The Botswana Meat Commission (BMC) monopoly which has been in place since pre-independence era is coming to end following a decision by cabinet to approve several reforms in the country’s beef sector.
Cabinet recently finally agreed to reform Botswana’s beef sector following calls by farmers in the past few years to allow more players in the sector. The interesting part of the reforms will be the introduction of the beef regulator. “This will go in a long way as a decision help the small farmers, since 80 percent of beef producers are small farmers,” announced the ruling party’s deputy secretary general Shaw Kgathi in a press briefing this week.
In a deal that is yet to be concluded, owing to consultation that will ensue, cabinet has resolved that BMC, will transform from being a corporation to a limited company. Government is to retain 50 percent of BMC stock, while the other 50 percent goes to farmers, Kgathi revealed. The two other abattoirs owned by BMC, the Francistown and Lobatse abattoirs will be privatised, and cease to be part of the BMC.
BMC has been protected from export competition, with several privately owned and local council abattoirs, as well as a large number of local butcheries that undertake slaughter having been restricted to supply only the domestic market. BMC Act gave BMC a monopoly over the export of beef and related products and also prohibited the export of live cattle. The EU quota – which is specific to Botswana – also means that the BMC always faced little or no competition in the EU from other beef exporting countries. Despite the monopoly and all these privileges, the BMC continued to experience both administration and efficiency problems.
BMC MONOPOLY AND ITS INEFFICIENCIES
In 2012, parliament resolved to establish a parliamentary select committee following a motion by then Kanye North MP, Kentse Rammidi requesting Parliament to establish a special parliamentary committee to investigate the country’s declining beef industry. The committee which consisted of eight legislators had found that BMC CEOs, with few exceptions, have been chosen from the ranks of retired civil servants not based on merit or their commercial experience.
The MPs had also pointed out that the BMC management practiced poor governance and there were bad relations between the board and management. It discovered productions inefficiencies caused by over staffing, declining productivity, and high marketing costs. There was no proper and efficient system of financial controls. The BMC became financially insolvent over the 2009-2012 period.
The Parliamentary Select Committee at the time picked on the issue of BMC marketing, pointing out that “At present BMC’s marketing agent, Global Protein Solutions (GPS) provides for a legal monopoly on exports. The BMC should seek to revise the contract and segments of the global beef export market to hedge against a monopoly of the marketing of the Botswana beef produce.”
Interestingly the Committee also declared that an investigation be undertaken by the Directorate on Corruption and economic Crime (DCEC) into the award of the marketing contract by BMC in favour of GPS and consideration be made for a review and renegotiation of the contract terms to ensure residual contract of the beef export marketing by the BMC. The Committee also discovered a “strong circumstantial evidence of under-pricing of beef to the EU, South Africa, and domestic markets over the period. The recommendations by the committee were never considered.
The Parliamentary Select Committee also decided that Feedlot activities should be undertaken by the Botswana private sector and not by the BMC In 2016 Feedlotters Association of Botswana said in a scathing ‘confidential’ report channelled to the Minister of Agriculture and Food Resources, Patrick Ralotsia, expressing shock at the establishment’s attempt to wish BMC problems and alleged corruption away by pushing numerous damning reports under the carpet.
The report titled ‘Overview of BMC 2013-2016’ was uncompromising in detailing how some executives at BMC in cohort with some third parties are ensuring that the BMC is seen as an unprofitable venture. The Feedlotters were of the view that there was a deliberate move to ensure that the BMC remains unprofitable and does not identify new markets.
In their explosive report, they write: The recent “Shambles” that bedevilled the BMC resulting in the institution of two state Commissions of inquiries to investigate the wrongs of the BMC itself does not seem to have solved anything at BMC. They had no kind words for the management of the BMC; they alleging that it was the worst in many years.
“If managed properly, BMC is a sustainable business that can go far in empowering and enriching communal farmers in Botswana. The country as a whole is being deprived of the values and sustainable incomes that could be available through a thriving cattle industry, under the leadership of a viable and profitable BMC,” the Feedlotters write in their report.
BEGINNING OF THE END OF BMC MONOPOLY
In 2016, when appearing before the Parliamentary Committee of Statutory Bodies and Enterprises BMC Chief Executive Officer, Dr Akolang Tombale revealed that the beef industry could now be looking forward to the end of the commission’s monopoly and other entities to come on board.
This was despite the fact that only a year earlier he had rejected the idea in totality before the same committee. Tombale had told the committee in 2015 that the BMC monopoly was not the reason the entity was beleaguered by financial crisis. Tombale however made a u-turn and informed the committee that he had shared with government and that he is committed to end BMC monopoly. Tombale said the end of BMC monopoly will require establishment of a meat regulator to ensure that quality of the meat remain high.
Tombale further told the committee that the Maun and Francistown abattoirs remain a “social responsibility case” and they may be privatised to transform the beef industry. He was optimistic that the Lobatse plant remains the core of BMC business and could be easily returned to profitability without the other two abattoirs.
