Retailers rapped for slow BEE deals

Analysts last week attacked the retail industry for dragging its feet on empowerment because they were not under direct pressure from the government as their main customer was the man on the street. The comments followed Spar's announcement last week that it planned to sell 10 percent of its business to empowerment partners for R1 billion.

Spar rose 2.53 percent to R60.80 on Friday, while the retailers sector fell 1.63 percent. Retailers such as Clicks, Truworths, Foschini and Lewis have not done any deals to date, at least at ownership level.

Retail analyst Syd Vianello from Nedcor Securities warned that at some point the government would force companies to put black economic empowerment (BEE) schemes into place.

Empowerment deals in the sector were an eventuality, but retailers did not consider it important enough, Vianello said.

Cadiz Asset Management's Mark Ansley said the history of the country necessitated empowerment. Ansley added that some retailers that lacked in this department, including furniture retailer JD Group, were probably working on deals.

Warwick Lucas from Imara SP Reid said most retailers had relatively voluntary BEE deals based on public spiritedness.

"This issue will be raised time and again, but there's an element of inevitability about the societal pressure that will leave retailers with little choice (but) to implement these schemes," he said.

Yasmine Ganief, a retail analyst from Old Mutual Asset Managers, commended Spar for being proactive.

"Spar is being proactive by going this route before its main competitors. This deal is beneficial to employees and is also likely to encourage (franchise) members to buy more goods from Spar because they are now part owners of the company," she said.

She added that Spar had a loyalty ratio of approximately 78 percent (the percentage of goods sold by Spar stores that is purchased from the group itself). It was her view that Pick n Pay franchisees probably had less leeway in terms of what they could source from other companies.

Pick n Pay has opted to transform its low-budget chain, Score, into black-owned franchises, while Shoprite has invested heavily in the group's own skills development programme and is training future store and office personnel.

Massmart's BEE initiative, the Thuthukani Empowerment Trust, has to date paid out R59 million in dividends to staff since 2007.

Ansley said the BEE scheme by SA Breweries (SAB) was probably the "cleverest" as it filtered down to customers, staff and retailers, including shebeen owners. It puts 10 percent under black ownership through the issue of new shares to about 60 000 new investors, including SAB employees, black-owned liquor retailers and consumers through an SAB foundation.

However, Empowerdex chief executive Vuyo Jack said the problem with BEE deals done by local retailers was that they relied heavily on the company's share price, and not its underlying cash flow, for value to accrue to shareholders

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