Online Annual Report 2009

GRI III
QUESTIONS & ANSWERS


Strategy and analysis

1.1 Statement from ceo
What are massmartís current sustainability priorities?
We believe that, as a retailer, Massmart can play a pivotal role by advocating responsible business practice to our suppliers and responsible consumerism to our customers, recognising that a prerequisite for doing this credibly requires that we embrace the principles of responsible corporate citizenship.

Our sustainability priorities include improving staff access to private healthcare benefits, achieving 12% reduction in electricity consumption, improving sustainability performance in foreign african operations (corporate social investment, local procurement and indigenisation of management), formalising our approach to ethical supply chain management and evolving an afro-centric approach to sustainable development.

These issues are discussed in greater detail in the Ceoís letter.

1.2 key impacts, risks and opportunities

What are key sustainability risks and impacts that confront massmart?
We conduct a biannual sustainability SWot assessment that involves desktop research, consultation with external sustainability subject matter experts and also internal debate to identify the sustainability issues confronting the organisation.

This year we also contracted KPMG Consulting to conduct a social materiality risk review, Imbewu Sustainability legal Specialists to conduct an environmental legislation risk review and Maplecroft who conducted a generic climate change risk review.

We maintain a comprehensive sustainability risk register but have chosen to only highlight five priority risks in this report. These are failure to: respond to skills shortage, sustain BBBEE performance, identify irresponsible supplier behaviour, adopt merchandise to low-carbon society and failure to adapt to climate change in African operations.

We continue to develop appropriate responses to the provisions of the Consumer Protection Act (effective 24 October 2010) and the National Waste Management Act (effective 1 July 2009), changing consumer attitudes to responsible consumerism and high crime levels.

Organisational profile

2.1 - 2.7 Profile and markets
How does Massmart’s operational structure support sustainability?
Responsibility for monitoring the scope and quality of sustainability practice rests with the Massmart Sustainability Committee, a committee of the Massmart board. The committee meets at least twice per year with the objective of reviewing Massmart’s Socially Responsible Investment Index, broad-based black economic empowerment, and Global reporting initiative performance.

The Group’s sustainability priorities are agreed by the Massmart Executive Committee on the recommendation of the Group Corporate Affairs Executive. Sustainability priorities are identified with primary reference to the detailed criteria that constitute the JSE Limited Socially Responsible Investment (SRI) Index.

Implementation is coordinated by the Group Corporate Affairs Executive who works in close collaboration with divisional line managers. Divisional sustainability practice is regarded as a line management function whilst overall accountability for sustainability performance rests with divisional executive committees. Each division reports their sustainability performance to Massmart Holdings on an annual basis.

2.8 Scalee
What is the scope and scale of Massmart’s operations?
Massmart is a managed portfolio of nine wholesale and retail chains, each focused on high volume, low margin, low cost distribution of mainly branded consumer goods for cash. The Group operates in 14 countries in southern Africa through four divisions comprising 256 stores and one buying division.

  We employ 28 162 people, 35% of whom are unionised. The Group’s total market capitalisation as at 30 June 2009 was R16 billion.

2.9 Significant changes
What sustainability reporting changes have been implemented in this report?
  Sustainability reporting has remained the same in terms of geographic and divisional scope. We have however added a separate section that covers performance in our foreign African operations. Carbon and electricity intensity data has been reported using electricity consumption for the 2008 calendar year and trading m² at June 2008. Broad-based black economic empowerment data is reported per our Empowerdex verified scorecard for the year ending June 2008.

2.10 Awards/Recognition received
What sustainability awards did Massmart achieve during the reporting period?
We were ranked third in the low emissions category of the 2008 Carbon Disclosure Project (CDP), achieved Top Performer status for the second year running in the JSE Limited's 2008 Socially Responsible Investment Index (Medium Environmental Impact Category) and we were ranked 15th out of 400 South African companies in a Sustainability Assurance Review of GRI+10 reporting.

Report profile

3.1 Reporting period
What reporting period does this report cover?
This is Massmart’s sixth report and it covers sustainability performance for the financial year ending 30 June 2009. The content of our sustainability reports is supplemented by ongoing communication via stakeholder workshops, press releases, results presentations, Massmart website and Massmart’s internal news magazine.

3.2 Most recent previous report
When did Massmart publish its last sustainability report?
Our last sustainability report was published for the financial year ending 30 June 2008.

3.3 Reporting cycle
How often does Massmart publish sustainability reports?
We publish annual sustainability reports that are timed to coincide with the Group’s annual financial reporting cycle (1 July – 30 June).

3.4 Contact point
Who compiled this report?

This report was compiled by the Group Corporate Affairs Executive who is a member of the Massmart Executive Committee. The report was compiled in consultation with divisional management.

Who does the compiler report to?
The Group Corporate Affairs Executive reports to the Chief Executive Officer of Massmart Holdings.