Tombale said prior to approaching the ministry over privatisation, they had satisfied themselves that with establishment of meat regulator, they would be no negative impact brought about by liberalisation of beef industry in Botswana. The BMC CEO had said the liberalisation of beef industry in Botswana did not necessarily mean immediate success for the industry since Botswana remain a small player in the beef market. Tombale said what the BMC have done was to focus on the niche market and benchmarked against Namibia which is producing the same amount of beef with Botswana.
Government has been resisting calls by farmers to liberalise the beef industry. Since independence government, through BMC have been the only entity authorised to run an abattoir that export the beef to other countries. The idea of liberalisation of BMC came about in 2013, when Ghanzi Farmers Association garnered support at Otse Meeting of farmers associations, resulting in the Letsema Resolution, wanting government to bring to an end BMC monopoly.
In the coming months prices will go up and inflation will shoot sharply above the target of 3 percent to 6 percent towards the third quarter of 2021, the Bank of Botswana on the other hand will continue to withhold its knife on the Bank Rate. This is according to a forecast made by Kgori Capital in its recent Market Watch Segment.
Statistics from Statistics Botswana show that the recent 1.8 percent increase in the September inflation, from 1 percent in August, was a reflection of the upward adjustment in public transport fares (Transport (from -6.9 to -3.9 percent) in September 2020, which is estimated to have increased inflation by approximately 0.64 percentage points.
Local anti-trust body, Competition and Consumer Authority (CCA), this month received back to back acquisition proposals from South African clothing retailers to wipe out their former rivals, Edcon, from Botswana malls.
Last week BusinessPost was in possession of Merger Notice No 23 of 2020 whereby a South African clothing retailer owner, Retailability Proprietary Limited, through Oclin Proprietary Limited, proposed to acquire parts of the Edgars business conducted by Edcon in Botswana (through Edcon Botswana), as a going concern, consisting of certain assets and identified liabilities.
South African government’s Business Rescue Practitioners earlier this year announced that Retailability will buy Edgars, after the latter filed for a business rescue plan in April after it failed to pay suppliers. This move will see Retailability add Edgars to its portfolio consisting of brands such as; Legit, Beaver Canoe and Style.
Retailability landed on Botswana shores 18 years ago with its flamboyant urban fashion Style which had 17 stores. Style, having almost the same target market as Edgars as it offers men’s and ladies’ contemporary and formal fashion, gave the 91 year old legendary clothing retailer a run for its money, and has won the battle as its parent company has taken over Edgars.
Retailability brands are synonymous with Botswana shopping centres and there are currently five (5) Beaver Canoe stores, 10 Style stores and seven (7) Legit stores across this country. The Beaver Canoe stores sell clothing apparel for men and boys only. The Legit stores have a fashion store format which focuses on the retailing of clothing, footwear, accessories, colour cosmetics and cellular products.
Retailability operates in over 460 stores across South Africa, Namibia, Botswana, Lesotho, and Eswatini. Many observers suggest that because of the deal with Retailability to swallow Edcon, most Edgars stores in Botswana will change their name and be branded Style. A sad tale for religious consumers of the Edgars trademark who got used to love their favourite brand for years.
According to CCA’s Merger Notice No 23 of 2020, Retailability is controlled by Clifford Raymond Lines (through a company which functions solely as a holding company of his interests in Retailability) and Metier Investment and Advisory Services Proprietary Limited (“Metier”). Metier is a private equity enterprise with investments in a number of industries spanning from healthcare, hospitality, FMCGs and telecommunications.
Retailability directors are mostly South Africans; Clifford Raymond Lines, Mark Richard Friday and Norman Victor Drieselmann. Only Nasreen Essack, who was appointed February this year, is a Motswana. He comes after Brian Thuto Tsima left on the same date. Retailability 100 percent owns Oclin Proprietary Limited, the company it is acquiring Edgars with, by a capacity of 3000 shares.
The target business, Edgars, offer textiles, cosmetics and cellular products. Edcon has a Motswana director, Charles Mzwandile Vikisi, a South African, Shane Van Niekerk and Zimbabwean Jethro Kamutsi.
“The Target Business comprises of two (2) Edgars franchise brands and private label stores across Botswana. These stores target middle to upper income customers and are home to a range of private label brands such as Free2BU, Charter Club and Stone Harbour, and a wide range of market label brands (such as Levi’s and Guess) for clothing, footwear and cosmetics.
In addition, the Target Business operates iconic Edgars Home and Edgars Beauty stores as store-in-store formats rounding out the department store offering in Botswana,” said CCA. Foshini also lines up to take Jet Botswana from Edcon.
The Foschini Group (TFG) released a statement confirming its latest intentions to acquire Edcon assets or Jet for a cash purchase consideration of R480 million. This was after the business rescue practitioners offered TFG to buy Jet by that amount.
