Retail sector boosted by growing black shopper base as BEE stays on the shelf
IN South Africa’s retail sector, black consumers make up most of the customer base, yet ownership of listed entities in the industry remains the least transformed.
A lag in the drive for economic transformation has placed the retail industry in the spotlight as efforts to transform ownership structures are stunted by a lack of commercial pressure placed on retailers.
Shoprite, Pepkor Group, Pick n Pay Stores and Woolworths Holdings are some of the beneficiaries of a growing black consumer base that enabled the industry to balloon to a market capitalisation of about R504-billion on the JSE last year.
The bourse has a total market cap of R15.2-trillion, according to data supplied by the JSE.
Retail tycoon Christo Wiese said the sector had a small pool of talent able to run big retail organisations.
“Forget about race or any race classification — just finding people is a very difficult task and you have to train people over a very long period of time to do that kind of job,” he said.
The doyen of South Africa’s retail world and an increasingly big player in Europe, Wiese holds significant stakes in Shoprite, the continent’s biggest grocer, and Pepkor, the biggest fashion retailer in terms of the number of stores.
“Whitey Basson [Shoprite CEO] had the opportunity over 40 years to grow into the business, so it’s not like we have dozens of people, white or black, where you can just go and pick one and say: ‘Well, this guy is capable of running an operation of that scale,’ ” said Wiese.
“It’s got absolutely nothing [to do] with a lack of transformation. If that’s what people’s criticism is, it is absolute nonsense.”
Regarding ownership, Wiese said analysis of the full shareholding of Shoprite “will find that the majority of the business already belongs to black people [through] the various funds and pension funds”.
In the scores of the most empowered companies for 2015, collected by empowerment ratings agency Empowerdex, the Clicks group ranked 51st, the highest among retailers. The Spar Group scored the lowest, ranked 108th.
Nomzamo Xaba, group executive of research and advisory at Empowerdex, said: “A lot of them [retailers] are very conscious of the fact that they service a consumer base that is largely black, and therefore having the correct BEE credentials helps their cause.”
A study by the Department of Trade and Industry of the mass groceries segment showed that the level of transformation was low, said Liso Steto, the department’s acting chief director for BEE.
“Ownership in particular is the element which lags behind.” Steto said the study “recognises that transformation in the retail industry will not be realised if we do not focus on the entire value chain, which is vertically integrated”.
Retailers say they have been playing their part in growing South Africa’s value chain through supplier development programmes.
David North, head of group strategy at Pick n Pay, said spend on small and medium-size suppliers had quadrupled in 2015 and expenditure on broad-based BEE businesses rose by over 39.2% to R33-billion, with a focus on businesses owned by black women.
Zinzi Mgolodela, Woolworths’ head of transformation, said the retailer’s employee share scheme had brought about significant economic empowerment to its almost 8 000 staff, most of whom were black.
Most active staff in the scheme each received a pre-tax cash payout of more than R200 000 on top of the dividends they had been getting over the past few years, she said.
Jenni Lawrence, MD of Grant Thornton verification services, said that for most retailers, the consumer was the end-user, and empowerment credentials were not critical to business.
“When you go and buy things at Builders Warehouse, Truworths or Pick n Pay, you don’t look for a BEE certificate.”
Steto said that to transform the retail sector, companies needed to work closely with the industry by establishing partnerships. One of the partners the industry had identified was the Consumer Goods Council of South Africa.
Council CEO Gwarega Mangozhe said the Department of Trade and Industry was considering a retail charter to drive transformation.
But Mohale Ralebitso, CEO of the Black Business Council, said: “We have lacked the ability over the years to have an enforcement mechanism that holds companies to account on their [empowerment] plans and which doesn’t punish them for not delivering on those.
“So we have had an extended period when there has been noncompliance. We’ve rewarded business that don’t deserve to be rewarded . . . too many have enjoyed the flow of opportunity from us, whether it be social grants and other mechanisms that have expanded their market,” he said.