Report scope and boundary

3.5-3.7 Process for defining content, and any limitations
How does Massmart identify and select information covered in the sustainability report?

We attempt to select information that is perceived to be socially material to our key stakeholder groups placing particular emphasis on government, employees, customers, suppliers, communities within which we operate and civil society. The information reported is based on input provided during stakeholder meetings, outcome of Massmart’s internal risk management process, advice of independent subject matter experts, local and global industry trends, content of public discourse and standards defined by initiatives such as the JSE Limited Socially Responsible Investment (SRI) Index and Global Reporting Initiative (GRI).

The content of this year’s report has also been shaped by a survey of Massmart’s major shareholders and a group comprising leading South African sustainability subject matter experts.

How does Massmart ensure that its reporting is balanced?
We aim to achieve balance in three ways. Firstly we emphasise purely statistical reporting through the compilation of sustainability scorecards covering black economic empowerment, human resources, environmental and climate change, African operations and corporate social investment performance. Secondly, we consciously disclose priority performance concerns within each sustainability performance area, for example failure to meet CSI targets in African operations. Finally, we direct executives to cover both successes and failures in their respective progress reviews, for example non-compliance with the Department of Labour Employment Equity (EE) reporting standards.

In addition, this year we asked our Chief Executive Officer to focus his letter on areas of underperformance. Our reporting is sometimes limited by insufficient data accessibility, for example scope 2 and 3 carbon emissions data lacks reliability and accuracy of the comparative retail data that we use is difficult to verify.

3.8 Reporting on Group elements and data measurement techniques
Are data measurement techniques described sufficiently?
Our scorecards are constructed in a manner that seeks to eliminate opportunities for subjective interpretation. We don’t provide specific formulae and detail underpinning the statistical information presented in the scorecards. We try, wherever possible, to apply key performance indicators that are in general use, such as kWh/m² and CO2(kg)/m².

How does Massmart ensure the accuracy of the data reported?
Data accuracy has, and continues to be a significant sustainability reporting challenge. The key issue is that we do not have access to centralised Group information systems containing the data required for sustainability reporting purposes. As such, data tends to be sourced from various paper-based and automated sub-systems before being consolidated in Group spreadsheets. This process is cumbersome and open to error, and does result in inaccurate data reporting.

Massmart attempts to overcome the problem by ensuring that sustainability scorecard data is checked and verified by Massmart Internal Audit Services. We have considered the option of only reporting data that is proven to have absolute accuracy but believe that this will undermine the momentum of our sustainable development efforts. We estimate that the margin fro error in reported data can range from 10% to 15%, this is particularly true in the case of climate change and environmental data.

3.10-3.11 Restatements or significant changes
Have significant reporting changes been made/identified since the previous reporting period?

  Yes:
Percentage equity controlled by the Thuthukani Trust was overstated by 2%;
Energy consumption was overstated by approximately
4 119 000 kW;
Emissions from company owned transport and air travel was overstated by approximately 10 000 metric tons;
Employee turnover has been adjusted to only include dismissals and resignations;
Carbon emissions calculation has been extended to include estimates of waste to landfill emissions and direct import logistics emissions; and
Incidents of ethics raised is now reported as all calls received by the ethics line, versus Massmart identified calls to the line that are strictly defined as involving unethical conduct.

3.12. GRI Index
Why does Massmart use the GRI standard and how does it impact on sustainability processes at Massmart?
Massmart applies the GRI standard given that it has been widely adopted and has, in our opinion, become the de facto sustainability reporting standard. We apply GRI standards as key performance indicators in our sustainability processes, for example economic value generated and distributed.

Assurance

3.13 Policy and practice on external assurancee
We are of the opinion, giving their independence and intimate knowledge of the Group and our information systems, that Massmart Internal Audit Services is well placed to check and verify the statistical scorecard information contained in this report. We also believe that verification is best achieved by focusing on purely statistical data. The Massmart Internal Audit Department is currently responsible for verifying all Group sustainability scorecard information that is reported.

However, following the launch of the Draft Report on Corporate Governance in South Africa (King III) on 25 February 2009, we have resolved to appoint an independent organisation to assure future sustainability reports.

Governance

4.1-4.3 Governance structure, independence
What structure exists at board level to cover responsibility for sustainability practice?
Sustainability practice is reviewed by the Sustainability Committee which is a committee of the Massmart board. The committee comprises two non-executive directors, independent sustainability subject matter expert, Massmart CEO, Massmart Corporate Affairs Executive and Group Human Capital Executive. The chairperson of the committee is a non-executive director appointed by the board. The committee meets at least twice annually to review Massmart’s sustainability performance.

We have finalised the appointment of Professor Derick de Jongh as an independent external representative on the Sustainability Committee with effect from 31 August 2009.

What other board committees are charged with governance oversight responsibility at Massmart?
There are four principle committees of the board that are charged with governance oversight responsibility. They are the: Audit, Remuneration and Nominations, Risk, and, Strategy and Investment committees. The mandate and composition of these committees is discussed in the Corporate Governance section of the Annual Report.

