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Trade Balance rebounds

Botswana trade balance has rebounded spectacularly after two successive months of recording a deficit. The rebound follows a strong performance in the month of September which was underpinned by a 59.2% increase in total exports.

 

This information is contained in the latest International Merchandise Trade Statistics for September released by Statistics Botswana. According to the monthly report, the total imports for September were valued at P5.2 billion, showing a decrease of 2.2 percent (P117.6 million) from the revised August 2016 value of P5.3 billion.

 

This decrease was mainly influenced by the residual group (Other Goods) and Machinery & Electrical Equipment, with decrease of 38.1 percent (P106.1 million) from P272.2 million to P165.1 million for the residual group and 8.8 percent (P74.1 million) from (P842.4 million to P768.3 million for Machinery & Electrical Equipment.


Comparison of import figures for September 2016 and September 2015 shows a decrease of 18.9 percent (P1, 214.5 million), from P6, 427.7 million recorded during September 2015 to P5, 213.2 million recorded during the reference month. The decrease in import value in this case is mainly due to the low value of Diamond imports during September 2016, having decreased by 56.2 percent (P1, 482.6 million), from P2, 638.5 million during September 2015 to P1, 155.9 million in September 2016. Chemicals and Rubber Products is another commodity group that contributed to the fall in imports level, having decreased by 19.1 percent (P118.2 million) from P617.8 million registered in September 2015 to P499.7 million during September 2016.

The total exports were valued at P8.4 billion, showing an increase of 59.2 percent (P3.1 billion) from the August 2016 revised value of P5.3 billion. This is mainly due to the increase in exports of Diamonds and Vehicles & Transport Equipment. Diamonds exports increased by 68.4 percent (P3.1 billion) from P4.5 billion recorded during August 2016 to P7.7 billion registered in September 2016. Vehicles & Transport Equipment recorded an increase of P35.0 million from P34.3 million recorded during August 2016 to P69.3 million during the month under review. Exports of Vehicles & Transport Equipment are mainly re-exports.

The report revealed that the trade figures for the month’s total exports value to that of September 2015 shows an increase of more than 100 percent (P4.2 billion) from P4.2 billion recorded during September 2015 to P8.4 billion recorded during September 2016. The increase is attributed mainly, to exports of Diamonds and Copper Nickel. Diamonds exports increased by P4.1 billion, from P3.5 billion to P7.7 billion while Copper & Nickel rose by P159.3 million from P13.9 million to P173.1 million during the period under consideration.

The strong performance in September saved what could have been the first quarterly trade deficit of the year. Figures show that the country recorded a trade surplus in the first and second quarters. However the third quarter was marked by two successive trade deficits for the months of July and August. For the month under review, the country recorded a trade surplus of P3.2 billion, reversing the previous two deficits to result in an overall trade surplus of P3 billion for the third quarter.


While the third quarter was saved by a surge in diamonds and Copper Nickel Exports, economists have warned that the fourth quarter will record a lower trade surplus given the prevailing economic sentiments. Chiefly amongst those sentiments is the government’s decision to shut down the BCL group operations. 

 

The decision to close the mines in October is expected to wipe hundreds of millions from the economy. In the latest trade report, Copper and Nickel contributed about 2% to the total exports after 1145% surge in trade value of the base metals. It went up by P159.3 million from P13.9 million to P173.1 million during the period under consideration.  Now with a halt on copper and nickel production, the focus will shift to diamonds.


Diamonds are the main stay of the country’s economy as evidenced by trade figures which show that diamonds contribute more than 85% to total exports. For the month under review, diamonds exports stood at 90.6% of total exports. Economists worry that since diamond trades tend to slow down in the last quarter of the year, so will the exports. Recently, Anglo American Plc has posted the lowest diamond sales for De Beer’s ninth sales cycle of 2016, amounting to $470 million, compared with the $494 million value of the eighth cycle of the same year.

 

The figures fit in with expectations of slowing sales in the second half of the year. The diamond industry is seasonal, with the holiday period from thanksgiving in November through the Lunar New Year in Asia in January or early February the busiest period for jewellery sales. Rough diamond prices have rebounded by 7.4 percent this year, a marked contrast to the slump experienced in 2015 when sales slumped by 18%.

