The world’s largest grocer, Walmart, is still backing its struggling SA subsidiary Massmart, owner of Makro and Game, after more than 30 of its stores were looted and a distribution centre near Durban was burnt down, CEO Mitchell Slape said in a letter to staff.
In response to the riots and destruction of shops in KwaZulu-Natal and parts of Gauteng, Slape has sent a letter to the company’s 45,000 employees every evening since Monday.
“We are also fortunate to have a good majority shareholder in Walmart who are working with and supporting us through these challenging times,” he wrote in one of the letters seen by Business Day.
In a deal that was supposed to launch its foray into the African market, Walmart bought Massmart, which also owns Builders Warehouse and Cambridge Foods, for R148 a share in 2010. But Massmart has not lived up to expectations, with its share at a third of the value, and recently looked to review its African operations in Nigeria and Uganda. It suffered two consecutive losses of R1bn, but before the looting Slape said it was expected to break even this year. Locally, Game has struggled with a constrained consumer market in SA and heavy online competition that has been worsened by Covid-19 and civil unrest.
The rioting and devastation of infrastructure in KwaZulu-Natal and Gauteng has led to concern that foreign investors will exit the country or withdraw money from SA.
But Walmart, which has provided senior executives, IT outsourcing services and more than R4bn in rolling loans to its SA company, remains firm in its support.
“Walmart joins Massmart in our commitment and priority in supporting our associates and customers in SA during this time,” the company said in response to questions from Business Day.
On Wednesday, Slape told staff it was a “tough blow” when he found out that the company’s 52,900m² distribution centre near Durban had been set on fire.
“It often happens in difficult situations that our emotions can go from very high to quite low,” he said. “I felt a little like that yesterday [on Tuesday] when I wrote that the police were restoring order at our Riverhorse Distribution Centre in KwaZulu-Natal, only to hear later in the evening that the distribution centre had been breached and set alight.”
Massmart is already building a new distribution centre in KwaZulu-Natal, which is expected to be completed in the last quarter of 2021, which will alleviate the pressure caused by the loss of the current centre.
Still, the loss of the Riverhorse distribution centre will be a blow to Slape’s target for the company to break even this year.
Slape has encouraged employees by telling them that earlier this week a senior union official at a Massmart store and a regional union colleague helped secure the store.
“My feeling is that this moment best represents the spirit of all our Massmart colleagues,” he said
Slape told staff he was “heartened” by messages of support from customers.
“The following was my favourite Twitter comment, because it really captures the way the Massmart leadership team is thinking about our business: ‘You guys will come back stronger’.”
In 2020, Massmart hired Martin Halle, a long-time company executive, to improve its supply chain and product availability.
Halle previously told Business Day that upgrades and new distribution centres would ensure that the facilities that are designed to sort large pallets of goods for stores and would also act as online fulfilment centres that usually pack small orders for customers.
The logistics upgrades include using Walmart’s artificial intelligence technology to predict when demand for certain items at certain stores might spike in response to an event such as an important football match.
The company is sending food parcels to all its KwaZulu-Natal staff.
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