
THIS ISSUE: 30 Apr - 06 May
YOUR NUMBERS THIS WEEK
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Pick n Pay There will be blood
Last month, in what we can only surmise to be a protective move, the Zambian government suspended licences for the importation of edible oils. Today, according to the fearless journalists of the Sunday Times of Zambia, you will find a veritable torrent of the stuff sloshing down the aisles of South African chain stores in Zambia. This, explains Pick n Pay, is because they had so darned much of the stuff in the first place, and haven’t managed to flog it all. Not so, says a Mr Merchant of local manufacturer, Zamgold cooking oil, which presumably has a bit of skin in the game. He tells lurid stories of conveys of trucks smuggling barrels of the stuff over the border, under the pretext of transiting it through to neighbouring countries. In the meantime, the suspension – which is not a ban, says the Department of Agriculture – remains in place.
Comment: Who knew that the sunflower oil sector could be such an invigorating place?
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Massmart Bright ideas
Massmart is using its Builders Warehouse stores to showcase its increasing use of green energy to do the right thing by dear old mother Earth while reducing costs in the business. A case in point: Builders Warehouse Rivonia, which has reduced its energy use by around 22% to 89 kWh/m2 since 2010. How’d they do that? you ask. Through a devilishly cunning Building Management System, that’s how, which “harvests” daylight in-store, switching on the LEDs (themselves a handy little energy saver) only when the gloom in the aisles becomes Stygian. This in turn reduces the heat in the building, which is further cooled by an evaporative system rather than a conventional one. And while other Builders outlets harvest rainwater in tanks, saving 7,000kl per year of municipal supply, Rivonia has the good fortune to be built on top of an aquifer, with its water needs supplied by borehole.
Comment: Significant effort, major savings. We live in promising new times, in some respects.
MANUFACTURERS AND SERVICE PROVIDERS
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Pioneer This one seems a little flat…
Pretty sure we didn’t mention it at the time, oops, so here goes: Pioneer Foods announced last year that it will be ditching its contract, up for renewal in July, for the rights to bottle, sell and distribute Pepsi and sister brands 7Up, Mirinda and Mountain Dew. Pepsi, sadly, has failed to get the kind of traction it needs to go up against Coke, snaffling only 10% of soft drink sales in formal retail, and failing to get brand recognition in the informal market where the real $$$ are. Pioneer spent tens of millions – perhaps more than 100miilion – of ronts on infrastructure and operations to get Peps into South African refrigerators, but no joy. Other businesses have been down that thankless road before Pioneer – notably New Age Beverages and Bowler Metcalf. Pepsico itself trades successfully in SA, marketing such moreish favourites as Lay’s and Niknaks.
Comment: So perhaps, in the absence of another buyer, it will champion in its own brand in this challenging market.
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Coca-Cola Meanwhile, down in the Coke mines…
The juxtaposition of this story with the previous one is unfortunate, but here goes. Having invested a massive $17billion in growing its African markets, Coca-Cola (“Coke”) will be following this up with Source Africa, an initiative to procure its ingredients locally. Currently, all concentrate used in the African product is either shipped in from France or manufactured by Oompa-Loompas – using the legendary and closely-guarded recipe – in a plant in the magical kingdom of Swaziland. And that’s not all. The Scarlet One is also intent on pumping yet more moolah into the continent, in the form of new manufacturing lines, cooling and distribution equipment and production.
Comment: Why? you ask. Penetration, that’s why. Coke, like almost everyone else, is coming off a low base in Africa, and this is where the growth – the stuff that exercises shareholders at Berkshire Hathaway shindigs – is still to be found.
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Clover Holy cow!
With its acquisition of Nkunzi Milkyway given the approving nod by the Competition Commission, Clover is set to become a massive supplier to a little outfit we like to call Woolworths Holdings. Nkunzi, you see, owns the bucolically-named Ayrshire, a name synonymous with the dairy section at Woolies, and responsible for a notoriously thick and silky line of cream. While the Comish initially expressed concern about the impact of the acquisition on small farmers and on employment, Clover has undertaken to leave all jobs intact, and to take over all of Nkunzi’s supplier contracts on the same terms and conditions. And the Woolies contract will also, needless to say, remain in place.
Comment: A huge deal for Clover. While Ayrshire remains inextricably linked with Woolworths, it is a powerful and trusted brand in its own right. One wonders what they will achieve with it.
TRADE ENVIRONMENT
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Food Prices Bitter Harvest
While predictions for this year’s maize crop have been revised up a tad by the Crop Estimates Committee (yes, there is), the outlook for the life-giving grain remains bleak, with economists predicting that sooner or later we’ll have to import yellow maize, the stuff that is eaten by the things we eat. And this, with the sickly rand, means inflation, at a time when stretched households can ill afford to pay more. That’s the bad news, and it’s pretty grim. On the upside, some economists believe that what with still-relatively low fuel prices, higher-than-inflation wage increases and manageable inflation of 3.9%, consumer spending should tick up in the second half of the year, hitting growth of up to 2.2% for the year after last year’s miserable 1.4%. Tariff increases by Eskom could rain on everyone’s parade just a little, though.
Comment: Sounds suspiciously to us like the dismal scientists are clutching at straws.
IN BRIEF
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Tongaat Hulett Sticking it out
In Zim, sugar barons Tongaat Hulett are being accused by the provincial government of Masvingo of dragging their heels over the transfer of suitable land to community members as part of their commitment under the indigenisation and empowerment laws, by which foreign businesses are kept in their place. It’s all got a bit he said/she said up there, with details like the exact arability of the land being called into question. Still, it must be worth it, or Tongaat wouldn’t be doing it.
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Investor Confidence Or the lack thereof
According to consulting firm AT Kearney’s Foreign Direct Investment Confidence Survey, the Beloved Country has dropped off the map somewhat. Having come in at an ebullient 13th last year (for some reason), we didn’t even make the top 25 this year. If it makes you feel better, neither did anyone in Africa or the Middle East, as nervous investors took their money to the comforting vaults of the developed world, where it would receive the treatment to which it has become accustomed. Which is a shame for us.