‘Walk the talk: cut red tape to get SA on track’
RED tape and a wildly fluctuating rand are Whitey Basson’s biggest concerns.
The CEO of South Africa’s most successful retailer, Shoprite, says red tape is impeding trade and smothering the small business sector at a cost of hundreds of thousands of jobs.
The government says it is committed to cutting red tape, but he sees no evidence.
“It’s not getting any easier,” he says. “This is why South Africa is not progressing.”
And although “we never talk politics” he admits that the political environment causes sudden and wild movements in the exchange rate, which makes doing business in South Africa difficult.
“If the rand suddenly drops the way it has it creates havoc for us.”
A couple of hours after his interview with Business Times the rand plunged 4% after the news that Finance Minister Pravin Gordhan was being charged.
Basson has just delivered another set of financial results showing why he is considered the best retail boss in the country and one of the best in the world.
Full-year profit rose 17%, beating analyst estimates, while headline earnings per share rose from R7.73 to R9.04. Group turnover grew 14.4% despite a slowdown in new store openings.
But most of the talk has been about the R100-million annual salary he was paid, which included a performance bonus for beating the group’s targeted profit growth.
Basson insists he never discusses his salary.
“My salary’s controlled by a remuneration committee, and they must decide what I’m worth. I am totally neutral, I don’t interfere.
“I have never asked for an increase. If anyone wants to know ‘Why the hell do you pay Whitey so much money?’, then my chairman must answer that.”
Chairman Christo Wiese says if he could find more Whitey Bassons he would hire them all.
“I must get paid what people think I am worth,” says Basson. “If they think I’m not worth it then I must find another job.”
He says almost half his salary goes to the state in tax.
“Between 40% and 50% of my salary goes into other salaries. I keep people employed.”
He says the level of poverty in South Africa depresses him.
“It makes me depressed to see poor people. I hate to see people without food and begging.”
He does what he can to alleviate poverty by financing projects out of his own pocket.
“A lot of them are not based on high returns but because I am happy to see people develop.”
An example is a restaurant he built and gave to a young man. It created 30 jobs, he says.
Basson, 70, is as down to earth and unpretentious as his modest head office in Brackenfell in the northern suburbs of Cape Town, the equivalent of the southern suburbs of Johannesburg. He doesn’t look like a fat cat or sound like one.
“My lifestyle must not change to project lavishness. Everybody who knows me knows that I don’t live that salary. I don’t fly my family first class.”
He admits to having “a beautiful deep-sea fishing boat” in Gordon’s Bay, but says he hasn’t been on it for three years because of work.
Basson became CEO of Shoprite in 1979 when the retail space was dominated by Pick n Pay, OK Bazaars and Checkers. Shoprite was worth just R1-million. Today its market cap is R114-billion.
He took calculated risks such as absorbing OK and Checkers, and expanding into Africa at a time when no one else was. Members of his board opposed him.
Wiese backed him. “And that was it,” he says.
The two men have been friends and mutual admirers since studying at Stellenbosch University together. Both became chartered accountants.
“He liked making money on the share market doing his corporate thing,” says Basson.
“I did retail operations. I like the operational part of it. So he never interfered in my operational business, but he kept the rest of the bells ringing.”
Basson doubts he would have been so successful if he’d been working for some conglomerate or institution that owned all the shares.
“So I really had that” — the support of a chairman who owned a big chunk of the shares and, crucially, most of the voting rights.
“Our opposition wanted a McKinsey study done before they opened a store. We just opened the store and let them do the study afterwards.”
Quick decision-making and implementation are essential ingredients of success, he says.
“In our trade there are very smart people around us that are in opposition to us. So we have to make very quick decisions.
“The rand can dump you by 9% and all of a sudden you’re not a net importer from a certain country, or you’re not a net exporter to an African country. Or there’s a political uprising. You literally live day to day.”
Shoprite has 336 corporate stores in 14 African countries outside South Africa and their number is growing faster than in South Africa.
Basson is more optimistic about prospects in these African countries than those in South Africa.
“Africa is at a lower point in the scale. There is less competition, there are more opportunities — vast countries with lots of resources.
“To be successful in the retail industry you have to have people, which they do. And you have to be really advanced technologically. If you can satisfy those two areas then you’re on top.”
African countries are “leapfrogging” South Africa in terms of information and communications technology
Some have much cheaper, faster broadband.
On his first trip to Nigeria 10 years ago he had to use a satellite phone rigged up in the garden. The lines were “terrible”, he says.
“Now the internet is 20 times faster than anything we in South Africa can offer. So they’ve just leapfrogged us. We have a similar number of Facebook followers in Nigeria as in South Africa [with 1 519 corporate stores].”
The physical infrastructure — mainly roads and ports — has improved by leaps and bounds, thanks in large measure to the Chinese.
The approach of Africa’s bureaucrats to trade has not improved much, though, he says.
“It’s fantastic to talk to them, it’s fantastic to negotiate with them. The fact of the matter is that nothing comes of it. It’s not a question of people don’t understand or appreciate the problem. The fact is there are so many laws that prevent you from doing business in an easy format.
“But we have worse problems in South Africa.”
The minister in the presidency said he wanted South African companies to do more crossborder trade with southern African countries. More exports and imports, he said.
So Basson asked his head of logistics to give him a report on what this involves. The results are horrifying. “We do 15 000 shipments to 14 African countries. For that we need 758 462 pages of documentation. That’s 64 000 pages per shipment — 634 pages of documentation needs to be completed to send one container out of South Africa. Unless we fill in 758 462 forms we won’t get anything across the border.
“That’s exports from South Africa. It’s money that is supposed to keep the growth rate above 1%.”
This kind of bureaucratic madness is also stifling the development of the small business sector in South Africa.
“All the talk is about supporting small entrepreneurial businesses.” But it is just talk.
Basson takes a keen interest in helping people develop small businesses out of what they do, be it fishing or making koeksisters and milk tarts. He gets his stores in the towns to equip them with deep freezes and stoves and buy from them at agreed prices.
More often than not they’re defeated by red tape.
“As soon as we supply you we have all these requirements to comply with,” they tell him. Invariably they give up.
“We have a whole department, which costs us a fortune, so we can comply. Small traders, who can create a massive number of jobs down the line, can’t afford that.”
Wiese has been very involved in the CEO Initiative to avert a sovereign ratings downgrade to junk status, but Basson is sceptical.
Too much talk and too little action, he says.
“I went to one meeting and said I’m going to go bankrupt if I go to the next one.
“It’s night-time stories. The world only takes notice of you if you actually do things and actually get it done.”
If you want to know ’Why the hell is Whitey paid so much?’, my chairman must answer Unless we fill in 758 462 forms we won’t get anything across the border We have a department, which costs us a fortune, so we can comply. Small traders can’t afford that