SA’s second-largest retailer, Pick n Pay, has defended its decision to open a single store in Nigeria after a shareholder at the annual general meeting held on Monday raised concerns about the risks of investing in the West African market.
Pick n Pay’s new store in Lagos, which opened in March, offers a discount format and reduced range of goods, in a style similar to that of Boxer supermarkets in SA.
It is partnering with AG Leventis, which has experience in doing business in Nigeria, in the same way it partners with a local supermarket business in Zimbabwe.
Nigeria, with more than 200-million citizens and a growing economy, has seen many SA businesses lose money and eventually pull out of the country. Many SA companies in Nigeria were looted in 2019 and 2020 in retaliation for xenophobic attacks on Nigerians locally.
Businesses also face difficulties buying foreign currency and repatriating money to SA.
Shoprite sold its Nigerian business earlier this year for an undisclosed amount and Massmart, owner of Game and Makro, is reviewing its Nigerian operation, suggesting it may leave that country even as its majority shareholder, Walmart, had wanted to expand on the continent.
One investor in the meeting asked why Pick n Pay was expanding in such a risky market, pointing out that “risks outweigh any potential benefits”.
Pick n Pay director of strategy David North told Business Day “after many years of careful planning, the team is excited to have a small presence in the region”.
“By opening one store on a pilot basis, we are seeking to learn from our experience about the feasibility and potential for sustainable growth in the market,” he said.
The pilot store does not guarantee it is going to expand there.
“We do not have a fixed view on the future, and would only develop our ambition if we were confident about our prospects,” North said.
Pick n Pay believes success in Africa will come if it opens discount stores outside SA that meet the needs of the low-income majority rather than the affluent few.
“Our pilot store is about testing this hypothesis in a potentially important market,” he said.
Former Pick n Pay CEO Richard Brasher said previously it had been successful in Africa as it never “bet the house on the continent” but expanded gradually.
During the meeting, some shareholders also expressed unhappiness about the levels of pay of the most senior Pick n Pay executives. The dissatisfaction has highlighted the 1-million shares, worth about R52m at current share price values, awarded to incoming CEO Pieter Boone as a sign-on bonus.
In the meeting, non-binding votes on executive remuneration failed to pass, just missing the required 75%, which revealed some shareholders are unhappy with the retailer’s remuneration for top staff.
When these votes do not get the required majority, this triggers a JSE-listing rule that the company must engage with shareholders on their unhappiness and publish a summary of their issues in its next annual report.
Mike Martin, from advocacy group Active Shareholder representing the Labour Research Service and The Ditikeni Trust, voted against both remuneration proposals.
He pointed out that if the shares and votes linked to the family of Raymond Ackerman, who founded Pick n Pay, and company directors were excluded, only 27.3% and 9.7% of shareholders supported these two remuneration resolutions.
Martin told Pick n Pay the shareholders he represents do not support Boone’s signing bonus of 500,000 shares that vest in 2023 and another 500,000 that vest in 2025.
“We do not support the payment of large sign-on bonuses and consider the granting of 1-million shares is a very large sign-on bonus even if it does have vesting conditions,” he said.
North said the company had spoken to shareholders before the annual meeting and some were concerned about the changes to the performance targets linked to short- and long-term bonuses to reflect the extraordinary circumstances of the Covid-19 pandemic.
However, he said shareholders supported the success of the management team in navigating an exceptionally difficult year, under the leadership of outgoing CEO Brasher.
Would you like to comment on this article?
Sign up (it's quick and free) or sign in now.
Please read our Comment Policy before commenting.