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Our material matters, risks and opportunities

Our material matters are those matters that could substantially affect Massmart’s ability to create value in the short, medium or long term. In determining these issues, consideration is given to the Group’s long-term strategy, its operating context, the interests of key stakeholders, media coverage or public concern and key risks and opportunities facing the business. Material matters are reviewed periodically by Executive management, the Risk Committee and the Board.

The following key material matters are likely to impact our ability to create value:
A Constrained consumer environment
Food & Liquor performed well in a constrained consumer environment
The weak economy, job security concerns and continued pressure on consumers’ disposable income have led to deferred spending and a longer-term focus on servicing debt and savings rather than spending.

In the current economic climate, consumers have an increased appetite for promotions and are willing to defer spending for occasion-based promotional activity such as Black Friday and new store openings. As a result of very weak consumer confidence levels, Food & Liquor performs relatively better than discretionary items within the General Merchandise and Home Improvement categories.
Our risks:
  • Non-adherence to business model or inability to adapt strategy to changing market conditions
  • Inability to innovate in response to changing competitive landscape
  • Increase in cost of product and operating expenses may undermine our low-cost foundation
Our opportunities:
  • Maintain a positive price-gap against our competitors across Known Value Items (KVIs)
  • Work closely with key suppliers to ensure supply chain efficiency
Potential for economic and political progress
The political and policy uncertainty that ultimately led to the June 2017 downgrade of South Africa’s sovereign rating negatively impacted confidence and growth. This further weighed on business confidence; restrained job creation and investment, and added to the volatility of the Rand.

Whilst South Africa’s new political leadership and direction will, in the short to medium term, improve many economic factors, the structural, policy and public sector impediments remain long-term challenges.
Our risks:
  • Volatile economic conditions impact our growth potential
Our opportunities:
  • Given Africa’s young and growing population, rapid urbanisation, and widespread mobile technology adoption, Massmart is well-positioned to capture the opportunity to provide a world-class merchandise offering to the sub-Saharan continent
  • Positive political climate creates opportunity for improved consumer confidence in coming years
digitalisation of our business
We anticipate online participation to grow
Our customers expect a seamless omnichannel experience when dealing with our stores, products and retail/wholesale offerings. Efficiently and effectively serving our customers will be best achieved with a compelling contemporary suite of IT hardware, skills and capability.

The significant advances in the processing power, flexibility and relative affordability of mainstream IT software and hardware, enables us to now consider these applications in some of our low operating cost formats. This will improve efficiencies throughout the business and consequently increase speed and effectiveness for our customers.
Our risks:
  • Threat of cyber security breach
  • Inefficient or ineffective supply chain or a failure in the supply chain
  • Information technology failure
Our opportunities:
  • Increase customers’ ease of shopping and interaction with our brands and merchandise by efficiently moving merchandise through different channels
  • Innovate through the effective use of analytics and data insights to personalise customer experience
  • Respond to changing customer requirements by digitising in-store processes
Building strong teams
Talent is integral to Massmart’s success
We recognise that attracting, developing, motivating and retaining the right people is critical to delivering our strategy. Our employees shape our customers’ in-store experiences and enforce the store standards that, in turn, drive footfall and on-shelf product availability.

Developments in our operating environment have necessitated that we secure digital, IT, ecommerce, analytics, supply chain and merchandising skills. We continue to drive best-in-class talent through our training programmes.
Our risks:
  • Talent retention and succession
  • Labour costs increasing above sales growth
Our opportunities:
  • Integrated talent management programmes to ensure that we have the right skills to deliver our strategy and serve the customer
  • Leverage our organisational culture and values to achieve career development
Transformation and BBBEE
Ismail Abdullah, owner of Nkuleko Bricks and partner in the Massmart Supplier Development Programme
Perceptions of insufficient progress relating to racial transformation could impact negatively on the Group’s relevance and effectiveness in our society. This is being addressed through ongoing initiatives to improve representation of black managers and suppliers. These include prioritising transformation in the activities of the Massmart Supplier Development Programme and the Massmart Corporate University.
Our risks:
  • Insufficient progress with transformation
Our opportunities:
  • Driving transformation and creating a vibrant workforce and broadening our supplier pool through the Supplier Development Programme
  • Investment in communities through our store CSI programmes and the training of local entrepreneurs and the employment of graduates