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:     25 Nov - 01 Dec

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Pick n Pay  Beyond Thunderdome

Pick n Pay has announced that in under a week they are expecting delivery of a cheque to the value of R1.4 billion, from Metcash Aus, for the purchase of their Franklin’s operations, in defiance of the Australian Competition and Consumer Commission’s ruling on the subject. The ruling has been widely excoriated in the Aussie press, elements of which believe that a strengthened Metcash would begin to provide fair competition for the Woolworths/Coles duopoly that blights that already benighted land. Metcash is playing chicken with the Commission which would then have to take the legal route in opposing the deal.
Comment: Competition authorities the world over, ahem, seem to share a sort of gung ho amateur zeal which leads to some pretty interesting rulings.

Business Day 24/11/10

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Massmart  And that’s our final offer

Walmart and Massmart announced yesterday that the former had made a formal offer to the latter for the acquisition of 51% of its shares, at the R148 per originally offered before certain shareholders – probably, we are reliably informed, the PIC – mentioned that they would like to see the stock still listed on the JSE. The PIC is Massmart’s only SA investor of any real scale and owns 14% of the company’s shares. There are of course a couple of hurdles still to get over, or indeed under – like opposition from the Unions, or the Competition Commission. Word on the street is that in the interest of the deal, Massmart might swallow a couple of unpalatable union-led conditions – for example, a moratorium on retrenchments.
Comment: In this instance, SACCAWU reminds us of certain schoolboy conspiracy theorists who used to sit at the back of the classroom and say “What if, sir?”

Business Day 29/11/10

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SPAR  Owner/Driver

SPAR has quietly set up its own retail division, nothing major, just to manage five stores at the moment, bought when their owners went bust. But it will be buying another five before the year is out, and that amounts to a certain scale. In the past, the Friendly One would have held onto the stores to preserve its footprint until a suitable buyer could be found, but now – a retail division. According to Captain Hook, the move is purely defensive, and geared merely at keeping key sites in play. SPAR’s unique franchise model has been good for the Group, even in these tricky times – for the year to September, turnover was up 9% to R35 billions, with operating profit up 8.4% to R1.3 billion, and trading margin a happy 3.8%. Why would SPAR get properly into retail? Some franchisees are battling to get finance from the Fica-embogged banks, and there’s the small matter of bad debt from franchisees to the tune of R55 bar.
Comment: So a retail division could be a shrewd move, helping the group manage more efficiently stores it will be holding onto for longer than it would have liked.

Finweek 2/12/10

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Pioneer  Under the mattress? In the old boot?

Who gets Uncle Pioneer’s millions? Young Ebrahim Patel over at Economic Development wants to snaffle a large chunk of the R865million fine levied upon the manufacturer for bread price fixing, and use it to address weaknesses in the economy. The Treasury objects. While it is true that the Competition Commission falls under Mr Patel’s department, and that under an agreement reached with the Commission, Pioneer agreed to pay R250bar into an agribusiness startup fund, the Treasury argues this is illegal, fines by law being rendered unto the Treasury, and the Commission not being empowered to decide arbitrarily which portion of a payout is a fine, and which a generous contribution to enterprise development. This is all getting hacked out before the hatchet-faced patricians of the Competition Tribunal as we speak.
Comment: An imbroglio wrapped in a conundrum wrapped in a jolly old how’s-your-father.

Business Day 30/11/10

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Tiger Brands  Good lord, Stanley – a Tiger!

Tiger, which has given notice of a muted set of results on the way, pretty much in line with last year’s, is on the acquisition trail in deepest darkest. It has bought Deli Foods in Nigeria, an unlisted biscuit maker, presumably in line with some baked goods strategy in Africa’s biggest country, and has formed a JV with the east African Group of Ethiopia for the manufacture and sale of personal goods and food, sums undisclosed. Also in Nigeria, Tiger has reached an agreement in principal for the purchase of 49% of the food and beverage interests of UAC. On the results front, operating income was down 1% while margin was up 0.1% to 15.6%. The hormonally-enhanced strength of the rand has been a factor.
Comment: Africa is the biggest commercial story of the next decade, and here we are.

Sapa 25/11/10

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Pharmacy  Bitter little pill

Bittersweet news for the little guy is that the Department of Health has increased the caps on dispensing fees – a subject which so exercised Clicks a few short years ago – to above their current limits. This means that they will be able to choose to be nailed on economies of scale, rather than being forced to. The Competition Commission is good at protecting big businesses against each other, and consumers from businesses, but does little for the entrepreneurs whom, we are told, are the life blood of the economy.

Business Day 23/11/10

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Household Income  We’ll huff and we’ll puff

SA’s total household income has improved nominally but has not outstripped inflation according to the hoary sages at the Bureau of Market research (BMR).Total household income increased to R1.6 billion in 2009 from R1.5 billion in 2008, growing a nominal 6.5% but shrinking in real terms to the tune of 2.7%, oh dear.

Sunday Times 28/11/10

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