Good Woolies money after bad in Australia
It hardly surprised that Thursday ’ s announcement that David Thomas, CEO of Woolworths ’ Australian folly David Jones, has resigned for personal reasons had a chilling effect on investor sentiment.
Thomas was the man tasked with stopping the rot at the Australian department store; in that role he was leading the incredibly extravagant A$200m refurbishment of its flagship store in Elizabeth Street in Sydney. Remarkably, the A$200m was being spent in a bid to spare Woolworths further write-offs of its R21bn investment. Just 12 months ago the group announced it was writing off a third.
Some shareholders may recall comments by the chair at the AGM in November that there was no certainty there would not be further write-offs.
Thomas was at the helm for only two years; the new CEO, who has yet to be appointed, will be the fourth since Woolworths acquired the troubled Australian business in 2014. A lot of South Africans visit family in Australia during the year-end holiday and return to recount their stories. One, an international retail expert, reckons the A$200 is a case of “good money after bad”.
He told Business Day that while there is growth opportunity for traditional bricks-and mortar-stores in Australia, the David Jones team seems to have badly miscalculated market trends. It’s not just that the brand focus is inappropriate or that the food hall idea isn’t working, but David Jones’s traditional market is moving out of the city centres and increasingly shopping in the suburbs. All their promises are delivering almost nothing.
If true, the CEO churn is hardly surprising.
There was a distinct air of cynicism at the Investing in Africa Mining Indaba despite the copious reassurances from President Cyril Ramaphosa and mineral resources minister Gwede Mantashe.
As veterans of the National Union of Mineworkers (NUM), with Ramaphosa instrumental in making it the country’s most powerful union in the 1980s and 1990s, both men understand the mining sector. Ramaphosa became the first sitting president to address the annual conference in its 25-year history and he went out of his way to placate critics, soothe fears and deal with the concerns resulting from a cautious approach by mining companies and investors towards SA.
He spoke of the need to tackle the crisis at power utility Eskom, he said investors shouldn’t worry that their assets would be seized in the government’s planned land expropriation without compensation, and that his government and law enforcement agencies are getting on top of the corruption problem that is such a feature of SA politics and business.
Mantashe stressed regulatory certainty coming from a fiercely debated mining charter and the scrapping of amendments to the Minerals and Petroleum Act.
But still there was cynicism. After nine years of Jacob Zuma and the corruption and incompetence during his presidency, the antiquated liberationist rhetoric of the ANC, and apparent inaction against corrupt ministers and officials, investors remain unconvinced.
What Ramaphosa has to do is tackle head on the most difficult and politically dangerous problems facing him, ensuring his corrupt comrades are arrested, tried and jailed. Nothing will send a stronger message that he is serious and that his words can be taken seriously.