Towards the end of the financial year, with the South African economy in a clear recession, management’s focus shifted to protecting market share, profitability and cash flows. Investment in viable long-term projects continued however, with the opportunities that presented themselves in property and business acquisitions taking priority.

Food and Liquor inflation increased from 12,5% last year to 15,0% this year. Home Improvement inflation remained largely unchanged at 8,1%, while General Merchandise inflation increased from 1,1% last year to 6,4% this year.

The steady 500 basis point reduction in interest rates, beginning in December 2008, has been most welcome and consumers are responsibly reducing their debt. While we monitor our comparable sales for signs of the positive effect of such reductions on consumer expenditure, we do not anticipate this before late 2009.

The greatest management challenges, other than economic, have been in crime prevention and labour relations. The recession has emboldened criminals and we are seeing upturns in fraud, store robberies and shrinkage. In terms of labour relations, we have been fortunate so far, through careful management of other costs, to avoid resorting to cost-saving retrenchments. Within the current South African political and economic environment, it is understandable that the incidence of industrial action has increased as the differing stakeholders’ demands exert their pressures. We continue to do our best to adjust our employees’ benefits in line with inflation and productivity gains.

The Competition Commission investigation into the large Food Retailers and Wholesalers, announced in June 2009, has recently commenced. We welcome the investigation and look forward to any practical suggestions the Competition Commission has to increase the sustainable competitiveness of the retail and wholesale industry in the interests of the consumers. Notwithstanding the potential outcome of the investigations, we know that the retail and wholesale food industry is among the least concentrated and one of the more competitive industries in South Africa.