How labour has fared in Ackerman’s empire
He was known for his role in opposing labour restrictions in the apartheid era. But as economic conditions became tough, so did Pick n Pay
In 2009, as South Africa’s economy reeled in the wake of the global financial crisis, the relationship between now late retail titan Raymond Ackerman and Pick n Pay’s main labour union seemed to have soured.
As Pick n Pay counted the costs of a 20000-strong strike by the South African Commercial Catering and Allied Workers Union (Saccawu) over alleged racism on the part of the grocery chain’s executive, Ackerman released a statement denying the accusation.
In doing so, Ackerman invoked Pick n Pay’s liberal history: “Both the company and I suffered significant abuse at the hands of former politicians for our stand on human rights for black South Africans. We were harassed for our decision to violate the Job Reservation Act and promote black South Africans to positions they had earned in Pick n Pay.”
The following year, Ackerman would relinquish his chairmanship, handing over the reins to his son, Gareth, who thereafter endeavoured to cut Pick n Pay’s labour costs, which had soared above its biggest rival, Shoprite.
In the years since, Pick n Pay has struggled to get an edge over its competition, as South Africa’s retailers vie for a shrinking market. Although some have blamed burdensome labour costs for Pick n Pay’s troubles in the past, most analysts still point to the heavy price tag on the retailer’s biggest strategic blunder — its slowness to adapt.
Tributes to Ackerman have poured in since his death last week. Ackerman, who founded Pick n Pay in 1967, is remembered as having advanced the interests of consumers, as well as his employees, defying apartheid laws by promoting black staff to managerial positions.
Speaking to the Mail & Guardian this week, Cosatu’s acting national spokesperson, Matthew Parks, noted that Ackerman was one of the few white employers to go against apartheid-era labour restrictions. “At that time, it was quite revolutionary,” he said.
Ackerman also recognised the role of trade unions, working with labour as partners and not viewing them as adversaries, Parks noted.
In Asijiki: A History of the South African Commercial Catering and Allied Workers Union by labour historian Kally Forrest, trade unionist Herbert Mkhize reflected on changing labour dynamics post1994, which — as the book suggests — came with “a new breed of employers”.
“Employers were more sympathetic in the early 1990s, not as adversarial. Raymond Ackerman … opposed apartheid. We played on this. It was a liberal company,” Mkhize is quoted as saying.
But the relationship between Pick n Pay and labour hasn’t always been a smooth one. Even back in 1986, Ackerman went head to head with Saccawu, known then as the Commercial, Catering and Allied Workers Union of South Africa (Ccawusa).
With the founding of Cosatu, unionisation grew rapidly and the fight for better wages intensified, according to Asijiki. For Ccawusa, “Pick n Pay was the first national wage battle”.
In wage negotiations, Pick n Pay initially offered a R52 a month raise, while the trade union demanded R95. When negotiations deadlocked, 65000 workers went on strike. In a new tactic, striking workers demonstrated on the shop floor, waving placards and staging demonstrations inside stores, according to Asijiki.
“In response Pick n Pay, the company with the liberal, caring image, brought in white, coloured and Indian scabs in an attempt to divide workers along racial lines,” the book notes, adding that Ackerman also accused Ccawusa of using violent methods.
The parties ultimately agreed to a R85 increase. A year later, the union negotiated a R100 across-theboard increase, or 25.6%. According to Asijiki, this was the highest wage increase in South African labour history for a large group of workers at the time.
There were other strikes, including one immediately after the 1994 elections.
In 2011, when it became clear that Pick n Pay had truly been out-manoeuvred by Shoprite, the Financial Mail ran an article with the headline, “Pick n Pay — What went wrong?”
The article suggested that labour relations was among Pick n Pay’s biggest issues, quoting then operations director Neal Quirk as saying that the retailer’s cost per worker was the highest in the food retail industry.
Pick n Pay had recently received another bruising after about 27000 Saccawu members embarked on a two-week strike. According to reports, Pick n Pay initially offered an inflation-linked wage bump, while the union wanted a R500 increase. The parties ultimately settled on R365 and R400 a month over two 18-month periods.
