish coal market is also providing support. COVID-19 will still be closely managed, and we look forward to the lifting of the State of Emergency, as announced, and trust that vaccination programmes will achieve herd immunity in Botswana during the next 12 months.”
Du Plessis expressed his excitement on prospects stating that, “The Eskom due diligence process is continuing, and we are hopeful of receiving feedback during the current financial year. In addition to this opportunity, Minergy is also investigating participation in the request by the Government of Botswana to provide a 300MW power station for which the company has been shortlisted.”
The approved process to issue shares for cash is showing positive leads and he concluded by saying that a listing in London is still being investigated.