Broad-based black economic empowerment (BBBEE)
Massmart achieved an Empowerdex verified score of 58.3 in 2016, for the BBBEE measurement period from January to December 2015. This decrease from 68.3 achieved for 2014 is associated with the introduction of the amended Broad-Based Black Economic (BBBEE) Codes of Good Practice.
Despite this drop in score, we achieved full scorecard recognition for investment in Supplier Development, Enterprise Development and Socio-economic Development, while improving our performance in the areas of Management Control and Ownership.
Unfortunately, our preferential procurement score dropped by 8.4 points, largely as a result of significantly increased procurement targets. To achieve full points against these targets would, for example, require us to procure a total of R23.0 billion from qualifying and emerging suppliers compared with the R4.0 billion we currently procure.
We remain focused on identifying and exploring opportunities to improve our contribution to Broad-Based Black Economic Empowerment.
Supporting emerging local manufacturers
The Massmart Supplier Development Programme (SDP) provides small and emerging suppliers with access to the Group’s supply chain. The Massmart SDP gives preference, but not exclusivity, to black and black woman owned-enterprises, who received 81% of the funds disbursed in 2016.
The core focus of the SDP is developing General Merchandise manufacturers in categories in which we are market leaders.
The SDP portfolio consists of 32 suppliers, eight of whom are female-owned businesses, who manufacture a variety of products including mosaics, hollow-core doors, bricks, office furniture, textiles, adhesives, cooler-boxes and paints.
The SDP typically involves assisting suppliers to meet product quality standards, investing in bespoke manufacturing equipment to build capacity and providing retail and business management training. We have seen encouraging sales traction through the programme, with total procurement surpassing R139 million in 2016, 10 times more than the R13.8 million achieved in our first full year of operation.
Total procurement from SDP participants has grown ten-fold in the last four years – total procurement from beneficiaries surpassed R139 million in 2016 compared to R13.8 million in the SDP’s first full year of operation.
In 2016, we invested R24.1 million, representing 1.8% of profit after tax, in CSI initiatives focused primarily on nutrition, Early Childhood Development (ECD), and school maintenance and infrastructure.
During the year we expanded the Game amaLunchbox school nutrition project in partnership with the Department of Basic Education (DBE) and Makro’s ECD initiative with Hope Worldwide. We also continued to provide food donations, through Game and Cambridge, to vulnerable communities in collaboration with FoodBank SA.
Of those initiatives undertaken in 2016, we are most proud of our mobile kitchen project which provided for the efficient, safe and hygienic preparation of approximately 40 million meals supplied by the DBE school nutrition programme.
In addition to the donations made by our operating divisions, and emergency relief aid provided in association with the Gift of the Givers, we donated a total of R1.5 million to Council for the Advancement of the South African Constitution (CASAC), the Helen Suzman Foundation and Section 27 for the purpose of Constitutional rights advocacy. It is our expectation that this financial support will, hence forth, be provided on an on-going annual basis.
With Walmart’s assistance, Massmart initiated a responsible sourcing programme for our private label, direct import and exclusive brand products in 2013. As part of the programme, suppliers are assessed by independent auditors on a broad range of dimensions that include fair labour practices and compliance with health, safety and environmental standards and regulations. Post implementation of the responsible sourcing programme, all direct import facilities have the required audits in place and supplier audit status is verified prior to the placement of orders.
In 2016, additional focus was placed on engaging domestic import and manufacturing facilities and piloting a programme whereby recognised third-party audits (rather than only Walmart-specific ones) were accepted as part of the responsible sourcing programme. Presently, 55% of all Massmart domestic import facilities have either been subjected to Walmart responsible sourcing audits or submitted acceptable third-party audits. Our priority in 2017 will be to secure complete audit reports for the remaining domestic import facilities and for a select number of domestic manufacturers.
Engaging our stakeholders
Understanding the views of the people and organisations who are impacted by our activities and in turn have an influence on us, is central to the way we do business. Aligned to this is our desire to contribute to social sustainability initiatives that create opportunities, foster growth and promote socio-economic inclusivity.
In the course of doing business we engage with a wide variety of people and organisations on a range of topics. To help us identify relevant issues we use the following forms of engagement:
- Conduct desktop research to identify topics of interest in the broader public discourse;
- Track media coverage to understand leading public viewpoints;
- Assess the materiality of these issues to the Group through workshops and engagement with subject matter experts and interested parties; and
- Review alignment to broader Walmart objectives and priorities.
Food safety is one of the platforms that we use to build trust. To ensure food safety, regular supplier compliance audits are conducted and our management system is audited by reputable third parties. Massmart has robust recall procedures in place. There is high compliance, health and safety awareness across the Group. We also make use of professional third parties to assess in-store food, health and safety issues.
Massmart’s consumer protection and product safety programme
The Massmart Consumer Protection and Product Safety programme has been enhanced by the implementation of new standards and controls across the businesses. Our research efforts that serve both in alignment of our business with future international and national policy, as well as the influence of these policies, position our organisation in good stead for the future. This has served as an effective catalyst in balancing our ethos of Everyday Low Price with higher levels of product safety and quality, which leads the markets. As the programme continues to roll-out into the operational community, the rights and value proposition of our customers will continue to be honoured and improved.