Shoprite boss puts blame on manufacturing

Shoprite chief executive Whitey Basson has moved beyond blaming the usual suspects of unions and labour legislation for South Africa’s economic woes and has lashed out at the “declining” manufacturing sector for its lack of innovation and competitiveness.

In his chief executive’s statement in the latest Shoprite annual report, Basson says he is concerned about the decline of manufacturing and also about “its lack of innovation and competitiveness”.

“Many manufacturers complain that due to high input costs they cannot compete with imports and therefore beseech the government to limit those imports by imposing higher duties on imports.”

Basson says this attitude places retailers in a difficult position because the people employed in manufacturing, who are at risk of losing their jobs, are customers of the retailers.

“The dilemma is that at the same time, the retailer owes the people of this country the opportunity to buy what they need at the lowest prices – 50 million people cannot be held to ransom by manufacturers that are unable to compete effectively in a world market.”

In recent months the government has approved increased duties on imports of both chicken and sugar in a bid to protect those industries from foreign competition.

While industry players have argued that the increased duties are needed to compensate for what is tantamount to “dumping” by exporting countries, a number of analysts have pointed to the low levels of investment in the local sugar and chicken industries as contributing to their limited ability to compete.

At the Astral Foods annual general meeting earlier this year Chris Logan, an analyst with Opportune Investments, criticised the management for paying out dividends instead of investing in new capacity that would lower production costs.

Basson criticises the government for not doing more to enhance the business environment. He describes the trading environment for the 12 months to the end of June as “disappointing” and notes: “The country’s low economic growth rate created many challenges for the retail industry, a situation exacerbated by the government’s sluggish pace at creating an environment in which business could flourish. At the same time, a lack of job opportunities increased the dependence of millions of South Africans on government grants, of which the annual increase did not keep up with inflation.”

Basson says the group was able to compensate for the disappointing trading environment through its “substantial presence” in other African countries where growth rates in excess of 5 percent were being achieved. “Whatever the difficulties of doing business on the continent, it provides us with enormous potential for future expansion at potentially higher returns than what we are achieving locally.”

Last week Woolworths chairman David Susman said there was “deep concern” within business about the “populist legislation being imposed on commerce in South Africa”.

Susman made particular reference to restrictive labour and trade practices. Despite the difficult environment, Woolworths was able to report a 27 percent hike in earnings, a 50.7 percent return on equity and an 18 percent increase in dividend payments to shareholders. Chief executive Ian Moir was paid R27 million.

At Shoprite, earnings and dividends were up 11 percent during 2013 while return on equity was squeezed back to 20 percent. Basson received R50 million in remuneration.

In his Shoprite chairman’s statement, Christo Wiese refers to the attractive opportunities in Africa but describes as an embarrassment the fact that on the continent, with so much prime agricultural land, 37 of the 54 countries import more food than they export.

On employment Wiese says the group employed an additional 9 201 people during 2013, bringing the total to 111 338.

Wiese says the group’s selection criteria for staff rank attitude higher than skills. “Over the years we have learnt that we can, through training and guidance, provide people with the skills they need. Attitude is another matter.”


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