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Business

Pula smiles at COVID-19 vaccine

25th November 2020
COVID-19 vaccine

A squeaky and glittering metaphoric smile was the look reflected from the Pula against the greenback this week and money market researchers lean this on optimism following Monday’s announcement of another Covid-19 vaccine which is said to have boosted emerging market economies.

With other emerging market currencies, the Pula too reacted to optimism and fanfare on the new Covid-19 vaccine against the weakening US dollar which has been losing its shine since the uncertainty laden US elections.

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Choppies high on JSE rollercoaster volatility

25th November 2020
CHOPPIES

After bouncing back into the Johannesburg Stock Exchange (JSE) last week Friday, following a year of being in the freezer, the Choppies stock started this week with much fluidity.

Choppies was suspended in both the Botswana Stock Exchange and its secondary listing at the JSE for failure to publish financial results. Choppies suspension on Botswana Stock Exchange was lifted on 27 July 2020. On Friday last week, when suspension was being lifted, Choppies explained that this came into fruition “following extensive engagement with the JSE.”

Choppies stock, prior to suspension, hit a mammoth decline in value of more than 60 percent, especially in September 2018. Waking from a 24 month freezer, last week the Choppies share price was at R0.64 and the stock did not make any movement.

However, Monday was the day when Choppies stock moved vibrantly, albeit volatile. Choppies’ value was on a high volatile mood on Monday, reaching highs of 200 percent. At noon, the same Monday, the Choppies share had reached R1.05. Before taking an uphill movement, Choppies stock slightly slipped by 2 cents. But the Choppies share rode up high and by lunch time the stock had reached the day’s summit of R2.00 and that was at 13:30 when investors were buying the stock for lunch.

The same eventful Monday saw gloom on the faces of Choppies rivals, when Choppies gained by 220.31 percent around lunch time its rivals in the JSE Food & Drug Retailers sector were licking wounds. Spar lost 2.94 percent, Pick Pay fell by 2.43 percent, Shoprite 7.52 percent and Dis-Chem 1.98 percent. The only gainer was Clicks by a paltry 0.51 percent.

In an interview with BusinessPost, Choppies sponsors at the JSE PSG Capital Managing Director Johan Holtzhausen explained that the retailer’s stock was in high demand after a long suspension. He said when a company list or a suspension is lifted the market needs to find itself on the pricing of the share.

“Initially when the suspension was lifted there were more buyers than sellers. As far as we could see this created a shortage of shares so to speak and resulted in the price at which the shares traded going to R1.20 and eventually R2.05 before finding its level around R0.80 sent from a JSE perspective.

This is marked dynamics and reflect that there are investors that are positive about the stock in the long run. This is a snapshot over a short period and one requires a longer period to draw further conclusions,” said Holtzhausen in an interview talking about the Choppies stock.

On Monday this week where the Choppies value grew by 200 percent, the stock took a turn looking down, closing the day at R0.87 from a high of R2.00. According to local stockbroker Motswedi Securities on Monday while there was no movement by Choppies in the local stock exchange as the retailer appeared on the board as 141,000 shares traded at P0.60 each.

However in Choppies’ secondary listing the stock price rallied to over 200 percent during intraday trading on Monday before losing steam and declining to around R0.87 share.

Before press yesterday Choppies opened the market with the stock starting the day at R0.80 then went flat for few hours before taking a slide downward, dropping 5 cents in 30 minutes. Choppies then went flat at R0.75 for 50 minutes yesterday before going up at 10:20 am where it nearly recovered the open day price of 80 cents, but was shy of 1 cent. From 79 cents the price went flat until noon.

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Foschini-Jet merger, a class and rivalry conundrum dissection

25th November 2020
Foschini

Competition and Consumer Authority (CCA) has revealed that in its assessment of the Jet take over by Foschini, there were considerations on possible market rivalry and a clash in targeted classes.

According to a merger decision notice seen by this publication this week, high considerations were made to ensure that Foschini’s takeover of Jet is not anyhow an elimination of rivalry or competition or if the two entities; the targeted and the acquiring enterprise serves the same class of customers or offer the same products, to elude the anti-trust issues or a stretch of monopoly.

