
THIS ISSUE: 22 Aug - 27 Aug
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Pick n Pay Do you have what it takes to make $$$ in your spare time?
While rival Woolies has bought back its franchise stores hand over fist, to the often vocal complaints of the buyees and at a cost of R1.1billions, Pick n Pay’s own franchise programme continues apace, with 450 of its 1,100 outlets nationally still owned by bushy-eyed entrepreneurs. Franchise has been kind to the Ackermen, helping them grow footprint in those tricky, hard to reach areas, and helping them achieve the sorts of economies of scale that stiffen the resolve of the buyers as they go into those awkward price negotiations with Tiger Brands and Unilever. On the downside, of course, is the slim margins that the corporate parent typically gleans from its franchisees, and the merry heck they can play with your brand if you’re not watching.
Comment: The message here, is, franchising’s not for everyone.
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Shoprite Gonna take a lot to drag me awaaay from youuuu….
Shoprite, as you may have heard, is Doing Big Things in Africa, a continent which lies north of South Africa’s borders. They’re erecting malls and laying down warehouses, building supplier networks and generally striding around in those two-tone safari shirts that your dad is so fond of, like the manly men and strong, proud women that they are. What they are not doing, of course, is bringing the South African suppliers with them: 80% of goods sold by the Big Red One in their three top-performing countries on the continent come from Europe, Latin America, the East and Africa itself. This is because South African suppliers are crowding the south bank of the Limpopo like nervous wildebeest during the migration, eager to sample the lush grasses on the further shore but nervous of the costs and risks involved in doing so, as well as the dent this might threaten to short-term profitability.
Comment: Although businesses like Tiger Brands and Pioneer have shown themselves quite equal to the challenge.
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Massmart Build it and they will come
While gloom is expected from Massmart this Thursday, with The Men in Black warning us of declining profits and stressed consumers, and the share price following suit, there is a little glimmer at the edge of the clouds, and its name is Massbuild. Massbuild, Massmart’s building materials and DIY division, is going great guns with its low-cost Builder’s Superstores, which are taking on Cashbuild and SPAR’s Build it. Massmart launched with five Builders’ses last year and is planning another three. The success of the format, Massmart believes, is due in part to the wave of renovations undertaken by lower-end consumers who cannot afford to trade up but want to improve the houses they already own, and the owners of a new generation of RDP houses.
Comment: The bakkie brigade and their buck have long been a source of stiff competition among the businesses in question.
MANUFACTURERS AND SERVICE PROVIDERS
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Tongaat Hulett Burn, baby, burn.
Tongaat Hulett is one of the businesses which may or may not be interested in turning the beautiful, windswept Makhatini Flats into the next Kuwait, where a major investor – thought to comprise Brazilian and US interests – is looking at developing 30,000ha of sugar cane to feed a new mill and bioethanol refinery. Other businesses joining the biofuel rush are Ubuhle, who want to build their plant near a wetland recently trashed by KZN Wildlife and the provincial department of agriculture, and Silvapen, who eat small children for breakfast. Tongaat Hulett, who have not otherwise made their intentions clear, are investigating further plantations in this area. The proposed developments will add immeasurably to local household income, dramatically reduce the cost of fuel and bring peace to Gaza.
Comment: Fuel – whether you frack it or cultivate it – is a great pyramid scheme which has just about run its filthy course.
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Clover Quod erat demonstrandum
Much has been heard, lately, about plucky South African businesses and sectors which have turned the tide on cheap imports by successfully lobbying the government to slap protective tariffs on anything resembling a Brazilian chicken or a French onion. Here’s a feel-good story about just the opposite: Clover have succeeded in getting the Namibian High Court to set aside restrictions on the import of dairy products into that thirsty land. Clover had reported previously that these restrictions – embodied in the evocatively named Government Notice 245 of 2013 – were costing them N$500k a month, or 70% of their business there. Interestingly, neither the Dairy Producers Association of Namibia nor Namibia Dairies opposed the Clover application.
Comment: Swings and roundabouts, ay.
TRADE ENVIRONMENT
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Retail Shares Best to shove it all under the mattress then
The boom is over, or so the gimlet-eyed analysts are telling us. Retail shares everywhere are on the run, with Shoprite declining 9.7% over two days last week, SPAR down 1.39%, Woolworths down 0.77% and Massmart, who have warned us not to expect great things at the results presentation, dropping 7.24% and Pick n Pay almost 5%. Analysts – and the retailers themselves – are uniformly pessimistic about the prospects for South African consumers and thus the businesses that serve them, with high indebtedness and persistently high unemployment particular causes for concern.
Comment: Still, it was good while it lasted.

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