Rejecting Steinhoff has paid off for Shoprite
During last week’s parliamentary briefing former Steinhoff International chairman Christo Wiese recounted how confident he was in the Steinhoff management team and board. So confident that in 2015 he sold Pepkor, the group he had built up over 50 years into Steinhoff, in exchange for sufficient shares to ensure he was the largest single shareholder in the group.
His original plan had been to consolidate all of his business interests including Shoprite, into Steinhoff. However, Shoprite minority shareholders were having none of it. There was speculation at the time that Shoprite CEO Whitey Basson was also keen to avoid his retail group being poured into the Steinhoff melting pot.
But Wiese was determined. Lured by his confidence in the Steinhoff team, a primary listing in Europe and the prospect of being the single largest shareholder in the second largest global furniture retailer, he plugged away at his plan.
In 2017, Wiese announced he was selling his Shoprite shares into the Steinhoff Africa Retail (Star) subsidiary. Basson seemingly never reconciled himself with being a senior executive and major shareholder in anything related to Steinhoff. Perhaps knowing how determined Wiese was to consolidate his interests, Basson bailed from the Shoprite executive team in December 2016.
Wiese’s presentation to Parliament reminds Shoprite shareholders of the debt they owe Basson. Not only was he key to creating the largest grocery retailer in Africa, he sheltered it from Steinhoff. The share price movements since December indicate how grateful shareholders should be.
Steinhoff struggles to stay above R6, Star is down 20% on its early December price, while Shoprite moved to a record high of R248 last week before edging back.
The Oceana group, which had recent turnover of between R6.8bn and R8.2bn a year, is splashing out on desalination technology. This will protect thousands of jobs amid the Cape’s water crisis, it says. The company produces Lucky Star pilchards, a staple of South African diets.
About R20m will be spent on building a desalination plant that can produce 800,000 litres of water a day at the company’s biggest canning facility in St Helena Bay on the west coast by the end of March. The factory will be able to function without drawing water from the municipal supply, Oceana says. Another 600,000-litres-a-day desalination unit will be built at the processing plant in Laaiplek, a little farther up the coast.
The company says it is investing R2m in a reverse osmosis plant and is exploring the possibilities of drilling boreholes on a nearby farm and conveying the water to the St Helena factory.
These water-saving initiatives may seem expensive in the short term, Oceana says, but in the long term the benefits for the company and communities far outweigh the costs. The logic applies to the water crisis in Cape Town, where desalination has been a hot political potato. Many naysayers claim that when the drought breaks, the city will be left with unused and expensive infrastructure.
But scaled to the costs for Oceana relative to its multibillion-rand turnover, and recent R468m and R916m in annual profits, this attitude is short-sighted. While desalination will be costly, just think of the cost of a city without water.