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Pick n Pay’s Gareth Ackerman issues dire warning to SA government in annual address

Pick n Pay’s Gareth Ackerman issues dire warning to SA government in annual address
(Photo: Waldo Swiegers / Bloomberg via Getty Images)

Ackerman sounds warning on profits, saying Pick n Pay expects a decline of more than 20% for H1 2024. It’s been difficult to stay positive about the future of South Africa for a long time, said the retailer's chairman.

Foolhardy government policies will push South Africa over the edge, increase food shortage and prices and destroy business, warns Pick n Pay chairman Gareth Ackerman.

At the retailer’s AGM on Wednesday morning, Ackerman, who is also co-chair of the Consumer Goods Council of South Africa, railed against the government’s newly drafted race-based water rights quotas and the Employment Equity Amendment Act (EEAA), which are compounding pressure on businesses already being squeezed by rolling blackouts, crime and criminal cartels, the breakdown of logistics capacity, truck burnings and diplomatic stand-offs with our biggest trading partners.

Together, these factors are undermining any hopes of an economic revival.

By imposing new racial quotas on employers of more than 50 people, the EEAA is a threat to private employers should they fail to employ a workforce mirroring racial demographics, which will in effect make large numbers of qualified people unemployed and substitute them with unqualified people, he said.

“It (the act) is very probably unconstitutional and could ruin many productive companies and foreign investments on which the economy depends.

“I cannot understand why our government has not caught up with the times. The act tries to force on business, by decree, an outcome that most large corporates are already doing their best to achieve. Not because they’ve been instructed to do so, but because of the growing recognition that a diverse workforce and leadership is a strategic asset.

“This is the very foundation of ESG principles that most companies are following with vigour and energy,” Ackerman said, pointing out that PnP had spent more than R50-billion on BEE businesses during the past financial year – “a factor of eight ahead of any other retailer”.

A further worrying development is the new provision for race-based water rights which will threaten food security, he said, as there is no line of would-be black shareholders with the necessary capital to purchase this required equity in farms.

“This could ruin or close many of our farms and undermine the value of all existing farms, thus also creating a banking crisis – at a time of high food inflation and unemployment.”

The retail group has been working for years on ensuring it adapts to changes that will affect society and the difficult space they find themselves in, but when being hammered relentlessly by setbacks on every front over a long period, there’s a temptation to give in.

“It’s been hard to stay positive about the future of SA for a long time now.”

Better signs

On a more cheerful note, Ackerman said despite everything, he was somewhat more positive about the country than he was when PnP presented its financial results, because the government appeared to recognise that it needed help to get the economy moving again; independent power projects were taking off, there was hope for freight transport and logistics, and the broadband spectrum impasse had been unblocked.

“More than 4,300MW, equivalent to four stages of load shedding, is set to come on to the grid in the next two years. That is not even counting the impact of accelerated domestic and private investments in small-scale solar generation, supported by tax incentives, and local government initiatives to procure energy independent of Eskom.

“The consequences of this will ripple through the economy for years to come.”

From a business and consumer point of view, he said he hoped consumers would finally get some relief from interest rate hikes, which had been “brutal”.

“For our part, I am immensely proud of the contribution Pick n Pay has made to shielding consumers from the worst, keeping internal inflation below CPI, and at less than half the current 14-year food inflation high of 14%.

“Our commitment to private and confined label rollout has made an enormous difference to the consumer. Our no-name brand, a feature of Pick n Pay since 1976, continues to help the consumer make ends meet.”

Ackerman said the group was built during a period of enormous uncertainty in South Africa.

“Now, as then, we have continued to invest – putting R4-billion into the business over the past year – as a demonstration of our commitment to build for the future.”

Trading statement

On Wednesday, PnP released a trading update for the 20 weeks ended 16 July 2023, saying it had made good progress on the implementation of its Ekuseni Strategic Plan during the first four-and-a-half months of the 2024 financial year (FY24), with strong sales momentum in Boxer and Online, although PnP South Africa’s sales were down 0.3%. For this, it blamed efforts to contain the impact of rolling blackouts.

