Online Annual Report 2009

Broad-Based Black economic empowerment

We’ve achieved a credible BBBEE score, but the BBBEE track record of our industry as a whole continues to be criticised.

Broad-based black economic empowerment scorecard as at June 2009

BBBEE score
Management control
Employment equity
SA retail peer
SA retail peer
SA retail peer
SA retail peer
Skills development
Preferential procurement
Enterprise development
No change
Socio-economic development
No change
Note: BBBEE scorecards are calculated retrospectively, therefore the data reported is based on the scorecard compiled in January 2009 for the period ending June 2008.
SA medical aid membership
SA national
SA retail peer
SA retail peer

Scorecard commentary

This year Massmart engaged Empowerdex to verify the Group’s BBBEE score and we were delighted to achieve level 5 BBBEE contributor status. Our year-on-year BBBEE score improved from 49.44% for the previous reporting period to 55.67% for this one. We consider this to be a credible score which has improved our BBBEE ranking from 58th to 55th place in the FM Top Empowerment Companies survey. In the same survey, however, we were disappointed to find that we’ve dropped from first to third place in the retail industry rankings.

One ongoing concern is a perception in the media, amongst civil society and in government that the retail industry as a whole is failing to embrace the spirit and practice of BBBEE. We recognise that this perspective could cause collateral damage to Massmart’s reputation, so we’re engaging regularly with government, BBBEE advocacy groups and media commentators about our own BBBEE progress. Through consultation and transparency, we’re hoping to positively differentiate our BBBEE commitment from that of others within the industry.

Ensuring better BBBEE compliance on the part of our suppliers was a key factor in improving our BBBEE performance. Our preferential procurement score increased from 3.60% during the previous reporting period to 8% in the current period, but in comparison to the retail industry best practice (15.99%) we see there’s still room for improvement. We have therefore redoubled our efforts in this area by extending the list of priority suppliers from whom we require verified BBBEE scorecards.

We were also concerned that whilst we procured goods and services to the value of R9.9 billion from verified BBBEE suppliers only R792.7 million could be attributed to emerging black businesses. Competitive pricing tends to be the main barrier to improving procurement from this category of suppliers, an issue that we are struggling to resolve.

Massmart addresses black ownership within our company through the Thuthukani Staff Empowerment Trust. Overall, the year-on-year increase (1.49%) in our BBBEE ownership score can be attributed to the more accurate Empowerdex scoring process, rather than to any change in the structure of black ownership in the organisation.

It is noteworthy that the Thuthukani trust has distributed R67 577 622 worth of dividends to staff members between October 2008, when it was launched, and June this year. The trust has enjoyed a capital growth of R410 395 698 during the same period, but disappointingly only 10 683 of the original 14 065 employee participants are still involved. In the vast majority of cases, this anticipated decline in participation is the result of normal staff turnover.

Massmart is committed to:

Achieve a minimum score of 65% or level 4 BBBEE contributor status by June 2011.