Integrated Annual Report 2021
Integrated Annual Report 2021
Message from our Chairman
Kuseni Dlamini,
Group Chairman
To our shareholders

I’m pleased to advise our stakeholders that despite the signifcant impact on our business of unexpected external events, including the Covid-19 pandemic and the civil unrest in July 2021, our business has proved to be resilient.

I’m pleased to advise our stakeholders that despite the significant impact on our business of unexpected external events, including the Covid-19 pandemic and the civil unrest in July 2021, our business has proved to be resilient. We have made significant progress with the execution of our Board-approved Turnaround plan announced in January 2020, which we believe will reposition the business for sustainable growth and profitability.

By year-end 2020 we were delivering on our goal of stabilising the business and driving renewed financial health. During 2021 our focus on simplifying the business, which included divesting the business of non-core assets to drive sustainable profitable growth, achieving an excellent performance from Builders and Makro, making good progress with the turnaround of the Game business, investing in our e-commerce offering and improving our e-commerce service levels, positioned us well to pivot towards accelerated growth in 2022 (see the message from the CEO for details).

Our ongoing ability to leverage the experience and talent of Walmart is adding exceptional value to our business. The areas that have benefitted from this during the year under review are the consolidation of our Supply Chain network and the acceleration of our omnichannel offering.

The civil unrest that occurred in the KZN and Gauteng provinces of South Africa not only had a significant physical and financial impact on our business in KZN, it also had a traumatic impact on our associates and the communities in which we operate (see here for more information). I would like to pay tribute to the Massmart Executive team and our associates across the business whose positive spirit, resilience, ability to rally together and work as a team, and preparedness to innovate and adapt to a crisis, allowed our business to bounce back quickly and, where possible, re-open damaged stores and start trading and providing goods to our customers.

At this juncture I would like to confirm that Massmart is a strong believer in South Africa, and we are here to stay. As we said when the unrest occurred, we believe we are coming back stronger and will continue to invest in KZN and other parts of the country.

 

ESG

Environmental stewardship

Becoming a regenerative Company is very much part of Massmart’s overall ESG strategy. We set ourselves ambitious stretch goals in terms of ESG to make sure our performance continually improves. These include: Private Brand packaging being 100% recyclable, reusable, or industrially compostable by 2025; net zero waste by 2030; and net zero emissions by 2040. We are mindful that our stakeholders are increasingly concerned about ESG, and we share their concern (see here).

 

Our role in society

Massmart believes that if the communities in which it operates prosper, we will also prosper. We therefore aim to be a first responder to social need. We saw combatting the Covid-19 pandemic as a key part of our social responsibility with our aim to help people live better and have made every effort to help our associates and members of the communities in which we operate to become vaccinated against Covid-19. We believe that the more private sector organisations cooperate in a public-private sector partnership with Government and assist its efforts to fight Covid-19, the better the prospects will be for our economy to recover faster and more sustainably.

A lot of good work has been done in the area of transformation in Massmart (see our people performance for more detail), which also includes developing a diverse and inclusive Supply Chain, and increasing the number of beneficiaries from our business activities.

As part of our commitment to supporting the achievement of the UN SDGs, and in particular UN SDG 2: Zero hunger, we focus on increasing access to food on an ongoing basis. We also invested over R13 million to assist communities unable to access food and other essential items during the unrest in July 2021.

 

Governance

I am proud of the commitment and determination of our Board and Executive team members to lead ethically and contribute to the establishment of an ethical culture in Massmart, to act in good faith and in the best interests of our business (see here).

We have made good progress with regard to the racial and gender diversity of our Board and our Exco. With the changes made to the Board’s composition during the year, we have maintained the achievement of our racial and gender diversity targets.

We have also made good progress with regard to ensuring that we have a Board and Exco that are equipped with the skills and experience they need to take the business forward.

A pleasing result of our commitment to ongoing engagement with our shareholders and listening to and addressing their views, was the 85.2% vote of approval for the implementation of our Remuneration policy at our Annual General Meeting on 20 May 2021. We will continue to maintain this engagement with the aim of addressing any outstanding issues.

 

Future outlook

2021 saw global supply chain challenges, exacerbated locally by the civil unrest, affecting the availability of goods. We expected that our innovative and agile approach to our Supply Chain would reduce the impact of these challenges, however, the impact of the Russia/Ukraine war is likely to further exacerbate global supply chain challenges. We need to brace ourselves for these challenges and be agile and innovative to ensure we can weather any storms the situation creates. Hopefully, a positive and constructive diplomatic solution can be reached, because the longer the war continues the greater its impact will be on the recovery of the global economy.

I’m very optimistic that if we can all act together, South Africa can emerge from the pandemic stronger and more resilient and ready to confront the triple pandemics of unemployment, poverty and inequality, which we need to prioritise, as the levels of unemployment and poverty we have in South Africa are not sustainable. If we do not address them, they will remain a ticking time bomb. Our focus needs to be on driving economic growth and job creation and creating an enabling environment for business to prosper and do what it does best, which is drive growth, employ people, pay taxes and contribute to the modernisation of the economy and infrastructure.

