Economic Performance

EC1

What is the direct economic value generated and distributed by Massmart, including revenues, operating costs, employee compensation, donations and other community investments, retained earnings, and payments to capital providers and governments?

We derive economic value with reference to employees salaries, wages and benefits, government taxation, shareholders’ dividends, interest paid to lenders, minority holdings in Masscash subsidiaries, amortization and depreciation. On this basis our value added figures are tabled below:

In addition, as part of our ongoing Corporate Social Investment, Massmart invested
R24.4 m, representing 2% of our trading entities’ after-tax profit to meeting pressing social needs in communities in which we operate.

EC2

What financial implications and other risks and opportunities exist for the organization’s activities due to climate change?

The Massmart Board considers risk management to be a key business discipline designed to balance risk and reward, and to protect the Group against risks and uncertainties that could threaten the achievement of our business objectives. 

Climate change risks are typically identified and quantified by the Group Corporate Affairs Executive through interventions that include desktop research, consultation with external subject matter experts (for example, environmental lawyers), facilitated workshops with appropriate internal managers (for example, Risk Managers) and consultation with Divisional Chief Executives.  These risks are formally debated and prioritised by the Massmart Executive Committee on an annual basis and response options are identified.  

A further division specific step involves each divisional Executive Committee discussing that division's exposure to the identified group risks and, where appropriate, re-prioritising the risks to reflect specific divisional concerns.  In most instances risks are assessed with reference to the impact that they could have on each division’s commercial and reputational proposition.  Massmart has prioritized ten potential climate change risks none of which is regarded, in the medium term, as significant. Some identified risks include climate change impacting on food security, causing water shortages  and disrupting supply chains.

These ten risks are tracked and updated by the Group Corporate Affairs Executive on an ongoing basis and are reported on in more detail in our CDP submission as at 30 May 2011.    

Opportunities exist to reduce costs in all divisions due to the implementation of electricity conservation measures. (see EN 5 for further details).

The potential for additional income from environmentally responsible merchandise also exists. In order to realize these opportunities, the following action has been taken: 

• Implemented customer surveys to track attitudes to responsible environmental consumerism and specifically to energy efficient products; 
• Produced  the “Green Book of Answers”  for merchandise buyers to facilitate informed procurement of "green" merchandise choices for customers; 
• Introduced the Massmart Eco-wise customer programme to stimulate customer environmental awareness involving issues such as energy efficiency and packaging re-cycling
• Massmart is in the process of finalizing an Eco-wise website to promote responsible environmental consumerism to our customers. The website is designed to be used by consumers to increase their knowledge about the items that Massmart endorses as greener alternatives. 
• Initiated product promotions featuring energy and water efficient products. 

EC3

Explain the organization’s defined benefit plan obligations.

All permanent Massmart employees are members of either a pension or provident fund which funds are managed externally by Alexander Forbes, a leading provider of financial, risk and insurance and multi-manager investment solutions internationally and  a licensed financial services provider.

EC4

What significant financial assistance was received from government?

Massmart receives no financial assistance from government.

Market presence

EC5

Range of ratios of standard entry level wage compared to local minimum wage at significant locations of operation.

Entry level wages are determined by each division with reference to minimum wage legislation, internal wage equity, sectoral standards and local market expectations.

* It is worth noting that the Group minimum average wage is greater than the highest minimum wage of R2, 159 prescribed by the Sectoral Determination for the Wholesale and Retail Sector in Area A.

EC6

What is Massmart’s policy, practices, and proportion of spending on locally based suppliers at significant locations of operations?

Massmart defines local procurement as being procured from sources within the country in which we operate.  We apply every effort to first procure merchandise from local manufacturers insofar as they satisfy our customer expectations of style, quality and price.

Total direct South African imports for the reporting period increased marginally for the 2010/2011 reporting period.

We estimate that local procurement in our foreign African operations stands at 21%, an increase from 17% for the 2009/2010 reporting period.

EC7

What procedures are adopted for local hiring and the proportion of senior management hired from the local community at locations of significant operation?

Massmart has a strong preference for hiring staff from local communities. We are however sometimes constrained in our efforts by the unavailability of individuals with the requisite skill and experience.  Local citizens represent 95% of our full staff complement, down 3% from last year’s figure.  This change in local staff numbers is a result of the expansion of our Africa operations. In addition, management representation in our foreign African operations stands at 86.7% for Massdiscounters and 64.2% for our Masscash division. (Only Massdiscounters and Masscash divisions currently have a significant presence in African countries outside of South Africa).

Indirect Economic Impacts

EC8

What development and impact of infrastructure investments and services are provided by Massmart primarily for public benefit through commercial, in-kind, or pro bono engagement?

Our trading divisions have been responsible for the provision of container kitchens, vegetable tunnels and for the provision of funding for feeding schemes at several schools in communities of need in which we operate.  In addition, boreholes for the supply of basic water needs have been provided in some foreign African countries.

EC9

Describe significant indirect economic impacts, including the extent of the impacts.

Our primary indirect economic impact is rooted in Massmart’s high volume low-cost customer value proposition that seeks to provide wholesale and retail customers with an exceptional value for money proposition and improved competitiveness of informal traders.