4.4 Shareholder/Employee interaction
What mechanisms are in place to enable shareholders and employees to make recommendations to the board?
Employees have a 10.05% shareholding in Massmart through their participation in the Thuthukani Employee Empowerment Trust, Black Scarce Skills Trust and Executive Share Trust. Employee and external shareholders are entitled to make recommendations to the board at annual general meetings. Employees are represented at the annual general meeting by staff elected Thuthukani trustees. A toll-free Thuthukani hotline has been established to enable employees to enquire about their Thuthukani investment and also to provide input to their elected trustees.

4.5-4.7 Link between compensation and performance
To what extent is sustainability performance taken into account when determining executive compensation?
Executive bonuses are based on individual performance as well as the overall financial performance of the Group, and the particular division in which executives are employed. In the case of sustainability performance a financial incentive is payable to top executives based on the extent to which they improve the BBBEE performance of their division. This reflects the high priority that the Group places on transformation. The Group remains alert to opportunities to introduce incentive structures that assume a similar level of priority in other sustainability areas.

4.8 Policies on triple bottom-line performance and implementation status
What informs Massmart’s sustainability proposition?
Our sustainability proposition is informed by adopting a balanced perspective of a combination of the Group’s commercial goals, impacts on society and the environment, expectations of civil society, prevailing socio-political conditions, public discourse, activities of retail peers in developed economies and our social accountability aspirations. This proposition is becoming increasingly influenced by our sub-Saharan African focus.

What is Massmart’s sustainability proposition?
Our sustainability proposition is to achieve commercial success by adopting a mass distribution business model that simultaneously offers benefits on both ends of the retail value chain without compromising our commitment to socially responsible business practice.

This involves sensibly integrating sustainability practices with business objectives, offering suppliers an efficient socially relevant channel to their markets, optimising value for customers, by providing affordable access to quality safe merchandise that has been procured responsibly, acting in a socially responsible manner and advocating principles of responsible consumerism to suppliers and customers.

Achievement of this proposition is underpinned by black economic empowerment, human capital, ethics, climate change, corporate social investment and related policies that define minimum standards of sustainability practice.

4.9. Managing triple bottom-line risks, opportunities and international compliance
What monitoring and assessment mechanisms are in place to oversee Massmart’s sustainability performance at board level?

The Chairperson of the Massmart Sustainability Committee provides the Massmart board with quarterly updates about the Group’s sustainability performance placing emphasis on JSE Socially Responsible Investment (SRI) Index performance, independently verified broad-based black economic empowerment (BBBEE) performance, Carbon Disclosure Project (CDP) participation and level of sustainability reporting disclosure.

In addition the Sustainability Committee is empowered to initiate both internal and external reviews of aspects of sustainability performance. In a most recent example the committee requested an Internal Audit review of the Group’s icon corporate social investment (CSI) projects. The Sustainability Committee has also requested that future sustainability reports be the subject of independent external assurance.

4.10. Self-assessment of triple bottom-line governance
What processes are in place to assess triple bottom-line governance at Massmart?

The Massmart Sustainability Committee assesses Group sustainability performance in terms of a framework that measures progress against agreed sustainability targets. This is supplemented by comparing internally assessed performance against the progress made in the JSE Limited Socially Responsible Investment Index. We also engage external specialists to review black economic empowerment, ethics and environmental risk performance. This year also saw the introduction of “comparative” data to the Group’s sustainability scorecards.

4.11. Precautionary approach
How does Massmart follow the precautionary approach in the procurement of products?
Massmart makes every effort to base procurement decisions on a sound understanding of all relevant facts with reference to the reasonable man test. The Group’s default approach is to adopt a conservative approach to procurement decisions in situations characterised by doubt about the practices of product suppliers and/or the product in question.

What does Massmart do to promote adoption of a precautionary approach in its decisions?
We have implemented a variety of interventions that reinforce the principles of the precautionary approach. These include training staff in the process of ethical decision-making, applying a risk management approach that seeks to avoid exposing the organisation to undue risk, defining comprehensive product specifications that emphasise health and safety issues, conducting supplier environmental surveys, contracting suppliers to specified standards of conduct, implementing third party food product testing and contracting external subject matter experts to conduct pre-emptive risk reviews within the organisation.

4.12 External economic, environmental and social charters or initiatives
Which charters/associations/principles or other sustainability initiatives does Massmart subscribe to or endorse?
Massmart’s sustainability programme is strongly influenced by the criteria defined in the JSE Limited’s Socially Responsible Index, Department of Trade and Industry’s Codes of Good Practice on Broad-based Black Economic Empowerment, Carbon Disclosure Project (CDP) questionnaire, the King III Report on Governance for South Africa and these Global Reporting Initiative guidelines.

4.13 Industry associations and advocacy organisations
What associations and advocacy organisations does Massmart participate in and support?