CCA is currently mulling on a proposed merger by TFG to take over Jet operations in Botswana. Merger Notice No 21 of 2020 from TFG came a few days before the Retailability proposal. In this merger TFG, acting through Foschini Botswana, want to take over “parts” of the Jet business conducted by Edcon through Jet Supermarkets Botswana.
TFG will be willing to add Jet to its portfolio of 30 retail brands that trade in clothing, footwear, jewellery, sportswear, homeware, cell phones, and technology products from value to upper market segments throughout more than 4085 outlets in 32 countries on five continents. TFG will also get Jet’s distribution centre located in Durban and certain stores in Botswana, Lesotho, Namibia and Eswatini. Also part of this fat deal is that the company is looking to also acquire JET Club and all existing JET stock of no less than R800 million.
Johannesburg listed TGF owns Foschini Retail Group which owns the local operations called Foschini Botswana, the acquiring enterprise according to CCA merger notice. “TFG is not controlled by any enterprise/s and for completeness, the three largest shareholders of TFG holding shares greater than 5% as at 27th March 2020 are: Government Employees Pension Fund (16.2%) Public Investment Corporation (13.2%); Old Mutual Limited (6.7%); and Investec Asset Management (6.3%). The remaining issued share capital in TFG is widely held,” said the merger notice.
Only Abdool Rahim Khan is a Motswana in the Foschini Botswana directorship, the rest; Ganeswari Shani Naidoo, Anthony Edward Thunström and Gustav Jansen (alternate director) are South Africans.
According to the CCA merger, the Jet Business is Edcon’s discount department store division, selling clothing, footwear, homeware and some cosmetics as well as cellular products and targets lower-to-middle income consumers throughout Botswana. The Jet Business does not directly or indirectly control any enterprises, says the notice. CCA seeks any stakeholder views for or against the proposed merger, which may be sent within 10 days from date of this publication to the following address.
Botswana Communications Regulatory Authority BOCRA signed a memorandum of Agreement (MoA) with the Ministries of Transport and Communications (MTC), Basic Education (MoBE) as well as Local Government and Rural Development (MLGRD).
The MoA seeks to continue the collaboration that dates back to 2016 when the three parties first agreed to work together in a project aimed at computerizing and providing broadband Internet to primary schools in remote and underserved areas of Botswana.
The project benefitted 68 primary schools and 9 secondary schools through the construction of Local Area Network (LAN) in each primary school, provision of 5 Mbps dedicated broadband Internet to each Primary School and provision of Wi-Fi enabled tablets, laptops and related peripherals such as printers and copiers.
Further, the project will see the augmentation of computers in 9 Junior Secondary Schools with 30 laptops per identified school and employment of Information Technology (IT) officers at each primary school.
When speaking at the signing ceremony in Gaborone, Chief Executive of BOCRA and Chairperson of Universal Access and Service Fund (UASF) Board of Trustees Martin Mokgware said the project’s ultimate goal is to facilitate pupils in schools and host villages to be able to play a meaningful role in the digital economy.
Mokgware indicated that this necessitates upgrading of existing Telecommunications infrastructure to high capacity broadband that will support delivery of education, accessibility to the quality Internet and usage of ICTs.
The Fund began its inaugural programme by sponsoring the provision of WiFi hotspots in public areas around the country as its first project. Following the successful implementation of public WiFi hotspots, the Fund identified Kgalagadi, Ghanzi and Mabutsane areas for mobile network upgrades, schools computerization and internet provision.
Conscious that the project would not be possible without buy-in and support from MoBE, MTC and MLGRD, the Fund facilitated the signing of the first MoU between the three parties in 2016 for implementation of the project.
BOCRA Chief Executive said the signing of this agreement is aimed at benefitting the Kweneng District, adding that they have already assessed the area and have determined that they will be covering 62 underserved villages and 119 schools, 91 of which are primary schools.
“This is a project for which the partner Ministries need to re-commit for its success. Lessons from the previous schools’ computerization and internet connectivity project require that we increase our involvement and resources dedicated to the project for it to be successful. It is my belief as the project coordinator, that we will not do things the way we did them during the first project, for if we do, then we will not have learnt anything,” he said at the signing ceremony.
The purpose of learning is so that there can be continuous improvement to minimize the length of time and amount of resources utilized, he said expressing confidence that their partners will step up to the plate and ensure they play their part in the implementation of the project and that it will progress smoothly having already tread along a similar path.
UASF’s role lies mainly in funding and project management. According to Mokgware, once the project is completed, the work to integrate ICTs into the classroom begins in earnest. Therefore, he said, the project will not succeed without full cooperation and oversight of partners.
“MoBE will put in place the necessary content and ensure that the curriculum is available to all. MLGRD will provide, among others, the enabling environment by ensuring readiness of the school’s infrastructure and necessary security.”