  • Group sales were up 4.8%, with SA sales growth at 4.4% (0.9% like-for-like), while the group’s Rest of Africa segment sales increased 15.9% (12% on a constant currency basis).
  • Clothing sales in standalone stores grew by 10.9% and group liquor sales for the period grew by 9.8%.
  • Online sales growth for the period was strong at 75.3%.
  • Boxer SA sales growth was 15.4%.
  • Group SA internal selling price inflation for the period was 9.5%, which is below Stats SA’s Food CPI of 13.2% for the period.

Pick n Pay estimates that the accretive abnormal costs for the period will amount to R610-million due to the increased expense of rolling blackouts, a duplication of supply chain costs and restructuring costs.

Between March and June this year, it spent R300-million on diesel to run generators. 

It also incurred a R110-million duplication of supply chain costs during its Longmeadow/Eastport distribution centre handover, and R250-million anticipated for restructuring costs.

The group, therefore, expects profits for H1 FY24 to be down by more than 20% when compared with H1 FY23.

PnP has been listed on the JSE for more than 50 years.

Its share price took a beating after the trading statement – knocked down by around 9% by midday – with a moderate recovery towards the end of the day. DM

Gallery

Comments - Please in order to comment.

  • Iam Fedup says:

    About bloody time that business leaders speak directly. What took him so long? The only way to get rid of this dreadful and useless ANC/EFF regime is to strangle any funding they get, and to actively speak out, over and over again.

    • Jane Crankshaw says:

      I’m with you on that! Taxpayers and Business leaders have been far too patient for far too long. waiting for a change….however we’ve reached the end of our patience – time to fight racist BEE policies and the theft and corruption that taxpayers have to pay for – twice!!!

    • Bruce Anderson says:

      Actually, Ackerman has been progressively outspoken for some time. Go back and see the comments with previous results.

  • Coen Gous says:

    As businesses crumble, the economy bleeding, individuals just become poorer and poorer, and ANC councillors wealthier and wealthier.

    • Campbell Tyler says:

      Come on Coen, address the article. Did you take the time to read the 4 page address that Ackermann gave? Yes, he led with the concerns, but followed with optimism and he specifically warns against fatalism. Your comment says nothing new and could be put at the bottom of any Daily Maverick article. Wallowing in misery helps no one, especially yourself. It is hard to be otherwise, I know, and I often fall into the same trap, but read Ackermann’s address, it is balanced and has seeds of hope.

  • Sydney Kaye says:

    He’s right of course, but on the other hand competitor Shoprite Checkers is still doing pretty well.

  • R IA says:

    This government seems hell bent on totally collapsing our economy.

  • Justin Hall says:

    To be clear, a “a decline of more than 20% for H1 2024” means profits for the first half of 2024 will be 80% of first half profits in 2023. That is still a very healthy outlook given current social instability; it is NOT a business collapsing.

  • Clinton Herring says:

    so white people are qualified and people that mirror the demographic of the workforce are unqualified. Got it.

    • Fanie Rajesh Ngabiso says:

      Not exactly clear on the point you are making here?

    • Rama Chandra says:

      If white people spend, on average, 100 times as much on education and skills, and have access to enormous more resources, why would you think that they would be only as skilled as the poor who haven’t been so benefitted? If the ANC wants equality, they should ensure first equality of education, before firms can be expected to have equality of hiring. In addition, the article doesn’t state local demographics versus national demographics. There are plenty of local firms of 50 people that couldn’t possibly match national demographics.

  • Donald bemax says:

    The point that most concerns me is that that the ANC want same BEE demographic to reflect on the flip side…. that is to say an increase in poverty in the other racial groups in SA. Nice balancing of the books for the collapse of our economy…………

  • Hester Dobat says:

    Am I not correct if I say the private sector is being drawn into solving some pressing issues? On business forums the private sector does speak out. It is the Government who is not hearing the message. They just keep pushing job creation onto the private sector because the lack the creativity and insight on how to make our country grow. You cannot force growth with unreasonable laws imposed on sectors already providing jobs. Private sector involvement is kept low key by Government. The election is not far off. They have to have something concrete achieved to front their propaganda machine. Private sector is just quietly getting some critical jobs done so that South Africa can survive for everyone’s sake.

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