Massmart are members of, participate in and/or make contributions to organisations that include; Business Against Crime (BAC), Business Unity South Africa (BUSA), Consumer Goods Council of South Africa (CGCSA), Ethics Institute of South Africa, National African Federated Chamber of Commerce (Nafcoc), National Economic Development & Labour Council (Nedlac), South African Institute of Race Relations, IDASA and WWF.

Stakeholder engagement

4.14 - 4.16 Stakeholder groups engaged, basis for identification and frequency of engagement
What is Massmart’s position on stakeholder engagement?

We are committed to proactively understanding and responding to the priorities of our stakeholders who we interpret to include investors, shareholders, employees, customers, suppliers, local communities, government, foreign African diplomats, civil society and the media. Our stakeholder engagement practices include participation in stakeholder organised forums, conducting one-on-one meetings, making formal submissions to parliament, conducting stakeholder surveys, and hosting public policy and general interest discussion groups.

What criteria does Massmart use in deciding who to engage with?
Massmart engages proactively with identified stakeholder groups that directly impact on, or are directly impacted by activities in our direct sphere of commercial influence. Factors that are considered before engaging stakeholders include representivity, credentials and, social and business relevance of issue.

What form does stakeholder engagement take?
We proactively contact various stakeholders, individually and collectively, to share information and gain an appreciation for their perspectives. Notwithstanding numerous one-on-one meetings, our stakeholder engagement generally involves conducting regular discussion groups that include themed discussions with subject matter experts, public policy discussions with government and civil society representatives and consumer discussions with consumer interest groups.

How frequently does Massmart engage stakeholders?
Stakeholder engagement activities occur on an ongoing basis throughout the year. Engagement with investors and shareholders takes place at least four times per annum through results presentations, meetings and the Massmart annual general meeting. We aim to engage with government and civil society stakeholders at least six times per year through meetings, workshops and surveys. Employee, customer and supplier engagement is considerably more intensive and generally occurs as needed.

Economic performance

EC1 How much value added has Massmart generated over the reporting period?
We derive economic value with reference to employees salaries, wages and benefits, government taxation, shareholders’ dividends, interest paid to lenders, minority holdings in Masscash subsidiaries, and amortisation and depreciation. On this basis our value added for the year ending June 2009 was R10,052 million versus R9,891 million at June 2008.

EC2 Financial implications, risks, opportunities relating to climate change How does Massmart measure risks and opportunities relating to climate change?
Massmart made extensive use of external consultants in 2009 to identify the risks and opportunities associated with climate change. This included entering into consulting engagements with Imbewu Sustainability Legal Specialists (legal review), KPMG Consulting (general risk review) and Maplecroft (carbon white paper). These reviews attempted to assess climate change risk with primary reference to the Massmart supply chain and the countries within which the Group operates.

EC3 Defined benefit plan obligations
Massmart has no defined benefit plans.

EC4 Financial assistance from government
What is the extent of financial assistance received from government?
Massmart receives no financial assistance from government.

EC5 Standard entry level wage compared to local minimum wage
How does Massmart determine entry level wages for employees?

Entry level wages are determined by each division with reference to minimum wage legislation, internal wage equity and local market expectations. The average minimum wage in the Massmart Group for the year ending 30 June 2009 was R2 139 versus R2 040 at June 2008.

EC 6 Proportion of spending on locally based suppliers
What is Massmart’s policy with regard to procurement from locally based suppliers?
We apply every effort to first procure merchandise from local manufacturers insofar as they satisfy our customer expectations of style, quality and price. Total direct South African imports for the year ending 30 June 2009 represented approximately 3.6% of total procurement versus 4.5% at June 2008. We estimate that local procurement in our foreign African operations stands at 19%.

EC 7 Procedures for local hiring
What is Massmart’s approach to hiring staff from local communities?
Massmart has a strong preference for hiring staff from local communities. We are however sometimes constrained in our efforts by the unavailability of individuals with the requisite skill and experience. A total of 98% of the full staff complement and 86% of management in our foreign African operations are local citizens.

EC 8 Significant direct impacts
What are the most significant indirect economic benefits that derive from Massmart’s operations?
Our primary indirect economic impact is rooted in Massmart’s high volume low-cost customer value proposition that seeks to provide wholesale and retail customers with an exceptional value for money proposition. Further economic opportunities are also created for the property development industry as the result of the Group’s store opening programme. We don’t however have sufficient data to quantify the specific indirect economic benefits attributable to the Group’s activities.

Environmental performance

EN1-2 Materials used and recycled
Does Massmart track and manage all the materials used in its operations?
Massmart doesn’t currently have the systems in place to track recycled waste materials as a percentage of all materials used in operations.

What percentage of materials used by Massmart are recycled?
Our stores are all required to recycle board and paper waste associated with merchandise packing material. To this end we currently have 120 active paper and board recycling facilities. In addition, Makro has established customer e-waste recycling facilities at nine of its stores.

