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Mixed feelings over Choppies proposed merger

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[blockquote style=alternative] It will monopolise the retail industry – analysts [/blockquote]

The Competition Authority (CA) last week received a merger notification between Choppies Enterprises Limited, Supasave (Pty) Ltd and Megasave (Pty) Ltd. According to the proposed merger, Choppies seeks to acquire all issued shares of Supasave and Megasave. Choppies is a service provider of fast moving consumer goods with 70 retail stores both in Botswana and South Africa and an estimated market share of 30 percent in the retail industry. As part of further expansion plans, five stores are nearing completion in South Africa and four in Botswana. On completion, this will bring the total to 79 stores. Supasave is similarly a service provider of fast moving consumer goods, while Megasave was incorporated for the purposes of sourcing and supplying stock to Supasave. Supasave operates six retail stores in Botswana and accounts for less than one percent of the national market share in the retail industry. The Gazette Business sampled the views of the general public, as well as analysts on whether it is a good move for Botswana’s fast growing retail chain to eventually swallow up the competition.

 

An analyst from I-Pro, Karabo Tladi, reckons that the merging would kill the spirit of competition. “It will not add value to their company, with Choppies having over 60 stores and with Super Save with only six. They are just trying to kill competition, hence monopolising the industry,” said Tladi. He added that the group’s ambition could be to buy Super Save stores because they are strategically located in busy shopping areas, like the Gaborone Bus Rank, for instance. Nonetheless, Botswana Institute for Development of Policy Analysis’s (BIDPA) research fellow, Professor Roman Grynberg, was of a different view. He said he does not see any problem with the merger. “The Choppies group is doing quite well and I do not see any problem with the merging of these firms. However, I do not understand why they (Choppies) opted to go for such small firms; and I still want to understand how the consumer is going to benefit in this,” Grynberg said. On a more pessimistic note, Dr Tebogo Magang, Lecturer in Corporate Governance and Management at the University of Botswana said if the merger becomes successful, Choppies will control the market and there will be possible price increases for goods. “We can just put faith and wait for the Competition Authority’s decision, as is the one that can only protect the consumers’ interest. It is not like the employees and consumers are going to benefit from the merger, otherwise it is likely to restructure and employees will suffer due to job losses,” he said.

 

If the possible merger is found to be exceeding the threshold of the market share as defined by the Competition Authority policy, Dr Magang said Choppies request then will not be successful. A consumer, Peter Madibela, said, “That is straight monopoly; I do not think it is a good idea. We have small businesses who supply Choppies and they are always complaining about Choppies dictating the prices for their supplies and the prices are too low. Considering this, where will they go for better prices if Choppies will have to control the whole retail sector in Botswana?” Another consumer, Tibayani Mabalane, said, “It is good if we have a big indigenous supermarket in Botswana as well, just like the South African chain stores. However, they should not be over excited with expanding their stores and forgetting to provide us with quality products.” He added that Botswana will now have an-all too powerful retailer, possibly with too much power over prices and calling all the shots in the industry. Asked to explain the rationale of the proposed merger and its benefits to the consumer by Gazette Business, Choppies’ Chief Executive Officer (CEO), Ramachandran Ottapath said, “The matter is still with the regulators and we cannot comment at this stage on any of these issues.”

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