Chairman

 

 

 

 

 

At the end of what was an eventful year for Massmart, it is an immense privilege to introduce the 2014 Massmart Integrated Annual Report. Massmart adds and delivers sustainable value to our customers, our shareholders, our suppliers and our employees. We achieve this through our deep and relentless focus on operational excellence, good business, sustainable business and growing our talent on an ongoing basis.

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The business environment over the past year was very difficult and challenging for most businesses, including Massmart. South Africa held its general elections which saw the ruling African National Congress gaining over 60% of the vote and the emergence of a new political party, the Economic Freedom Fighters, which got 6.4% of the vote. The issues of social transformation, service delivery, poverty, unemployment and inequality dominated the election campaign.
Global economic growth remained largely anaemic. While the American economy showed signs of recovery, Europe and China, both of whom are major trading partners for South Africa and other African markets where we operate, experienced slowing growth. The impact of this was felt by most of our sub-Saharan African markets, where the growth picture was mixed, although encouragingly, still higher than some regions elsewhere in the world.
The South African economy experienced an unprecedented wave of protracted strikes with a mining strike that lasted for months and a metal industry strike that took weeks to resolve. The retail sector was impacted directly by these strikes given the systemic importance of both industries to the economy in general and to consumers’ disposable incomes in particular.
South Africa needs a joint effort to create and maintain productive industrial relations that are key to the stability required to grow and expand the economy, create and maintain jobs and promote the country’s global competitiveness. This requires strategic and purposeful collaboration between government, business and trade unions, underpinned by a common commitment to make South Africa work for all.
The energy situation continued to present another key challenge for the South African economy with load shedding being implemented for the first time since 2008 when the country’s energy crisis first began. The stability of the national electricity grid is key to the growth of the economy on a sustained basis. Eskom needs to be stabilised and repositioned for operational efficiency for it to play the pivotal role it has in ensuring reliable supplies of electricity.

Strategy

The key focus of our strategy is about bringing value to our customer on an ongoing basis. We do this by embracing innovation, focusing on cost containment and proactively identifying and dealing with areas of under-performance across the business.
In 2014, we continued our focus on growth and expansion of our footprint in Africa which is key to our strategy going forward. The growing trends towards urbanisation, industrialisation, an expanding middle class and a youthful population, augur well for the future of our business across Africa.
We continued our focus on growing our fresh food offering through its introduction in some of our Game stores and the ongoing roll out of Cambridge Foods. This is an area of opportunity for growth that will continue to receive our increased focus. We will continue to invest for future growth in current and new markets in South Africa and sub-Saharan Africa.

Board and Executive changes

The year saw significant and well-managed changes at Board and Executive levels. The former Chairman of the Board, Mark Lamberti, stepped down and I was honoured to be appointed to replace him. The former CEO, Grant Pattison, was replaced by Guy Hayward. David Cheesewright, President and Chief Executive Officer of Walmart International resigned and was replaced by Shelley Broader, President and CEO of Walmart EMEA. Andy Clarke, CEO of ASDA, was appointed to the Board as a replacement for Jeff Davis, Walmart America CFO, who resigned from the Board. Most recently Johannes van Lierop was appointed to the Board as CFO, following the resignation from the Board of Ilan Zwarenstein.

Group performance

The comprehensive performance of the Group, which is described in detail throughout this Report, was solid and satisfactory, especially considering the tough environment under which the management team had to operate. We view performance from a strategic, operational, financial and social perspective.
All of our Divisions performed well, with the exception of Massdiscounters, which showed encouraging signs of improvement towards the end of the financial year. The Board is very confident that the management team is appropriately focussed on the challenges and opportunities in its operating environment.

Governance

The Group’s commitment to good corporate governance is informed by our awareness of our responsibilities to all stakeholders and our commitment to ensure the highest standards of governance.
The Board adopted a policy which outlines the engagement process with our majority shareholder, Walmart, on key issues and clarifies expectations appropriately. The process for engagement with them is working well and Massmart continues to derive value from the skills and expertise of Walmart as a majority shareholder.

Dedicated to adding value

The context in which publicly listed multinational companies operate continues to be in a state of flux. The different markets in which we operate pose unique economic, competitive, technological, regulatory, societal and environmental challenges of varying degrees of complexity. The role of business in society beyond narrow financial returns is becoming a key theme, especially in emerging markets such as ours. Massmart will continue to be a positive force for good in all our markets.
Our core focus in helping people save money so that they live better is key to the sustainable growth and development of the different markets in which we operate. This is partly enabled by our relentless focus on responsible sourcing, supplier development and mutually beneficial partnerships with small, medium and micro enterprises.
The rollout of our ethics and compliance programme is key to our responsibility as a trusted corporate citizen that is a champion and a catalyst for good behaviour in the markets in which we operate. Our focus and emphasis on ethics and compliance require ongoing vigilance to ensure that they are at all times entrenched as part and parcel of our culture.
This is also linked to our commitment to sustainability of not only our business but also the economies and societies in which we invest. Sustainability remains core to Massmart as a leading retailer in sub-Saharan Africa.
Our success is inextricably intertwined with the success of the countries and communities in which we operate. We continue to invest in talent development, community development, supplier development, education, job creation, entrepreneurship and the environment as ways of promoting sustainability.

Appreciation

Over the past year, all our Divisions faced a very challenging socio-economic environment. Notwithstanding they delivered pleasing results. In addition to that, good progress has been made with the integration process and focus started shifting towards leveraging off the skills and expertise of our major shareholder.
The success of the Group is underpinned by its exceptional talent and executive bench, commitment by all Massmart people to our customers and the outstanding and unwavering support of Walmart.
My thanks are due to Guy Hayward and every member of Massmart’s management and staff; to all at Walmart who continue to be very generous with their expertise and warmth; and to my colleagues on the Board, whose counsel and oversight continues to be of immense value to the Business and its stakeholders.

 

Kuseni-Dlamini

Kuseni Dlamini            
Chairman
2 April 2015