EN 3-7 Energy used and saved
"Who has responsibility for the implementation of energy saving measures?

Responsibility for the implementation of energy saving measures rests mainly with the Operations Directors and Store Planning Managers in the various divisions under the guidance of the Group Commercial Executive.

How much energy was consumed by Massmart during the reporting period?
The Group consumed approximately 246,331,161 kW of electricity during the reporting period ending 30 June 2009 versus 249,830,295 kW at June 2008. This data is susceptible to data reporting inaccuracy.

What percentage of energy was saved during the reporting period?
Energy consumption statistics decreased by 4,497,000 kW or 18%. We are however reluctant to attribute this decrease entirely to energy savings given the margin for error that is endemic to the data collection exercise. Our conservative estimate is that roughly 5% of this decrease is attributable to energy savings initiatives.

What steps have been taken to conserve energy?

Our divisions have, to different degrees of implementation, undertaken numerous interventions to reduce electricity consumption such as replacing incandescent light bulbs with compact fluorescent bulbs, decreasing night time store lighting levels, switching off store signage lighting, implementing energy efficient climate control technologies and decommissioning store geysers.

What alternative energy sources does Massmart use?
The Group’s operations in Malawi and Mozambique requiring approximately 991 kW of electricity are supplied from hydroelectric power schemes.

What steps have been taken to introduce energy saving products to consumers?

Massmart has and continues to proactively promote merchandise that conserves energy. This includes the promotion of compact fluorescent light bulbs, geyser blankets and a selection of Energy Star certified electrical appliances. The Group also retails alternative energy products such as solar pool heaters. We consider our endeavours in this area to be modest and capable of significant improvement.

EN8-10 Water used and recycled
How much water did Massmart use during the period?
We report water usage in rands rather than litres consumed given that we are experiencing significant difficulty in sourcing consumption data from the numerous municipalities in which the Group has a store presence.

The cost of water consumed, including foreign African operations, was R13 648 087 during the reporting period ending 30 June 2009. We have converted this to an indicative water consumption indicator of 1.8 kl /m2 (1,975,121 kl ) which was derived with reference to the Rand Water Board's retail tariff (including levy and value added tax) of 691 cents for the period 1 July 2008 to 30 June 2009.

How much water was recycled during the period?
No water recycling statistics are available.

What measures does Massmart have in place to improve water security?

Water saving mechanisms have been implemented in varying degrees across the organisation and include, for example, rainwater harvesting in certain Builders Warehouse stores and installation of waterless urinals. There is however no doubt that a more comprehensive plan is required to conserve water within the business and also to advocate better water conservation practices to customers and suppliers. A rainwater harvesting study has also been initiated at Makro.

EN11-15 Biodiversity
How does Massmart currently manage its impact on biodiversity?
Environmental impact assessments are conducted in respect of all store development activities. Furthermore Massmart does not own, lease or manage any land in or adjacent to protected areas or areas of high biodiversity value. We have not implemented initiatives in respect of tracking and managing the impact that suppliers have on biodiversity.

How does Massmart ensure the protection of biodiversity through its supplier networks?

Massmart does not currently have initiatives in place to ensure the protection of biodiversity amongst suppliers.

How does Massmart measure the impact of its products on biodiversity?

We don’t currently measure the impacts of our products on biodiversity.

EN16-25 Emissions, effluents and waste
What were Massmart’s greenhouse gas emissions during the reporting period?
We estimate, based on available data, that the Group emitted 392,363 metric tons of carbon dioxide for the reporting period ending December 2008 versus 249,222 metric tons at December 2007. The increase in emissions is attributable to the inclusion of estimates of CO2 emissions from waste to landfill and direct import transport emissions. Altogether 64% of reported emissions are attributable to electricity consumption. This calculation was based on the international WRI/WBCSD GHG Protocol Corporate Accounting and Reporting Standard.

What carbon offset mechanisms does Massmart have in place?

None

Were there any significant waste spills during the reporting period?
No

EN26-27 Products and services
What constraints will environmental considerations place on future demand for Massmart’s products and services?
We anticipate that consumers will seek alternatives to environmentally sensitive products, for example, detergents, insecticides, solvents and paints. The Group’s Eco-wise programme is intended as one response to cater to consumer needs for environmentally responsible merchandise.

How does Massmart take into account environmental issues associated with the procurement of products and services?
All merchandise procured must comply with legislated environmental standards and South African Bureau of Standards specifications where these exist. Massmart has developed guidelines that encourage buyers to ask suppliers about the environmental impacts of their products placing emphasis on manufacturing practices, product design, traceability, packaging and environmental labelling standards.

Does Massmart calculate the carbon footprint of the merchandise that it sells?
No

What is Massmart’s approach to environmentally friendly packaging?
We recognise the environmental and commercial benefits associated with reducing product packaging and have set an objective to explore packaging reduction opportunities with key suppliers. Massmart has made little progress in this area.

