Trade Tatler
“Government's view of the economy could be summed up in a few short phrases: If it moves, tax it. If it keeps moving, regulate it. And if it stops moving, subsidize it.”
Ronald Reagan


THIS ISSUE:     26 Mar - 30 Mar

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Investec  A need to know basis

Investec: now there’s a name you didn’t expect to see in these columns. But here’s the lowdown: the pith-helmeted missionaries of Investec’s Africa Frontier Private Equity Fund are finalising the purchase of 10–20% of OK Zimbabwe, on behalf of a client who is definitely not Shoprite Holdings, despite reports in the Zimbabwean press to the contrary. Investec are planning on making a R5million convertible loan (huh?) to OK, as well as underwriting a R15million rights issue to enable the existing owners to participate in the fund raising. OK, you will recall, is Zim’s second-largest retailer, and while trading is not predicted to tick up too dramatically in the next year, the next three to six years are looking good.
Comment: Depending, of course, on when Mr M. intends on popping his neat little clogs.

Business Day 24/03/10

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Woolworths  Green is the new black

Despite their dashing new black logo, designed, no doubt, with lashings of carbon from the tip of Creative Director Vince Frost’s Australian pencil, Woolies are making a big effort to reduce their carbon footprint by 30% by 2012, reducing their relative transport emissions by 20%, their electricity usage by 30%, building an experimental green store, sourcing food locally where possible, helping suppliers set up model green factories and working with scientists to ensure the sustainability of farmer’s soil, increasing its CO2 absorption. And they’ve managed a 12% reduction in electricity usage since ’04, in which period they’ve substantially increased their actual footprint.
Comment: Exemplary stuff, that man in the dark and beautifully cut suit.

Tatler Reporter 24/03/10

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Retail shares  The rating game

Business data boffs McGregor BFA have put together the collected thinking of all the gimlet-eyed analysts we love to meet over tiny little quiches at results presentations, and the sharp-nosed fellers don’t have a kind word to say about retail right now, unless they’re talking about Woolies, which broker consensus rates as a “buy”. Shoprite and Pick n Pay are rated as “sells”, while SPAR cracks the nod as a “hold”. Food retailers – a defensive stock in these treacherous times – are generally held to be overpriced at the Johannesburg Securities Exchange (JSE) where they trade at premium multiples of up to 18 times. However – and here’s the rub for Johnny Foreigner – they’re considered to be underpriced for adventurers relative to retail stocks from other developing countries, currently trading at a 25% discount.
Comment: Arcane stuff, but the lifeblood of this great creaking edifice we call capitalism.

Fin 25/03/10

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CGCSA  A suite deal

The Consumer Goods Council of SA has merged with the Furniture Trader’s Organisation, which believes the move will help it serve its members better at a time when the organisation was at something of a crossroads, unable to grow yet unwilling to fold. The move slots nicely into CGCSA’s imminent launch of the South African Retail Council, which will represent CGCSA’s retail members. CGCSA CEO Mncane Mthunzi believes that retail needs a single voice to government and other stakeholders, and fewer rather than more organisations.
Comment: Gone, it seems, are the glory days of Efficient Consumer Response, when retailers and suppliers marched abreast to a bright new dawn of collaboration.

Business Day 23/03/10

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SAB  Coinage ... now that’s competitive

The Competition Tribunal has thrown out an application by SAB to drop charges of anticompetitive behaviour brought against it by the Workers’ Committee of the Fifth Tractor Collective of the Competition Commission. The charges, you may remember, involve territorially exclusive agreements with distributors, the setting of minimum prices and the abuse of dominance over a market of which the Big Chap holds a 90% share. SAB are appealing on the grounds that the charges are not specific enough to answer, and unsupported as yet by any real evidence. And speaking of competition, Heineken have gone ahead and opened their R3.5billion Sedibeng brewery in the deep south.
Comment: Which could, let’s face it, have come at a better time for Mr Glass.

Business Day 24/03/10

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Fish  The one that got away

I&J, as recently reported, saw a 41% decline in operating profits year on year for the six months to December, while rival Sea Harvest saw a decline of only 3% for the year to December. Each has a roughly equal quota of the hake catch in local waters, and each are well-managed businesses – I&J as subsidiary of AVI, and Sea Harvest owned by Brimstone. So what’s up with the difference in profits? In addition to its own catch, I&J import big quantities of fish block, unprocessed white fish which it processes into things like fishfingers and fish cakes, then exports again, to countries like Italy, Spain, Germany and France – which is where the recent strength of the rand hit it hard. Sea Harvest, which is not like I&J primarily an exporter, managed to weather the worst of the rand strength, maintaining both volume and pricing on most of its markets.
Comment: So there you have it. But go easy on the oceans anyway, boys.

Financial Mail 26/03/10

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Interest Rates  The recession has been cancelled due to lack of interest

Over at the Reserve Bank, Mrs Doubtfire cut rates 0.5% to a recent low of 6.5%, helping consumers temporarily forget about the runaway Eskom truck heading down the freeway in the wrong lane, and surprising the heck out of most analysts, who thought that our recent return to economic growth would keep her hand off the green button. Mrs D explained that inflation, which has just lumbered into the targeted 3–6% range, as well as the recent strength of the dear old rand, had created the opportunity to do something Uncle Tito should probably have done in late ’08. Issues of growth and employment, highlighted by Pravin Gordhan in last month’s budget speech, had come into play when the decision to cut was made.
Comment: Comment: Every little bit helps, as they say.

Business Report 26/03/10

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Consumer Spending  Retail therapy

Consumer spending increased for the first time in six consecutive quarters in the last three months of ’09. Household expenditure was up an annualised 1.4% after dropping 1.9% in the third quarter and 3.1% for the year in total, the first annual decline since 1992, when being poor was considered quite cool. The increase came as wages increased, job losses eased and GDP growth lifted to 3.2%. The bad news for our great industry is that while spending on durables such as cars and TVs surged by 15.2%, it contracted in the non-durable sector, which includes clothing and food. Household debt was also up, to 79.8% of disposable income in the fourth quarter from 78.4% in the previous three months.
Comment: Something of a recovery is gaining momentum. Quick! Switch off the kitchen light and unplug your laptop!

Business Report 24/03/10

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