SA’s growth rate ‘not enough to create jobs’

• Edcon CEO Grant Pattison urges the government to create ‘positive investment climate’

The head of Edcon, the country’s second-largest clothing retailer, says SA’s anaemic economy is simply not growing enough to allow companies to boost earnings and create jobs.

Grant Pattison, the CEO of Edcon, which owns CNA, Jet and Edgars, joined business leaders from across the spectrum in calling on the government to put an end to policy uncertainty and create “a positive investment climate”.

Sibanye-Stillwater’s Neal Froneman and FirstRand’s Alan Pullinger have also urged the government to take action.

With the economy only growing at an annual 0.9% in the second quarter of 2019, according to Stats SA’s latest GDP figures, “this is the most difficult retail environment I have ever seen”, Pattison told Business Day.

“And worse than the current situation we are in, is there doesn’t seem to be much news ahead that would change it,” Pattison said.

Slow growth and perceptions of policy paralysis within the government have seen the optimism that greeted President Cyril Ramaphosa’s election evaporate. The Reserve Bank has projected that the economy will expand just 0.6% in 2019, well below levels needed to tackle a record unemployment rate of 29%.

Retailers, often viewed as a bellwether of the economy, have been battling across the board, with the likes of Massmart, Shoprite and Truworths all reporting disappointing results, resulting in their share prices taking a knock.

FINANCIAL CRISIS

The JSE general retailers index has lost 18.14% year-to-date, putting it on track for the worst losses since 2008 and the start of the financial crisis.

Given the widespread effect seen across Edcon’s peers, Pattison said: “I think one has to accept that it can’t entirely be bad retailing. I think there is an economic effect to this.”

The government has to create a more positive investment climate, he said, stressing that this meant encouraging not just foreign investors, but local investors to put money into

the economy. “If South Africans aren’t prepared to invest in their own economy, no-one will.”

Unresolved policy debates over issues such as land expropriation without compensation as well as the introduction of national health insurance were “not useful”, Pattison said.

Until parliament and the government achieved some certainty in these “sensitive areas” businesses would wait to make investment decisions, “and if we sit and wait we are going to fail”, he said.

Pattison, who has been at the helm of a restructuring plan for the 90-year-old retailer that almost collapsed in February, said that despite the tough climate, the group was on track with its turnaround strategy, though it remained “very fresh”.

The turnaround plan saw the injection of R2.7bn by Edcon’s lenders, its landlords and the Unemployment Insurance Fund (UIF) through new cash commitments as well as lease reductions from its landlords.

Though its floor space has been reduced by about 10%, amounting to about 150 stores, Pattison said the space reduction had been achieved without the need for job losses.

“We have retrenched no-one and we’ve transferred the jobs,” he said.

It was, however, still early days he said, with Edcon only into the first six months of trading since the rescue package was announced.

The group was set to deliver its second-quarter results “on plan”, he said.

But it was the third quarter, which covers the peak Christmas trade, that would be the test, he said.

“If we have a good Q3, shareholders will be happy with that. If we have a bad one, then I think we’ll have some stuff to talk about.”