EN28 Incidents of non-compliance
Were there any instances of non-compliance to environmental legislation and regulations during the reporting period?
No

EN29 Impact of transport
What were the greenhouse gas emissions that can be attributed to Massmart owned transport, and air travel during the reporting period?
We estimate that 6 745 metric tons of carbon dioxide attributable to company owned transport and air travel was emitted during the calendar year ending December 2008 versus 7 999 metric tons for the same period in 2007. There are however inconsistencies in the 2008 data which were unresolved at the time that this report was published.

What were the greenhouse gas emissions that can be attributed to third party transport during the reporting period?

We estimate that 42 643 metric tons of carbon dioxide attributable to supply-side direct import freight (land, sea and air) was emitted during the calendar year ending December 2008. This is the first time that we have reported direct import emissions. We do not have any data relative to transport emissions associated with other third party transport emissions.

EN30 Total environmental protection investments
Is Massmart a member of any environmental protection organisation?

Yes, Massmart is a member of WWF and interacts regularly with WWF staff in South Africa.

What is the extent of Massmart’s investment in initiatives and project aimed at environmental protection?
This data is currently not tracked and is therefore unavailable.

Social performance
 

Labour practices and decent work

LA1-3 Workforce breakdown turnover and benefits How many people does Massmart employ and what is the racial composition of the workforce?
We employ 28 162 employees 82% of whom are black (African, Coloured or Indian). Approximately 77% of all management and professional staff are black. Staff turnover for the financial year ending June 2009 was 9.34%.

What is the gender composition of the workforce?

A total of 59.65% of all permanent employees are males and 40.35% are females. In addition we employ 3 857 female managers/professionals representing 45.25% of all managers/professionals. Altogether 3 084 of all female managers are of African, Coloured or Asian (ACI) descent.

What benefits that are offered to permanent staff are not offered to temporary employees?
Temporary employees don’t, in general terms, qualify for medical and pension cover. We attempted to overcome this concern by introducing the concept of a flexible 40-hour rolling week to facilitate conversion from temporary to permanent employee status without losing the scheduling flexibility to staff up over peak trading periods. In terms of this arrangement it was envisaged that certain employees would be scheduled flexibly to work their allotted 40-hour work week at any time during the week. The process was discontinued after objections were raised by the South African Commercial Catering and Allied Workers Union (SACCAWU).

LA4-5 Employees covered by collective bargaining agreements and policies for communicating major change
Employees in collective bargaining agreements and policies on communicating significant operational changes

Which union represents employees within the various operating divisions?

Unionised employees are represented by the Confederation of South African Trade Unions (COSATU) affiliated South African Commercial Catering and Allied Workers Union (SACCAWU). Union negotiations take place on a decentralised basis within the various operating divisions.

What is the level of staff unionisation?
A total of 35% of all staff were unionized as at 30 June 2009 versus 40.74% at June 2008. The decrease in unionisation appears to be attributable to natural attrition.

Have there been any significant changes in collective bargaining agreements and union memberships?
Yes, union membership has decreased by 5.7%. This appears to be related to staff attrition.

Have there being any significant instances of labour unrest during the reporting period?
Yes, the South African Commercial Catering and Allied Workers Union (SACCAWU) engaged in one day of industrial action during December 2008 in protest about the introduction of a 40-hour rolling week at three Makro stores and the introduction of biometric time and attendance system at Game. In addition, at the time of publication of this report SACCAWU had declared wage disputes which led to industrial action at Makro and Game stores.

LA 6-9 Occupational health and safety
How does Massmart manage the risks associated with Occupational Health and Safety (OHS)?
Massmart’s risk management process includes applying extensive OHS safety protocols that include appointment of safety officers, establishment of store safety committees, regular health and safety training, incorporation of safety standards into job descriptions and, conduct of line management and independent safety reviews.

How many employee occupational health and safety incidents occurred during the reporting period?
A total of 708 workplace injuries were sustained by Massmart employees for the period ending 30 June 2009. This is significantly higher than the 516 injuries reported at June 2008 and is attributable to improved reporting protocols. No staff fatalities were reported.

How many customer occupational health and safety incidents occurred during the reporting period?

A total of 111 health and safety incidents involving customers were reported during the period ending 30 June 2009. This included one customer fatality resulting from merchandise which fell on a customer in a Masscash wholesale store. Subsequent investigation by the South African Police Services cleared the company of any wrongdoing.

How many health and safety personnel were trained during the reporting period?

A total of 1 923 employees attended health and safety related training during the period ending June 2009. The training covered topics such as first aid, fire fighting and evacuation, hazardous chemicals and dangerous substances, racking and stacking and, gas handling and filling.

