Bracing for the worst
SA companies are probably more familiar with economic and political uncertainty than most, but those that still have ties to the UK are in for an extra dose of the unknown.
Brexit negotiations are coming to a head and the reality, says Clive Black, head of research at Guernsey-based Shore Capital, is this: “Nobody can tell us what will be happening on April Fools’ Day in the UK this year — the uncertainty is growing by the day.”
Some Jse-listed companies, including Netcare and Spur, quit the UK before Brexit negotiations reached a fever pitch.
Those that have remained have mostly kept mum about their Brexit hopes and fears; their UK peers have been far more vociferous.
In late January, major retailers including Waitrose, Marks & Spencer and Mcdonald’s UK warned legislators that a no-deal Brexit — where border checks are reintroduced and the UK’S future relationship with the EU is uncertain — could put Britain’s food security at risk and push up prices, an article in The Independent says.
For instance, 90% of the lettuces sold by that group of companies during the winter months are imported from the EU, along with 80% of tomatoes and 70% of soft fruits.
“As this produce is fresh and perishable, it needs to be moved quickly from farms to our stores. This complex, ‘just in time’ supply chain will be significantly disrupted in the event of no deal,” the companies wrote in a letter.
Needless to say, this suggests similar complications for the likes of Gourmet
Burger Kitchen (GBK), which Famous Brands bought for £120m just months after the 2016 Brexit referendum.
Partly because of declining consumer confidence and fierce competition in the premium burger market, that business has already stumbled. Famous Brands has closed stores and written down the value of GBK by more than half.
But should a no-deal, or “hard”, Brexit materialise, things could get even worse.
“The UK wouldn’t starve, but there would be quite considerable logistical challenges for short shelf-life food retailers in particular,” Black says.
GBK and its peers could face logistical holdups at ports, as well as “some specific product availability issues”.