CA reports back on mergers
Business
The Botswana Competition Authority has said post- merger impact assessment regarding mergers and acquisitions since 2011 shows that a majority of their decisions have had a positive impact on job creation and citizen empowerment.
Giving a 2016/17 assessment report, Director of Mergers and Monopolies, Madeline Gabaraane said this year alone, they assessed six mergers of which five of them were approved and by far are performing to expectation. She said most of the mergers attracted public interest as the authority was interested in protecting jobs and creating employment as well as advancing business expansion from those acquisitions and mergers.
It emerged at the briefing that the Authority has been assessing mergers and acquisitions; and making determinations pertaining to mergers and acquisitions since November 2011. The Authority’s mandate with regards to the assessment of mergers and acquisitions does not end at the stage of issuing a decision but extends to the post-decision stage through conducting compliance monitoring and post-merger impact assessments. The post-merger impact assessments are intended to establish the market effects of the decisions taken by the Authority.
“The post-merger assessments provide an opportunity to check whether the conditions/remedies imposed were sound, given the information available at the time; and if the assumptions on which the conditions were made were sensible. The following seven (7) transactions are a summary of the cases that were assessed during the 2015/16 and 2016/17 Post-merger Impact Assessments,” said Gabaraane.
Gabaraane gave a report card on the acquisition of 100% interest in the operations of the liquid Petroleum Gases (LPG) of Puma energy by Easigas Botswana which was approved by the authority. She indicated that it was doing well at the moment, “The impact of approving the take-over has beard fruit. Through Easigas Botswana employment creation and maintenance has been recorded, stability in the supply of LPG supply in Botswana. Further there has been advancement of citizen economic empowerment initiatives,” Gabaraane said on Thursday morning.
LACK OF CITIZEN PARTICIPATION
However she said they are concerned by the citizen participation in the mergers. “Most of these are cross border and we concerned by the low citizen participation. We will influence them in the future to take part in.” Citing an example, Gabaraane said this is worsened by the fact that the citizen owned company, such as Pinks family outfitters which was controlling 22 Woolworths franchise stores will be taken by Leaping Eagles investment from South Africa, 100% control interests in Woolworths Group.
Retailing and Manufacturing companies are said to be leading the chain in both mergers and acquisitions, mostly from South Africa. By far the authority is traversing the road to prosperity in competition. They blocked Choppies attempts to take over Payless and Super Save supermarkets. In the year under review the authority refused to give G4S the green light to acquire both Trojan and Shield security companies as it raised competition concerns. “The merger would result in reduced competition due to the removal of a small but significant competitor and enhanced market power for the acquiring enterprises,” Gabaraane said.
Out of the six acquisitions G4S was the only one rejected. Others were approved looking at the fact employment will not be lost, and there would be network expansion. Others were allowed to be swallowed by international investors under conditions that they will source raw materials from citizen owned companies and that they will retain staff complement.
JOB CREATION IS ALSO KEY
From Gabaraane’s report it was evident that the Competition Authority pays attention to citizen empowerment and or participation in the mergers. When the Authority approved the acquisition of 100% interest in the operations of the LPG business of Puma Energy Botswana by Easigas Botswana, it was on the condition that: The merged entity does not engage in any conduct or activity that is tantamount to abusing its dominant market position since it is classified as a dominant firm as per Section 4(a) of the Competition Regulations;
and Further, that the proposed merging entities that during their establishment of the merger and their future existence, they should take cognisance of the need to advance citizen economic empowerment initiatives or enhance the competitiveness of citizen-owned small and medium sized enterprises.
Following an impact assessment, it was established that on ‘Employment creation or maintenance’ the merger yielded positive results. “As at the time of the transaction, there were no stand-alone employees dedicated to the running of the LPG division of Puma Energy Botswana but by end of January 2017, Easigas Botswana reported a staff complement of 20 Batswana working full time directly under Easigas Botswana. Furthermore, through Easigas Botswana’s leasing of their distribution plants to be independently managed, a total of 68 individuals were employed between the four different depots.”
The merger also led to stability in the supply of LPG in Botswana. The Authority reported that Easigas Botswana has managed to constantly supply LPG in Botswana following the consummation of the merger, and did not endanger continuity of supplies, as per section 59(1).
On the important aspect of advancement of citizen economic empowerment initiatives, the Competition Authority has established that Easigas Botswana has since adopted a strategy to assist indigenous Batswana businesses, especially those that are youth-led, in retailing LPG to corporate clients.
“Easigas Botswana’s support to the youth-owned companies has been in the form of assisting these businesses to set up cages necessary for the required handling of LPG cylinders, as well as through offering those businesses credit facility. Moreover, Easigas Botswana provides technical support to these companies, in order to ensure service standards are maintained,” said Gabaraane.
Another transactions that was approved in April 2012 and in April 2015, respectively, taking into consideration the commitments made by Manuli Fluiconnecto Holdings B.V. Led to employment creation as a result of expansion. It has emerged that Manuli has been able to employ seventeen (17) additional employees through the two (2) new Service Points (Palapye and Karowe Mine) and expansion of the Francistown Service Point.
The decision also led to the establishment of a partnership programme to train local apprentices. Fluid Systems Botswana has completed training of three (3) students from Selebi-Phikwe Technical College and other stakeholders that normally require their services, such as the Botswana Defence Force (BDF), local colleges and universities. The company is also in regular contact with the Botswana Qualifications Authority (BQA) for advice in an effort to provide quality training.
The Competition Authority is the primary enforcement agency for competition law and policy. It was established under the Competition Act of 2009 to monitor, control and prohibit anti-competitive trade or business practices in the economy of Botswana. The Competition Authority is a parastatal which falls under the Ministry of Trade and Industry.
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Business
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.
Business
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.