Whilst South African GDP growth estimates declined throughout the year, Massmart’s high comparable sales growth suggests a healthy overall consumer environment. Within the South African consumer-base however, middle-income consumers, particularly those that rely on unsecured credit to fund their purchases, came under increasing pressure and in Massdiscounters we saw a decline in credit spending on a comparable account basis. The large growth in new consumer credit accounts also points towards a trend of increasing use of unsecured credit.

Competition in most product categories increased as the battle for market share intensified, indicative of a healthy competitive environment. Most major retailers are being innovative in the search for growth by focusing on new categories, whilst the independent retailers remain nimble, exploiting opportunities in the market.

Wage settlements remain above inflation, requiring management to seek productivity gains. This puts downward pressure on employment in the comparable business whilst total employment will increase through organic store growth. The proposed amendments to labour regulations will require us to manage flexi-time workers differently, although the regulations will not affect the balance between full-time and flexi-time employment. They will however, increase the costs of managing flexi-time employees, which will again require management to look for productivity gains.

Massmart’s labour relations remain sound and our wage-agreements have, almost without exception, been concluded earlier than the case a year ago and, in some instances, with two-year agreements.

Our participation in the affairs of Government and industry are of growing importance and we will increase our contribution to the policy debates on matters affecting business, trade and the economy at large.