It was hardly surprising that Thursday’s announcement that David Thomas, CEO of Woolworths’ Australian folly David Jones, has resigned for personal reasons had a chilling affect on investor sentiment.
Thomas was the man tasked with stopping the rot at the Australian department store; in that role he was leading the incredibly extravagant A$200m refurbishment of the retailer’s flagship store in Elizabeth Street in the heart of Sydney. Remarkably the A$200m was being spent in a bid to spare Woolworths from further write-offs of its R21bn investment. Just 12 months ago the group announced it was writing off a third of that investment.
Thursday’s announcement may have prompted some shareholders to recall comments by the chair at the AGM in November that there was no certainty there would not be further write-offs.
Thomas was at the helm for only two years; the new CEO, who has yet to be appointed, will be the fourth since Woolworths acquired the troubled Australian business in 2014.
The problem for Woolworths is that a lot of South Africans who have family in Australia visit them during the year-end holiday and then return to recount their holiday stories. One, who happens to be an international retail expert, reckons the A$200 is a case of “good money after bad”.
He told Business Day that while there is growth opportunity for traditional bricks-and mortar-stores in Australia, the David Jones team seems to have badly miscalculated market trends. It’s not just that the brand focus is inappropriate or that the food hall idea isn’t working, but David Jones’s traditional market is moving out of the city centres and increasingly shopping in the suburbs. All their promises are delivering almost nothing.
If true, the CEO churn is hardly surprising.
There was a distinct air of cynicism at the Investing in Africa Mining Indaba this year despite the copious reassurances coming from President Cyril Ramaphosa and mineral resources minister Gwede Mantashe.
Both veterans of the National Union of Mineworkers (NUM), with Ramaphosa one of the instrumental players in organising the union and making it the country’s most powerful in the 1980s and 1990s, both men understand the mining sector.
Ramaphosa became the first sitting SA president to address the annual conference in its 25-year history and he went out of his way to placate nerves, soothe fears and address, as well as he could, the concerns resulting from a cautious approach by mining companies and investors towards the country.
He spoke of the need to address the crisis at power utility Eskom, he said investors shouldn’t worry that their assets would be seized in the government’s planned land expropriation without compensation, and that his government and law enforcement agencies are getting on top of the corruption problem that has become so much a feature of SA politics and business.
Mantashe stressed regulatory certainty coming from a fiercely debated Mining Charter and the scrapping of amendments to the Minerals and Petroleum Act.
But still there was cynicism.
Basically, after nine years of Jacob Zuma and the corruption and incompetence that flourished during his presidency, the antiquated liberationist rhetoric coming from the ANC, and apparent inaction on corrupt ministers and other high-ranking officials, investors remain unconvinced.
What Ramaphosa has to do is tackle head on the most difficult and politically dangerous problems facing him, ensuring his corrupt comrades are arrested, tried and jailed. Nothing will send a stronger message that he is serious and that his words can be taken seriously.
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