Massmart will continue to focus on repositioning the business for sustainable growth to drive solid financial performance, and thereby contributing to the South African economy.

 

 Appreciation

While there’s still a lot of work to be done before the final phase of our Turnaround plan is achieved, I would like to recognise the excellent job our Executive team has already done on driving our Turnaround plan. My thanks go to my colleagues on the Board for their commitment to Massmart , including the Non-Executive Director’s who have left, their contribution to its turnaround and their wise counsel. I would also like to thank all our associates who help our customers save money so they can live better. We want to be a customer-centric business that puts the customer at the forefront of everything that we do and our associates are crucial to our ability to achieve this. My thanks also go to our customers for their support, without which we would not have a business. On behalf of the Board, I would also like to thank our colleagues at Walmart for their ongoing support of Massmart, your increasing collaboration and partnership, and the opportunities you provide for Massmart to leverage what Walmart has to offer.

 

 

 

To fellow Chairs of companies listed on the JSE

 

While the civil unrest that occurred in the KZN and Gauteng provinces of South Africa had a significant physical and financial impact I would, however, like to highlight the damage the unrest has wrought on our country’s investment standing, which will take time to repair. I would call on all of you to join hands and stand shoulder-to-shoulder to work hard towards regaining the trust and confidence in South Africa’s impaired image with both local and foreign investors.

I would also encourage all South African Corporates to increase their investment in decarbonising their business and production processes. Climate change is a reality that requires collective and coordinated action across all sectors of society so that we can move towards a greener economy as a country and indeed as a region.

Gender-based violence (GBV), which has impacts throughout our society, is a matter of concern. In businesses like Massmart, employees impacted by GBV struggle to be productive. I believe business needs to create supportive environments for our employees to speak out. Mental illness, which is the next pandemic we are likely to experience, has been exacerbated by the Covid-19 pandemic, the high unemployment rate and poverty. Even those who are employed are impacted by poverty and unemployment as they have unemployed relatives for whom they need to provide. Further, safety becomes a greater concern as crime increases when there is high unemployment. We need an inclusive economy that will address the root causes of GBV, unemployment, poverty and inequality in our society and ensure we have functional schools. The current environment in our schools is particularly concerning. I feel we need a back-to-basics campaign to build a society based on morals and ethics where the values of respect and discipline are fundamental to every aspect of our lives and society. Business needs to play a role and as Massmart where we find an opportunity to contribute to a reduction in GBV, unemployment poverty and inequality, we are ready to do so.

 

 

To Government

 

We were pleased to note the significant development the Government announced with regard to liberalising the energy market by allowing private sector organisations to be able to produce up to 100MW of power. We have also noted the progress that has been made in the auctioning of spectrum, which is key to positioning South Africa in a digitalised global economy.

These are encouraging signs, however, there is still more work to be done, in particular in unlocking the full potential of our tourism market by making it easier for tourists wishing to visit South Africa to access visas. We are located some distance from the centres of global economic activity, and we therefore need to make every effort to make it easy for people to visit our country. If South Africa is to grow and prosper and our companies are to be globally competitive, we need access to scarce talent. We therefore also need to make the visa process for people wishing to work in South Africa easier and more user friendly.

Addressing bureaucracy and red tape is key to private sector growth, particularly of small businesses, and in this regard, I would commend President Cyril Ramaphosa for appointing a dedicated person in the Presidency to assist with this. I look forward to seeing progress in this area.

We still face challenges with our state-owned entities (SOEs) such as Eskom and Transnet, which are a drag on the economy. We need serious and urgent action from Government to fix our SOEs. They play a key role in South Africa’s ability to be globally competitive. When they are not operating optimally it negatively impacts job creation, economic growth, our GDP and foreign exchange earnings. Fixing them is the key to South Africa’s economic growth. The water crisis and the ineffectiveness of our Water Boards is another issue that urgently needs to be addressed by Government as does infrastructure. Now is the time for action, not nice words. We need tangible progress.

South Africa is falling behind in terms of service delivery at local Government level. We need to build more capacity at a local Government level because business operations are impacted by the performance of local Government. We need to ensure that the councils, mayors, municipalities and the metros are all fit for purpose and the future, that they run efficiently, there is no corruption and that we have qualified, competent, capable and willing people who can run world-class municipalities, which is ultimately where economic activity takes place. From a national perspective, we need to reprioritise the need to build capacity at local Government level.

South Africa is a country of such incredible potential, but this potential will only be realised if all of us work together to create the conditions that allow for our mutual success.

Government plays a critical role in embracing the clear opportunities for structural reform and improvement in the conditions that will allow businesses to be successful. At the same time, businesses must embrace the important role they play as creators of opportunity and catalysts for economic change. Massmart stands ready to fulfil its role in this important mission.

 


Kuseni Dlamini
Group Chairman
8 April 2022