The M&G’S own analysis shows that Pick n Pay’s cost per employee has consistently been well above that of Shoprite’s, despite the latter being the largest retailer by quite a margin. Where Pick n Pay dominated the market in the 1980s, Shoprite’s market capitalisation (R106.4 billion) now towers over its rival’s R22.5 billion.
According to Pick n Pay’s earliest available integrated reports, starting from 2002, the group also endeavoured to pay workers at a rate
above the average for the retail industry. In 2003, the department of labour prescribed minimum hourly wages in urban areas of R4.03 for a cashier, R4.84 for a sales person, R3.08 for a general assistant and R6.95 for an assistant manager.
In 2003, 71.7% of Pick n Pay’s value was allocated to worker salaries, wages and other benefits. By contrast, that same year, Shoprite distributed 66.4% to this line item. While only 5.4% of Pick n Pay’s value went towards growth, Shoprite allocated 22.2% to its expansion.
These ratios have inevitably changed over the years. In 2010, after Gareth Ackerman had taken over the chair, 65% of Pick n Pay’s value was distributed through employee costs. Shoprite’s had fallen to 58.9%. According to their most recent integrated reports, both Pick n Pay and Shoprite pay their employees more than the hourly minimum wage for retail workers.
In the years after 2010, Pick n Pay focused on reducing labour costs. In the wake of its lost market share and knocked profitability, the retailer announced it was considering retrenching more than 3 000 workers, although it eventually settled on a restructuring that allowed for a more flexible workforce. The group has embarked on several rounds of retrenchments since.
Veteran retail analyst Syd Vianello suggested that Pick n Pay had started to play hardball.
“It appeared to be a good relationship, but I am not so sure that it was. It went through troubled times … I get the feeling that the management — and it was very much a family business — probably felt that, in return for doing all these nice, good things, they should have been treated differently,” he said.
Meanwhile, South Africa’s retail labour force had been hit for a six by the country’s economic conditions as well as the rise of labour brokers.
According to Asijiki, by the 1990s, 40% of jobs at Pick n Pay were casuals. “A pattern began to emerge where companies restructured, retrenchments followed, then within a month they started to employ casuals,” the book notes, adding that trade unions were initially divided on how to relate to labour-broker workers.
Parks called the employment conditions of retail workers “exceedingly difficult”. “This is partly because of the changing nature of the economy and the outsourcing of work … That has had a negative effect on workers’ rights and has made it very difficult to enforce labour laws,” he said.
“It has also had the effect of suppressing wages. It makes workers very vulnerable. It is very difficult to organise.”
The retail environment became increasingly tough, as consumers began to count the costs of the country’s stagnant economy and climbing unemployment.
Sasfin Wealth senior equity analyst Alec Abraham said there has been no real growth (volume stripped of price increases) in the economy in practically every sector.
“And it is particularly pertinent in the food retail segment. All things being equal, one would expect that volumes in the segment will grow by approximately the growth rate of the population,” he explained.
“However, we haven’t seen that. Volumes are low. So, that means that people are consuming less — most likely because they can’t afford it.”
Abraham said that, for the most part, Pick n Pay’s underperformance stems from it being far too late in updating its strategy and operating model from a direct store delivery model to centralised distribution — a drawback also identified by Vianello.
In addition, Vianello pointed to Pick n Pay’s penchant for rolling out big stores as one of its flaws.
The group moved to centralised distribution in 2010, investing R628 million in a distribution centre in Longmeadow, Gauteng, which, incidentally, was also hit by strike action.
Shoprite began shifting to centralised distribution 15 years prior.
As Vianello pointed out, the eleventh-hour shift to centralised distribution also would have prompted Pick n Pay to streamline its workforce.
“When up against some very active and dynamic competitors, like Shoprite and Woolworths, they came up short very, very quickly,” Abraham said.
“The time for that shift in strategy, one, was overdue. And, two, I don’t think they had the strategic visionaries to pull off that shift.”
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