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When diamond sharpens diamond

Diamonds are the best mutual friend of the two girls, Botswana and Zimbabwe.

Botswana is the largest producer of diamonds by value on planet earth. Zimbabwe too is said to have the largest reserves of diamonds in the world. While iron is said to sharpen iron, it gives up that might when it comes to the diamond. Diamond sharpens diamond!

The relationship between Zimbabwe and Botswana can be understood on the fundamental basis of the above. Beyond that, the two countries are members of the Southern African Development Community (SADC), whose headquarters is in Botswana and whose incumbent chairman is Zimbabwe's President Robert Mugabe.

Both countries are therefore inspired by the SADC objectives, one of which is to "achieve sustainable utilisation of natural resources and effective protection of the environment."

….The wisdom in this objective is that diamonds don't belong to the current generation. We actually borrow them from the future generations to meet our current needs and have the responsibility to leave enough for the generations to come after us. In utilising the diamonds, we also have to pay particular attention to ensure that we don't distort the environment to the end that it will be unsafe and not healthy to the generations to come. It's almost like that polite messages we read in public toilets: "Please leave the toilet in the state you would like to find it."

But how come is it that public toilets still stink the most, despite the existence of such polite messages? Ok, let's not talk about public toilets – we don't want anybody to lose their hard-earned appetites.

Let's talk about diamonds.

So, diamonds are Botswana's number one export, and number five to Zimbabwe. They play a very significant role in the socioeconomic transformation of the two countries' economies. What is saddening to note, however, is that the two countries, despite owning these precious resources in remarkable quantum, don't have the right to put price tags on them.

They simply carry them to the market, and take whatever ridiculous price the market has to offer on that day – which is the total opposite to that wine you import from France, or that watch you import from Switzerland, or that designer suit from France.

How can we sustainably manage the resources of the future generations when we are condemned to just but price-takers who don't even know what we are going to sell at come next year? What legacy are we going to leave for the future generations? Dungeons and mine shafts exhausted of all the diamonds there were?

The poverty and inequality levels in Zimbabwe and Botswana also prove that diamonds are still not being optimally used for the betterment of the citizenry's quality of lives. The World Bank says that income inequality is very high in Botswana; while a survey conducted by the Zimbabwe Statistical Agency also established that Zimbabwe inequality levels are amongst the worst in the world.

Both countries are still facing fiscal consolidation challenges and have been advised by the International Monetary Fund to reduce the wage bill relative to GDP, broaden the revenue base, amongst a cocktail of other measures.

The same pressure that makes diamonds is apparently threatening to destroy some key aspects of these two countries. Their state owned enterprises are posting losses and the vulnerability to external shocks is apparently inevitable.

We surely cannot continue like this – living as if we are the last generation on planet earth. In any case, it's not like there is no solution to this problem. If a mistake is repeated more than once, it becomes a decision. Have we made the decision to live with this problem and not implement the solution – value addition and beneficiation? The reason why we can't write price tags on the diamonds we sell is that the majority of our diamonds sales occur in their raw state. It is also why we get peanuts for selling these raw diamonds and why we also still have unacceptable unemployment rates.

Value addition is a costly exercise as it requires a lot of money to acquire machinery, training human resources, amongst other costs. This is where these two girls (Zimbabwe and Botswana) need to show that they are not just a bunch of pretty faces – talk of beauty without brains; and brains without beauty too! Why can't these two beauties pool resources together to establish a plant that value-add our diamonds? Doing it together will speedy the process of raising the funds needed and ensure that adequate funds are raised. One of the objectives of SADC is to "promote self-sustaining development on the basis of collective self-reliance and the interdependence of Member States." There is not even a single need to invent the wheel here, we just need to spin it fast.

The Extra-Ordinary SADC Summit to be held this month must emphasize the need for concrete partnerships amongst Member States endowed with similar resources with a view to accelerate value addition in the region. Otherwise the gutter will be our deathbed.
 

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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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Business

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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Business

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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