AN ECONOMY UNDER SIEGE
…..the Premier Eswatini Anomaly!
A suspicious and highly questionable acquisition whose process was mired with controversy has seen Premier eSwatini consolidate and cement its monopoly status in the confectionery industry in the country.
It would seem that the company spent some considerable amount of time studying and carefully analyzing the socio-economic terrain of eSwatini, then came to the scientific conclusion that the weak or somewhat absence of dynamic state institutions in the country could be manipulated for its benefit.
For instance, it still troubles the mind of curious and conscious Swazis as to how a 100% South African owned company could be allowed to sell bread, a commodity that is regulated by the eSwatini government. But that is just one aspect of it!
To exhaustively understand the irregularities pertaining to this matter, one has to go back to the merger between Swaziland United Bakeries (SUB) and Mister Bread that was allowed by the Swaziland Competition Commission.
For the uninitiated, there used to be two major suppliers of bread in the country – SUB and Mister Bread and these were merged and later sold to Premier, assuming a new name – Premier Bakery – and became fully operational around February 2012.
Underline this: Premier had now taken over as the biggest supplier of bread in a transaction that was questioned by Competition Law and Policy experts, albeit in hush tones. But why was this merger problematic in the first place? Could the unconventional merger itself be a product of Premier eSwatini’s influence and powers behind the scenes? Experts don’t rule out that possibility.
As experts had advised The Bridge before, Competition authorities globally are generally more suspicious of horizontal mergers than they are of non-horizontal mergers.
A Horizontal merger is a merger between firms that produce and sell the same products. Basically, it is a merger between competing firms. A vertical merger joins two companies that may not compete with each other, but exist in the same supply chain.
Therefore, the SUB and Mister Bread merger involved two leading competitors, and the Competition Commission was correct in viewing it with suspicion at first because it was a horizontal merger. However, it went ahead to allow this merger. One expert told The Bridge before, “I can tell you that was a big blunder by the Competition Commission; that merger has adverse effects on competition. As a result, it is highly likely that some of the small bakeries closed down because of the effects of this merger. In fact the Competition Commission has some serious explosive to do here”.
Premier Eswatini also acquired flour producer, Ngwane Mills
Premier eSwatini was not done. It bought Ngwane Mills around 2014 and they now had controlling interest in the country’s producer of flour – in addition to owning the biggest bread company after the merger of SUB and Mister Bread.
That was the beginning of everything. Around 2018 the company bought Swazi Mahewu and started trading as Premier Eswatini Beverages. What a strategic move! Can fair competition ever be possible when Premier owns the flour producer in the country and has other businesses that need flour and where they compete with other companies?
The likely effects of this is that, for instance, the flour producer can charge high prices for Premier Bakery's competitors who may take a decision to pull out of the industry. Anyway, they have tactically mastered the game – in a country with weak systems and processes you can do anything with its economy and get away with it.
And boy, they are calling the shots! If you go to Premier Bakeries you will be shocked at how, for instance, they have demoted and cut salaries of qualified and experienced Swazis to give way to non-Swazis.
One Bonisile Sibandze was moved from the position of Finance Manager to be an Accountant; Sithembile Khumalo was demoted into Sales Manager position, down from Bakery Manager role which was later given to a white person.
Bonisile’s position was given to someone from Lesotho and a Zimbabwean national took over from a Swazi as Transport Manager! “It has been very painful to see qualified and experienced Swazis being demoted and positions given to non-Swazis. That was dehumanizing and salaries were also cut,” says a source who spoke to The Bridge.
It remains a question as to whether or not work permits are supposed to be given to an individual who comes to assume a position from a qualified and experienced Swazi who gets demoted in an inhuman manner as is the case at Premier Bakeries.
The Bridge has reliably gathered that Premier Eswatini hardly uses local suppliers and this is detrimental to the economy. In a recent public statement, the company says, “Premier Eswatini prides itself in making use of local suppliers and service providers as an integral part of our operations…” The company also talked about some Corporate Social Initiatives (CSI) in which it is involved in eSwatini.
However, an internal source revealed, “These CSI projects are way too little and disproportionate to the amount of money the company makes in eSwatini. Other companies that make far less than Premier Eswatini have made huge investments in our community, compared to them. They also lied about using local suppliers; cleaning services at Premier are provided by a South African company; the same applies for companies providing electrical services and promotional items - all South African. Transport services were monopolized to Southern Star's Wayne Londevale."
The million dollar question is: who allows for companies like Premier to operate like this? Why allow a 100% South African owned company to trade in a commodity that is regulated by the government – of flour at the same time? Why allow harmful business transactions or mergers that cripple the economy like that? Why allow the demotion of qualified and experienced Swazis to give way to non-Swazis the manner they do? How does it benefit the economy when we get foreign suppliers for goods and services that can be supplied by Swazi companies employing Swazis and using the money here at home?
Muzi Dlamini, the Competition Commission's Chief Executive Officer, told The Bridge that his organisation can take measures to correct undesirable situations, especially where they find that a lack of free and open competition in the market. Dlamini said they do this through conducting market inquiries and impact assessments.
"These studies can be defined as research projects aimed at gaining an in-depth understanding of how sectors, markets or market practices are working. In the case of the market you have mentioned, the Commission would deal with any adverse effects of the merger through conducting an impact assessment, which will have the purpose of determining whether there is a need for further or additional intervention to improve competition is the specific market as well as consumer welfare," continued Dlamini.
As a general rule, the Commission conducts impact assessments five years after a merger has been approved. The reports are externally published in order to further raise stakeholder awareness of any action taken by the Competition Commission. Dlamini confirmed that in this case an impact assessment in the market has recently been undertaken and the findings shall soon be published once they have concluded all necessary consultations.
NB: The article has been updated to include the Competition Commission's comments.