What is Massmart’s approach to HIV/Aids?
We have an extensive HIV/Aids programme which includes ongoing awareness building, peer counselling and support, regular voluntary testing clinics and the provision of free antiretroviral treatment for permanent staff and their spouses. The estimated HIV prevalence rate amongst permanent staff for the year ending 30 June 2009 was 6.44% versus 6.04% at June 2008. This is significantly below the 10.90% national infection rate.

The rate of infection is highest in our Masscash division (9.9%) which has a significant presence in KwaZulu-Natal, an area with the highest infection rate in the country.

What is Massmart’s approach to other priority diseases and ailments?
The Group runs regular store-based programmes to screen for diabetes, cholesterol, high blood pressure, tuberculosis and obesity. A total of 5 676 employees participated in the Group’s TB analysis questionnaire resulting in 53 referrals. Altogether 7 601 employees have, to date, been screened for cholesterol, blood pressure and diabetes.

LA10-12 Employee training and education Who takes responsibility for training at Massmart?
Job specific retail training is the responsibility of Divisional Human Resources directors. The Massmart Human Capital Executive has responsibility for development associated with maintaining the executive and priority skills pipeline. The latter is addressed primarily through the Massmart corporate university.

What investment does Massmart make in training and development?
The Group invested approximately R30.8 million in formal training and development activities during the year ending 30 June 2009 versus R23.7 million at June 2008. This equates to per capita training spend of R1 261 per annum.

How many employees received formal training during the reporting period?

A total of 13 752 employees were trained of whom 5 421 were female and 11 823 were African, Coloured or Indian (ACI). Only 42 disabled employees received training.

How many days of training were conducted during the reporting period?

Altogether 45 537 days of training were recorded of which 19 174 days benefited women and 38 955 days benefited African, Coloured and Indian (ACI) employees. Disabled people received 107 days of training.

What is Massmart’s role in tertiary education (e.g university bursaries)?

We launched, in January 2009, a bursary scheme in partnership with the commerce faculty at the University of Pretoria in terms of which Massmart will fund five new commerce bursaries per year on an indefinite but renewable basis. The bursaries cover tuition, residence, food and book costs and, include a monthly stipend and access to primary medical care.

How many hours training does each employee receive per annum?
Unknown

LA13-14 Diversity and equal opportunity
Does Massmart have any programmes in place to promote appreciation of diversity amongst employees?
Massmart conducts diversity training with executives and senior managers, and continues to implement diversity training across the Group. A total of 4 292 employees attended diversity training during the year ending June 2008.

Human rights

HR1-3 Investment and procurement practices
What proportion of Massmart’s investments have been subject to human rights screening?

Unknown

What does Massmart do to extend the principles of human rights screening to suppliers?
Massmart trading terms contracts include a provision requiring suppliers to comply with all relevant legislation and also with good human rights practice. Massmart approved, in 2008, a pilot project to conduct an independent social audit of selected direct import suppliers. This project had however not been initiated at the time of publication of this report.

HR4 Incidents of discrimination
What mechanisms does Massmart have in place to disclose incidents of human rights abuse?
Massmart has implemented an independently managed anonymous ethics line to which suppliers, supplier staff and Massmart employees can report any unethical issues which include incidents of discrimination.

The ethics line number is 0800 203 246

How many incidents of discrimination have been reported?
A total of 21 incidents of racial discrimination were reported during the financial year ending 30 June 2009 versus three incidents which were reported at June 2008. There are no clear trends in terms of the incidents reported.

HR5 Risks to freedom of association and collective bargaining Are there any areas of operation within Massmart in which risks to freedom of association may exist?
No, our commitment to freedom of association is authentic and we would act firmly against any employee who through their actions/omissions is found to undermine this commitment. The union did however level accusations of “union bashing” against Massmart during the recent wage related industrial action at Makro and Game. Our view is that the accusations were without merit.

HR6-7 Incidents of child, forced or compulsory labour What is Massmart’s policy with regard to child labour?
The Group does not employ underage staff and contracts suppliers to make the same commitment in their employment practices.

HR8 Security personnel trained in relevant human rights What training do security staff receive to ensure that they do not infringe employee, customer and supplier human rights?
Security staff receive training related to the legal procedures that they must follow when apprehending an employee, customer or supplier suspected of wrongdoing. This training, whilst dealing with the “rights” of suspects does not focus specifically on human rights per se.

HR9 Violations of the rights of indigenous people? Does Massmart have a policy covering the rights of indigenous people?
No, although we reinforce, through our ethics and diversity training, the general principle that the dignity and rights of all individuals may never be infringed in the way that the Group conducts its business.

Society

SO1 Programmes to manage impacts on communities
How does Massmart assess the impact of its operations on communities?
Massmart’s focus is limited to impact assessments that are conducted prior to the development of new store sites. Broader social impacts are identified through our programme of stakeholder engagement which is currently deficient in this specific area of engagement. Massmart is in preliminary discussions with an independent researcher to assess the social impacts of new store openings in our foreign African operations.

