Cycle retailers caught wheeling and dealing too much
March 6, 2009
The Competition Commission chose an interesting week to reveal that it is looking into a possible cartel among retailers of bicycles in this country.
As thousands of keen cyclists head for Cape Town to take part in the Argus Pick n Pay Cycle Tour, they will have much to talk about. The expected 38°C heat will certainly not escape discussion during the final preparations for what is described as the "world's largest individually timed cycle race".
It is also possible there will be some discussion around the very hot issue of the alleged cartel among retailers.
On Thursday the commission announced that it had initiated an investigation and issued summons against two cycle retailers - Fritz Pienaar of Fritz Pienaar Cycles and Andrew Mclean of Cycle Lab.
The commission noted that it was in possession of minutes of a meeting "from which it appears that a group of bicycle retailers met to discuss how to work together to raise prices in order to increase their margins".
It seems the retailers discussed increasing the prices of cycling accessories to lift those margins to 75 percent from 50 percent. Prices of bicycles were also to be increased, to improve margins to 50 percent from 35 percent.
The commission reckons there are more than the two named entities involved and it has initiated an investigation to uncover the "true extent" of the alleged cartel.
Presumably to ensure that there is some robust discussion among cyclists about the alleged cartel, the commission included, in its statement, the address of the website where it had unearthed the minutes.
The document on www.thehubsa.co.za reveals that these retailers did not believe that getting together to agree to set prices might be illegal, although at the very end of the minutes someone does suggest that they "should perhaps seek some legal advice".
Murray & Roberts might be able to point them in the right direction.
Too big to bank
Monetary authorities have always known that some banks are too big to fail. Now they are discovering that some banks are too big to save - because they grew their assets far more quickly than the economies in which they were based.
This emerged in a slide prepared by Citigroup Global Markets, which was part of a presentation on Thursday by Andre Roux, head of fixed income investment at Investec Asset Management.
Until the banking crisis is resolved, the world won't recover from the sharp economic slowdown, Roux says.
Among banks that are proving hardest to save is Kaupthing Bank, the biggest in Iceland, which lent nearly 550 percent of the country's gross domestic product.
In other words there is no way Iceland's government can guarantee to refund depositors if there is a run on the bank. And unlike the US, which has the benefit of a reserve currency, Iceland can't just print money.
In October British depositors in Kaupthing's UK operation were rescued by the UK authorities when that operation faced collapse. The parent bank was nationalised by the Icelandic authorities during that country's financial meltdown in 2008.
Other banks high on the list are Swiss banks UBS and Credit Suisse, as well as Denmark's Danske Bank. More problems are likely to emerge in countries like Ireland and those in eastern Europe.
The ratios highlight the meaning of systemic risk: there comes a time when the huge losses incurred by banks exceed the resources of the countries where they operate. And the problem can only get worse as global gross domestic product shrinks. Iceland's economy is expected to shrink nearly 10 percent in 2009.
Same difference
A breakfast meeting omn Thursday addressed by ANC secretary-general Gwede Mantashe at the Cape Town International Convention Centre, seemed like a switch back to another era.
The event was organised by the ANC Progressive Business Forum, a fundraising arm of the governing movement run by Renier Schoeman and Daryl Swanepoel.
Schoeman is a former deputy minister in various portfolios and was the KwaZulu-Natal leader of the New National Party (NNP) but was first directly elected to parliament in 1987 as National Party MP for Umhlanga.
He was deputy foreign affairs minister under Pik Botha and served as deputy education minister in the early years of the ANC-led unity government before the National Party withdrew in 1996.
He subsequently served as deputy health minister under then-minister Manto Tshabalala-Msimang until 2004.
Swanepoel, a former MP, was the last secretary-general of the NNP before it closed shop in 2006.
In the audience were Con Botha, a former Natal administrator, Piet Matthee, a former NNP MP for a Durban constituency and former Pretoria MP Edwin Conroy.
Among all the old Nats, Mantashe - a black communist - stood out like a sore thumb. However, even he acknowledged that much of the infrastructure provided by the former regime, including the homeland governments, had been allowed to run down in the period of democracy.
In the Eastern Cape just about every piece of land was used productively. Now one travelled miles to find agricultural activity.
He spoke against protectionism, despite pleas from business leaders to protect vulnerable industries, including textiles.
Responding to former National Party stalwart Jannie Momberg, a former envoy to Greece, Mantashe said the fact of qualified people chasing jobs abroad was perfectly natural.
Now, because of the changed economic climate, they were returning home. There were plenty of skilled people from abroad working on South Africa's infrastructure projects, he noted.
This just proves that in politics, the parties may change but the message stays much the same.
Edited by Peter DeIonno, with contributions by Ann Crotty, Ethel Hazelhurst and Donwald Pressly.
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