More than 4,000 jobs were lost in the long time it took to finalise the purchase of the Cambridge grocery stores from Massmart, said Shoprite CEO Pieter Engelbrecht, criticising a process that led to the devaluing of the stores.
Engelbrecht did not come straight out by criticising the competition authorities or Massmart, but said the deal took too long.
“I’ll start with my disappointment … that to get this over the line took almost one-and-a-half years, and a lot of damage was done to the equity of those sites.”
The deal, which saved the unprofitable stores from closure was delayed by the competition authority approval process, which took 16 months.
The bid of Shoprite, SA’s largest grocer, for the about 50 discount grocery stores, 40 liquor stores and an abattoir in August 2021 succeeded when the tribunal approved the deal in December 2022.
In the 16 months, the stores were underinvested in, and suppliers, staff and security guards lost business opportunities and jobs. Engelbrecht said he was “very annoyed” by the job losses.
He was speaking at the release of Shoprite’s 2023 financial results on Tuesday.
Engelbrecht said when the Shoprite group bid for the stores, 9,000 people were employed by the Massmart business.
“[When] we started with them, there were [about] 9,000 people. And when we finally did the transaction, it was 4,480. So half the jobs were lost.”
Massmart lost R1.5bn in the three years before the deal due to the Cambridge stores, and Massmart CEO Mitchell Slape said in September 2022 if the sale didn’t go through the board had “zero interest” in keeping the stores open.
Further degraded
The Competition Tribunal approval process was complicated by Pick n Pay and Spar opposing the Shoprite deal saying it would create a dominant retailer. Both had unsuccessfully bid for the Massmart business.
The Shoprite group has to invest more than R500m to fix the liquor and grocery stores that became further degraded as the deal took so long and Massmart stopped investing in them.
“If you know you are going to sell and the price has been agreed, how much attention are you going to give it? [Fewer] products were being stocked so there were small suppliers that didn’t have any place to sell their product.”
The stores are now bringing in about R2.4bn in annual revenue to Shoprite and are expected to break even by the end of June 2024.
He said the day after the deal was approved, in the middle of the December holidays, Shoprite staff started working on fixing the business.
Naspers CEO Bob van Dijk recently criticised the Competition Commission’s binding recommendation that forces its e-commerce retailer Takealot to separate its business that sells its own products from the division selling third-party goods.
In the Naspers boss’ criticism of the Competition Commission, Van Dijk noted its new rules for Takealot will put the unprofitable retailer on the back foot when and if global retail giant Amazon starts selling goods online in SA.
“The regulation hits a business like Takealot while Amazon, which is a $3-trillion company … [and] is one of the most powerful companies in the world, which gets an advantage because they are not defined as a ‘leading firm’.”
While the commission has said Amazon will be subject to the same rules, a leading competition lawyer who asked not to be named has said there is no legal basis to force Amazon to follow the rules made in an inquiry in which the US firm did not take part.
With Mudiwa Gavaza
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