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Top retailers avoid equity BEE partners
Top retailers avoid equity BEE partners

Top retailers avoid equity BEE partners

RETAILER NEWS

IOL Business - Nov 28th 2011, 08:35

Politically connected empowerment’s usual suspects are missing out on a combined market capitalisation of more than R160 billion as they are shunned by top JSE-listed retailers, which have chosen to rather give stakes to their staff and support struggling black entrepreneurs. 

A snapshot Business Report survey shows that since the broad-based black economic empowerment (BEE) codes were passed into law eight years ago, at least seven major retailers, most of them among the top 40 largest JSE-listed blue chip companies, have not had empowerment partners.

Shareholder activist Theo Botha inspired the survey.

The companies with no black partners include furniture chains Lewis Group and JD Group, clothing retailers Foschini and Truworths, supermarket groups Pick n Pay and Shoprite and personal care chain Clicks.

This could be because the retailing chains do not feel obliged to chase targets set by the Broad-based BEE Act as they do not rely on state contracts for their survival.

The retail sector, unlike other industries, does not have a transformation charter that would have set targets to be achieved by a particular date.

Suzanne Ackerman Berman, Pick n Pay’s transformation director, said it had always been Pick n Pay’s philosophy that its employees should be owners in the business and, to this end, the company instituted an employee share ownership scheme soon after its inception in 1970.

At the end of February, the Pick n Pay employee share trust held 3.4 million shares in the company. The company recently set up a transformation committee and appointed a senior manager to oversee its broad-base BEE strategies.

The retailer focuses mainly on the preferential procurement and enterprise development elements set out in the Broad-based BEE Act of 2003.

“We believe that empowerment strategies focus on areas where we are able to effect the most change. More than 33 percent of our franchise stores are exclusively black-owned, creating new business entrepreneurs, transferring skills and creating jobs,” she said.

In the 2011 annual report, Foschini chairman David Nurek said the company had a transformation committee that had the task of driving the group’s broad-based BEE strategy into the future.

Lewis Group management said: “Lewis Group’s transformation strategy focuses on all elements of the Department of Trade and Industry’s broad-based BEE scorecard.

“Transformation progress is reflected in the improvement in the group’s externally verified broad-based BEE status to level five with a score of 59.1, compared with level seven and a score of 41.9 in the previous year through a continued focus on employment equity, skills development, preferential procurement, enterprise development and socioeconomic development. Lewis aims to achieve level four status in 2013.”

The group had not entered into a direct broad-based BEE ownership transaction yet, because market conditions were not conducive to do so.

JD Group director of finance Ian Thompson said the firm was rated a level five contributor by Empowerdex, an accredited empowerment rating agency.

Clicks said that in February it had implemented a broad-based employee share ownership scheme programme through which 10 percent of the group’s shares had been allocated to full-time employees. The scheme was announced in October last year and approved by shareholders in January.

The company said: “A total of 7 695 employees have become shareholders in the Clicks group, with many owning shares for the first time; 71 percent of the new shareholders are black staff and 63 percent are women. Pharmacists comprise almost 5 percent of the beneficiaries.”

Sam Ngumeni, the human resources director at Woolworths, said the food and clothing retailer had launched its BEE share ownership scheme in June 2007, four months after the codes were implemented.

Employees who participate in the scheme have to date received more than R45 million in dividends since inception.

He said the Woolworths scheme was the first phase of a broader BEE transaction and would include a way forward in the near future. However, the company remained committed to delivering on all relevant aspects of the codes.

The group had not entered into a direct broad-based BEE ownership transaction yet, because market conditions were not conducive to do so.

Botha suggested that the Public Investment Corporation, which owns major shares in most of these retail companies, should work harder in persuading the companies to take on equity partners.  

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