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Slight twist in import and export shrinks trade deficit  

Overall exports in August, mostly diamonds enroute Asia, at a tune of P2.66 billion, leapt by 7.9 percent (P1.93 billion) from the July value of P2.47 billion.

On the other hand Botswana bought goods into the country at a value of P5.69 billion, a decrease of 5.3 percent from the revised July 2020 value of P6 billion.

Botswana is referred to as a free trade economy and has trade deals with many organizations like European Union, South African Customs Union and World Trade Organization.

The August 2020 export earnings were aided by diamonds, from P1.9 billion to P2.12 billion and this was followed by Machinery & Electrical Equipment with a contribution increasing from P1.33 billion to P2.41 billion during the current period.  Diamonds represent almost 90 percent of Botswana’s total exports.

According to Statistics Botswana, a decrease in imports of 5.3 percent (P3.2 billion) from the previous period was put down by fuel imports reflecting a decline of 58.8 percent. This trend shows that in the gauge of trade, the imports were going down slightly while the exports moved up a bit. But there was also a hike in diamond imports by 84 percent and this counteracted the overall decrease in total imports.

A rise in diamond exports and a decline in fuel imports could not help Botswana’s dogging trade deficit. Curiously, there was an increase in diamond imports by 84 percent for a diamond producing country. Botswana is a consuming country which leans more on exports from its neighbour South Africa and Asia countries. Diversification from diamonds mostly as a source of export is what is always advised. Covid-19 also disrupted trade elements domestically and globally.

Botswana had a trade deficit of P3.03 billion in August. The last time Botswana had a trade surplus was in January when P3.33 billion was recorded. That time export nudged by 8.2 percent and was boosted by diamond sales at 7 percent and machinery & electrical equipment (130 percent). That time most exports were from were India (27.8 percent of total sales), Belgium (18.5 percent) and South Africa (16.1 percent).

Main export partners were India (27.8 percent of total sales), Belgium (18.5 percent) and South Africa (16.1 percent) whereas the main import partners were South Africa (75.5 percent of total purchases) and Canada and India (4 percent each).

In the latest statistics, India bought Botswana goods more than any other country. India paid Botswana P5.78 billion while United Arab Emirates was the second biggest importer of this country’s goods with P5.11 billion.

Belgium is the biggest consumer of this country’s diamonds and has received 18.4 percent (P4.89 billion) of total exports to the country all attributable to diamonds. Stats Bots says South Africa received 16.1 percent (P 4.28 billion), attributable to Machinery & Electrical Equipment and Diamonds at 25.8 percent (P 1.10 billion) and 24.4 percent (P 1.04 billion) of total exports to the country.

 

Stats Bots says in August the SACU region contributed 74.6 percent (P4.23 billion) of total imports into Botswana during the month under review.

Diamonds were the most imported commodity group in August with a contribution of 22.7 percent (P961.6 million) of total imports from the region.  Food, Beverages & Tobacco and Fuel followed with contributions of 16.9 percent (P7.18 billion) and 16.3 percent (P6.91 billion), respectively. Botswana imported Machinery & Electrical Equipment that contributed 10.5 percent (P4.45 billion to this country’s import bill.

South Africa contributed 70.2 percent (P3, 991.8) of total imports, with diamonds contributing 24.0 percent (P956.7 million) while Food, Beverages & Tobacco and Fuel contributed 17.1 percent (P683.4 million) and 12.9 percent (P514.2 million), respectively.

According to Stats Bots, Botswana received imports worth P626.1 million from the EU, accounting for 11.0 percent of total imports in August 2020. Diamonds was the major commodity group imported from the EU, accounting for 90.6 percent (P567.4 million) of imports from the union. Belgium was the major source of imports from the EU, at 10.1 percent (P574.3 million) of total imports, according to Stats Bots.

On the mode of transport used for international trade, total imports amounting to P3.21 billion, representing 56.5 percent, were moved by road. Goods which were transported by air and rail were worth P1.8 billion and P7.03 billion respectively.

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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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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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