Retailers have a role in transforming S.A’s economy - Pick n Pay - CNBC Africa

Retailers have a role in transforming S.A’s economy - Pick n Pay

Southern Africa

by Gareth Ackerman, Chairman of Pick n Pay 0

Photo: www.sharebox.co.za.

As always, I want to begin by thanking the Pick n Pay team for delivering this result. Everyone in our business plays their part – colleagues who work in our supply chain, our stores, and of course Richard and his team, who drive the operation from the centre.

It has not been an easy six months for South Africa. We have wrestled with a stagnant economy, a prolonged drought, high inflation, rising taxes, and growing unemployment. And we have also experienced continuing political uncertainty.

There have been a few encouraging signs, in particular the demonstration by government and business that we can work together to stave off a credit rating downgrade.

It is only four years since the government published its National Development Plan. We all remember the crucial target of GDP growth above 5 percent per year. Achieve it, and we would double GDP per capita by 2030, bring everyone above the poverty line, reduce inequality and cut unemployment from 25 percent to 6 percent.

At present, that vision seems very far away. The World Bank’s forecast for GDP growth this year is a wafer-thin 0.4 percent. The IMF has growth flat at 0.1 percent.

Despite the NDP, unemployment is not below 25 percent. Officially it is 27 percent. The “expanded” unemployment rate –including those who have given up seeking work –is over 36 percent.

For a business like Pick n Pay, these challenges are more than just numbers. Stagnant GDP growth means fewer people benefiting from the dignity of work. Fewer families with disposable incomes. More poverty. More insecurity.

So I want to talk a little more about the role that a retailer like Pick n Pay can play in the challenge of transforming our economy and improving living standards.

Let me set out three ways in which retail is playing its part.

First, in an economy which is finding growth very scarce, retail is growing. Total GDP last year was 1.3 percent. Retail sales grew at 3.3 percent in real terms. Much of what growth there is in our economy is coming from the retail sector. Our company remains on track to spend close to R2 billion in capital expenditure this year. And, because our reach is national,

and because we have stores across the country, we help to deliver the regionally balanced growth our country needs.

Secondly, in an economy which is shedding jobs, retail is creating them. Pick n Pay created 5,000 new jobs last year and we have created over 2,000 more in the first half of this financial year. We have many areas of expertise, such as customer service, logistics, replenishment, energy management, pricing, communications. Each of our 5,000 new jobs a year can be the first rung on the ladder to other skills or to general management. More South African companies need to commit themselves publicly to creating jobs at a time when they are most critically needed.

Direct job creation is only one part of our story. Our supply chain sustains more than 400,000 jobs across the country. We invest considerable resources in nurturing and training small entrepreneurs so that they can build fully-fledged commercial enterprises.

Thirdly, I want to speak up for retail’s record on innovation. The turnaround of our business depends crucially on us becoming more efficient. This means using new systems, new technology, new ways to serve customers. Greater efficiency is not just about improving costs. It is about creating the room to deliver lower prices for customers, so that they can improve their quality of life. Richard will say more about how we have kept our prices well below general food inflation –despite one of the worst droughts in recent times and the volatility of the Rand. This benefits our customers, particularly those on low incomes.

Retail is a growing sector which makes a major contribution to the economy and to the transformation of this country. My plea is to the policymakers to understand this and to include retail in their thinking.

Too often retail is not seen as a stragically important sector which can be a partner in achieving national goals. Government does not seem to be concerned about the negative consequences of imposing additional regulatory burdens, on small companies as well as large. The sector is currently facing a full competition inquiry –barely two years after the previous inquiry found nothing to trouble the regulators. It is grappling with complex and bureauctratic proposals in areas such as packaging waste.

 

Retail is also seen as a sector which can be taxed without any negative consequences. We saw this in the last Budget with the announcements on a new tax on sugar-sweetened drinks and an increase in the tax on plastic bags. Both issues merit serious debate –debate which weighs up the policy goals, the likelihood of them being achieved and the risk of unintended consequences. Yet both proposals came as a surprise, with no prior discussion, no debate and no consultation.

Government must find more efficient and more effective ways of achieving what are often laudable goals. They should work with the grain of business, not against it.

Despite these challenges, we continue to look outwards, to achieve positive change internationally. I co-chair both the Consumer Goods Council of South Africa and the global Consumer Goods Forum. I was delighted last week when one of our most important aims was achieved. This was to achieve international agreement on phasing out HFCs –a potent greenhouse gas used in refrigeration and air-conditioning. We have set an example by making changes in our own business in recent years, and this historic amendment to the Montreal Protocol will accelerate the change we need.

We can achieve the goals we set, whether they are international or domestic. We need to be modern in our thinking. We need to be flexible and collaborative. We need to make the most of every sector which can make a real contribution. And that includes retail. 

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