SO2-4 Policies and practices on corruption
Does Massmart have a code of ethics and how is this implemented and enforced?
Massmart has a Code of Ethical Conduct which has and continues to be communicated to staff and strategic suppliers. Ethical practice in the Group is tracked and managed by accredited divisional ethics officers who are accountable to a Chief Ethics Officer. An outsourced anonymous ethics line has been established to report unethical practice and the Ethics Institute of South Africa conducts biannual surveys of the state of ethics in the Group.

How many incidents of unethical conduct were raised during the current reporting period?
The ethics line received 912 calls during the financial year ending 30 June 2009 versus 668 calls at June 2008. A total of 77 calls related to allegations of criminal misconduct, whilst 137 calls received were anonymous. We are delighted that employee usage of the ethics line has increased.

What is the extent of Massmart’s involvement in organisations dealing with ethics?
Massmart is a member of the Ethics Institute of South Africa. The Group recently contributed funding to the Ethics Institute of South Africa, to survey the ethics practice of listed South African companies.

SO5 Policies on public policy development and lobbying Where in the organisation does the responsibility for government liaison lie?
Government liaison is conducted primarily at the Group level where responsibility is shared between CEO, Group Corporate Affairs Executive and Channel Executive. The Channel Executive deals primarily with legislative and regulators issues covering operational activities and the Group’s merchandise proposition. The Group Corporate Affairs Executive is responsible for broader public policy issues.

How does Massmart engage government on public policy issues?
The Group focuses public policy engagement efforts primarily on the legislature by making written and verbal submissions to the appropriate parliamentary portfolio committees. We also participate in forums such as Business Unity South Africa that represent the business community’s perspective on public policy issues.

SO6 Contributions to political parties and related interests
What is Massmart’s policy on making donations to political parties?

Massmart does not make donations to political parties or related institutions.

SO7 Legal actions for any anti-competitive behaviours
Were any actions for anti-competitive behaviour lodged against Massmart during the reporting period?
No – however the Competition Commission has announced an investigation “into the retail trade of food through supermarkets” and Massmart will cooperate with the commission during the investigation. To this end the Massmart CEO has met with the commission to gain insight into the scope and terms of reference of the investigation.

What is Massmart’s policy regarding anti-competitive behaviour by suppliers?
We will report, anti-competitive behaviour that we encounter in our supply chain.

What proactive measures has Massmart taken to counter anti-competitive behaviour amongst suppliers?
Massmart has initiated a process to provide buyers with additional education and training about the requirements of the Competition Act 89 of 1998.

SO8 Fines or sanctions for non-compliance
What fines were imposed on Massmart for incidents of legislative or regulatory non-compliance during the reporting period?
None

Product responsibility

PR1-2 Customer health and safety
What standards and voluntary codes with regard to merchandise health and safety does Massmart subscribe to?
The merchandise that Massmart sells conforms with relevant legislated requirements, product specific South African Bureau of Standards criteria and HACCP standards. We also retain Food Consulting Services to conduct Good Manufacturing Practice (GMP) audits and random food quality and safety checks on private label food products.

PR3-4 Products and service labeling
What product labelling standards and voluntary codes does Massmart subscribe to?
Our suppliers are required to comply with all relevant labelling legislation, such as the Foodstuffs, Cosmetics and Disinfectants Act, (food and toiletries), Liquor Products Act (including health warnings on liquor products), Medicines Act, Tobacco Products Control Act, Agricultural Standards Act and the Merchandise Marks Act No 17, 1941 (various). We are investigating options to extend additional voluntary labelling disclosure standards to suppliers.

PR5 Practices on customer satisfaction
How does Massmart identify customer expectations with regard to sustainability issues?
Market research including focus groups and customer surveys are conducted at divisional and Group level within Massmart. The primary emphasis of this research tends to be on traditional commercial elements of the value proposition to customers, however recently introduced (April 2009) Group level research has started focusing on customer attitudes to responsible consumerism.

PR6 -7 Compliance with marketing and communications standards
What marketing codes and voluntary standards does Massmart subscribe to?

Massmart follows the Direct Marketing Association (DMA) and Advertising Standards Authority (ASA) codes of practice and complies with relevant marketing and advertising legislation. We have also started reviewing current group-wide advertising and marketing practice in terms of the principles proposed in the Consumer Protection Bill.

How does Massmart take sustainability issues into account in its marketing campaigns?
Game, Makro and Builders Warehouse have begun experimenting with mechanisms in their print advertising and in-store promotional material that draws consumer attention to socially responsible merchandise options.

Did Massmart incur any fines/legal sanction for breach of advertising and marketing standards?
No

PR8-9 Substantiated complaints and fines for breaches of customer privacy
What is Massmart’s policy on customer privacy?

Massmart maintains strict confidentiality with regard to all personal information relating to our customers. We are closely monitoring progress of the Protection of Personal Information Bill which had not been enacted at the time of publication of this report.

Did Massmart incur any fines/legal sanctions for breach of customer privacy during the reporting period?
No