Massmart Annual Report 2008

Further reading

Please see Improving employability for more details on WDB.

 
 

Increasingly, new graduates are facing the empty prospect of unemployment.

 

That's why we've developed a graduate trainee programme to help put them in the pound seats.
Massmart 2008 graduate development programme participants in Durban

Stakeholders

IMPACTING

Today’s South Africans are citizens of a young democracy and everyone deserves a dignified and prosperous life. We know meeting this expectation is not only morally right, but also commercially prudent. We’re aligning our e orts to the Department of Trade and Industry’s BBBEE Codes of Good Practice to ensure we’re contributing to a sustainable, fair environment for our business.

Estimated broad-based black economic empowerment (BBBEE) scorecard
Sustainability indicator 2008 (%) 2007 (%) 2006 (%)
Ownership 4,35 4,34 6,0
Management control 5,35 4,31 -
Employment equity 10,98 8,20 6,5
Skills development 5,16 2,20 10,0
Preferential procurement 3,60 4,80 5,1
Enterprise development 15,00 9,82 10,0
Socio-Economic development 5,00 5,0 9,9
Total 49,44* 38,67 47,5

* Source: FM 2008 Top Company Survey

 
Estimated African, Coloured and Indian diversity profile
Occupational levels 2008 (%) 2007 (%) 2006 (%)
Top management 17,8 13,6 21,0
Senior management 28,4 26,5 28,0
Professionally qualified specialists and middle management 42,5 39,3 43,0
Technically skilled and qualified 73,1 83,4 83,0
Semi-skilled and discretionary decision-making 90,9 90,1 88,0
Unskilled and defined decision-making 98,5 97,5 98,0
Total black permanent staff 83,8 83,4 83,0

2008 Feedback

Increase investment in enterprise development interventions that focus on customers.
Makro created a fund to provide high potential small traders, who otherwise would not have access to credit, with access to unsecured funding to support food procurement from Makro stores.

Implement accelerated payment terms for deserving small and medium black-owned start-up ventures.
Game has implemented a quick payments policy for black-owned non-trade suppliers who were collectively  paid approximately R125 million on pre-payment and/or early payment terms.

Develop a self-study retail procurement business guide for small suppliers.
A draft guide was developed but was found, in a small business focus group,  to be insufficient. The draft is being  enhanced.

2009 Priorities

Achieve level six BBBEE contributor status by June 2009.

Launch a group-wide initiative to employ more disabled people, placing emphasis on ensuring that 2% of all permanent employees are black disabled people. 

Increase the level of non-trade services procured from majority black-owned suppliers.

ACTUALISING

What we’re doing to empower South Africans

We use the DTI’s generic broad-based black economic empowerment (BBBEE) scorecard to guide us in making a meaningful contribution that creates more opportunities for black South Africans.

Most important for us is achieving transformation in our own business. Pleasing results in Financial Mail (FM)’s 2008 Top Empowerment Companies survey, in which we were ranked fifth overall on the Employment Equity scorecard element, indicates that we are making steady transformation progress. Five of our 12 non-executive directors are black as are 28% of senior managers, 43% of middle managers and 73% of junior managers.

We have also focused on creating economic opportunities for our employees through their participation in the Thuthukani Employee Share Trust. Black employees own 8,2% of Massmart through the trust, which has already enjoyed a capital growth of 70% since its launch in October 2006. This investment has also collectively earned employee participants R30 363 212,23 in biannual dividends*.

To create more opportunities for black youths not employed within our business, the Massmart/ Umsobomvu Youth Development Trust provides access to fast food franchise opportunities in or near our stores. Likewise, our WDB/Massmart Rural Women’s Enterprise Development Trust offers female entrepreneurs micro-loans to start up their own businesses in rural areas.

Our country’s most empowered listed retailer

In 2006, we set an internal goal of achieving a self-assesed group BBBEE score of 45% by January 2008. We surpassed this when we achieved 49,44%, and now we’re ranked as the most empowered listed retailer in the 2008 FM Top Empowerment Companies survey. Although our BBBEE ranking was high in the retail sector, we’re prioritising improving our overall rank of 58th out of all JSE-listed companies.

 Up to now, Massmart has relied on a rigorous process of preparing self-assessed scorecards that have been verified by Massmart Internal Audit. Beginning in October 2008, an independent verification agency will be validating our scorecard results. This decision comes before the finalisation of government policy on the South African National Accreditation System (SANAS) accreditation of BBBEE verification agencies. We hope this will serve as an example to our suppliers, many of whom cite the lack of SANAS accreditation of verification agencies as a reason for not submitting BBBEE scorecards.

Solid foundations for equitable employment

Our experience has shown us that two of the best ways to achieve employment equity are by investing in internal management development and by employing and training newly qualified black graduates.

Through our Graduate Development Programme, we identify qualified but inexperienced graduates for development in our business. For them, it’s invaluable retail experience; for us, it’s an opportunity to get talented young people excited about building retail careers within our business. So desirable have our graduate trainees become, in fact, that our operating divisions compete to retain the graduates they’ve trained within their chains.

Launched with an initial intake of 22 graduates in January 2007, the programme now hosts 40 graduates with plans in place for a further 35 by January 2010. We regard this as one of the BBBEE initiatives that has delivered the greatest value to Massmart.

Advocating supplier support for BBBEE

The success of BBBEE requires that each South African business encourages its partners to make a meaningful and authentic contribution. During the past three years, we’ve placed great emphasis on encouraging BBBEE compliance among our established supplier base and while our past experience has been that supplier commitment has been slow, our more recent findings suggest that more suppliers are starting to rise to the occasion by sharing their BBBEE progress with us.

Companies like Clover SA, Engen Petroleum, Eveready SA, Kimberley-Clark, Nestlé, Oceana Brands, Premier Foods, Parys Biltong, Ruto-Mills, Tongaat-Hulett, Tiger Brands, Unilever SA and Brand House deserve mention for their achievement of BBBEE scores between 45% and 75%**.

COUNTERACTING

The worrying lack of black-owned suppliers

Massmart distributes branded consumer goods that are known to and demanded by South African consumers. Typically these goods are produced through capital intensive manufacturing processes, enjoying significant brand building support and are competitively priced. As a consequence, it’s difficult for new entrants to compete in these markets and this has limited the number of meaningful transactions we’ve made with black-owned suppliers of merchandise. We’re not sure how to resolve this situation, therefore our current perspective is to remain alert to opportunities with black merchandise suppliers, whilst focusing more effort on opening opportunities for black non-trade services suppliers.

*   As of Massmart shares closing price on the JSE on 8 September 2008
**   Accurate at time of writing