The two entities are South African retailers whose services stretched to Botswana shores.  Last month local anti-trust body, CCA, received an acquisition proposal from South African clothing retailer, Foschini, stating their intentions to take-over Jet.

South African government’s Business Rescue Practitioners earlier this year after finding out that Jet’s mother company, Edcon, is falling apart, made a decision that Foschini can buy Jet for R480 million. This means that Foschini will 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.

However the main headache for the CCA decision which was released this week, is distinguishing the targeted and the acquiring entity businesses and services.

When doing a ‘Competitive Analysis and Public Interest’ assessment, CCA is said to have discovered that Foschini is classified as a “standard retailer” which targets middle-to-upper income consumers and it competes with stores such as; Truworths and Woolworths. The targeted entity, Jet, is on the lower league when compared to its acquirer, it serves customers of lower classes and is regarded as a discount/value retailer targeting lower income consumers or a mass market. This makes Jet to be in direct competition with Ackermans, Pepkor, Cash Bazaar and Mr Price.

“Therefore, a narrower view of the market is that Foschini through its stores trading in Botswana is not a close competitor to Jet. Additionally, there exist other major rivals who will continue to exercise competitive constraints on the merged enterprise post-merger,” concluded CCA this month.

The anti-trust body continued to explain that in terms of the Acquisition of a Dominant Position, the analysis shows that the acquisition of the target business by Foschini Botswana will result in an insignificant combined market share in the relevant market.

This made CCA reach to a conclusion that there is no case of an acquisition of a dominant position in the market under consideration or any other market on the account of the proposed transaction.

What supports the merger according to CCA is that it is in compliance with regards to ‘Public Interest Considerations’ because the findings of the assessment revealed that the transaction is as a result of the need for a Business Rescue by the target enterprise. This is so because in the event that the proposed transaction fails, it will translate into the loss of the employment positions at the target business.

“On that note the Authority (CCA) found it necessary to ensure that the proposed merger does not result in any retrenchments or redundancies. In light of this, the assessment revealed the critical need to protect the employees of the merged entity from possible merger specific retrenchments/ redundancies,” said CCA.

Before making a determination that the recently proposed transaction is not likely to result in the prevention or substantial lessening of competition or endanger the continuity of the services offered in the relevant market, CCA said it then moved into a concern for public interest which is a protection enshrined in the Competition Act of 2018.

CCA’s concern was mostly loss of livelihood or employment by 126 Batswana workers at Jet stores, stating that possible retrenchments or redundancies may arise as a result of implementation of the proposed merger.

Much to the desire of trade union or labour movements in Botswana and across Southern Africa where the Jet stores are stemmed-who also raised concerns about the retail’s workers job security- CCA subjects Foschini to keep the target entity 126 workers.

“There shall be no merger specific retrenchments or redundancies that may affect the employees of the merged enterprises. For clarity, merger specific retrenchments or redundancies do not include (the list is not exhaustive): i. voluntary retrenchment and/or voluntary separation arrangements; ii. Voluntary early retirement packages; iii. Unreasonable refusals to be redeployed; iv. Resignations or retirements in the ordinary course of business; v. retrenchments lawfully effected for operational requirements unrelated to the Merger; and vi. Terminations in the ordinary course of business, including but not limited to, dismissals as a result of misconduct or poor performance,” said CCA.

CCA also orders that Foschini informs it about all the details of 126 Jet employees within thirty (30) days of the merger approval date. CCA should also know information of when Foschini is implementing the merger, within 30 days of the approval date.

Other conditions include Foschini sharing a copy of the conditions of approval to all employees of the Jet or their respective representatives within ten (10) days of the approval date.

“Should vacancies arise in the target, the merged enterprise shall consider previous employment at one of the non-transferring Jet stores to be a positive factor to be taken into account in the consideration of offering potential employment,” said CCA.

According to CCA, in cases of any job losses, for the Authority to assess whether the retrenchments or redundancies are merger specific, at least three months before (to the extent that this deadline can be practically achieved and in terms of the prevailing and legally required employment practices) any retrenchments or redundancies are to take place, inform the Authority of:  i. The intended retrenchments; ii. The reasons for the retrenchments; iii. The number and categories of employees affected; iv. The expected date of the retrenchments.

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