Tag: South Africa

South Africa enters a recession

Gross domestic product contracted 0.7% for the first quarter of 2017, indicating that the country has entered into a recession, according to deputy director general of Economic Statistics at Statistics South Africa (Stats SA) Joe de Beer.

The latest GDP data was released by Stats SA on Tuesday.

For South Africans, this means:

  • The value of the rand is weaker, driving the price of commodities and imports up

  • Food and petrol prices are likely to increase

  • Foreign investment will slow

  • Local job creation will slow

  • The unemployment rate will continue to rise as companies contract and lay people off

The contraction follows the GDP decline of 0.3% in the fourth quarter of 2016. In 2016, the economy grew only 0.3% for the year.

Compared to the previous year, GDP growth came to 1%. “Over the last four years there were instances of negative economic growth prior to the last two quarters,” said De Beer.

The main contributors to the contraction were the trade and manufacturing industries. Trade declined 5.9% and manufacturing contracted 3.7%.

The agriculture and mining industries were the only sectors which made positive contributions. Agriculture increased growth by 22.2% on the back of the drought recovery, and mining grew by 12.8%.

However, expenditure on GDP contracted by 0.8% in the first quarter.

Household consumption declined 2.3%, with spend of food and non-alcoholic beverages, clothing and footware and transport the major contributors to negative growth.

Gross fixed capital formation grew by 1%, mainly due to machinery and equipment which grew by 7.9%.

Net exports contributed negatively to growth and expenditure on GDP, while goods and services contributed negatively to growth in exports. Exports of mineral products and vehicles and transport equipment were largely responsible for the decrease in goods, according to Stats SA.

Imports, which increased 3.2%, were driven by imports of mineral products.

Government consumption expenditure contracted 1%.

Recently the World Bank projected low growth for the following two years. The World Bank expects growth of 0.6% for 2017, 1.1% for 2018 and 2% for 2019. The projections for 2017 and 2018 are 0.5 and 0.7 percentage points less respectively than its January 2017 figures, Fin24 reported. data

The Reserve Bank also revised down growth forecasts. At the monetary policy committee rates announcement in May, Reserve Bank governor Lesetja Kganyago said political tensions and the sovereign downgrades to junk status have presented risks to growth.

The Reserve Bank’s growth forecast for 2017 is now 1%, down from 1.2%. Growth projections for 2018 were cut down from 1.7% to 1.5%. Similarly, the 2% growth forecast for 2019 was revised to 1.7%.

At its recent credit review, ratings agency Standard and Poor’s (S&P) emphasised that low growth remained a concern. S&P explained political risks would weigh heavily on growth priorities and this would slow fiscal consolidation.

“We believe the current political environment could result in the private sector delaying business investment decisions, thereby restraining GDP growth,” said S&P.

S&P projects growth to rebound to 1% in 2017 and average at 1.5% between 2017 and 2020.

By Lameez Omarjeev for News24

The stats of the nation

In the midst of all the chaos and depression around us, we must appreciate the fact that we have still been able to keep some world-class institutions running. One of these is Stats SA, which is right up there with its international peers. Regular visits to its website will show you why that is: the amount, depth and breadth of information is quite something.

In the past few days, three critical pieces of information from Stats SA were drowned out by the ugly, rotten politics. They all related to issues that are key to the lives of South Africans: crime, governance and jobs.

Crime is higher than ever

The first one, titled Exploring the Extent of and Circumstances Surrounding Housebreaking/ Burglary and Home Robbery, looked at these crimes that terrify South African citizens. It noted that, although the proportion of households experiencing this crime that “violates our private space and the one place that we think of as our sanctuary” has been on the decline for five years, public perceptions were the opposite.

Differentiating home robbery (a break-in while the family is there) from housebreaking (burglary), the report says the former “fuels fear in communities, because it puts people at risk of personal injury and emotional trauma in their homes, where they should feel safest”.

Then came the really frightening part, which painted an appalling picture of the arrest and conviction rates.

“An arrest is made in only one out of every five reported cases of housebreaking or home robbery. Only one in five people arrested for housebreaking was convicted, and one in three people arrested for home robbery was convicted,” it stated.

Unacceptable vacancy rates

The second report, The Non-financial Census of Municipalities, contains some disturbing information about the vacancy rates in municipalities that cannot afford to be short of service-delivery personnel. Overall, the vacancy rate jumped from 13.3% in 2015 to 14.4% in 2016. Last year, the most affected areas in terms of unfilled vacancies were environmental protection at 26.1%, road transport at 22.3% and wastewater management at 19.9%. What was worrying was that only health – at 10.9% – had a vacancy rate of less than 12%. Crucial functions such as electricity (13.7%), water (13.6%) and finance (12.9%) had unacceptable vacancy rates.

Such high vacancy rates when positions are fully funded affect service delivery and increase the reliance on outside consultants, the report noted. By way of illustration, it pointed out that in Vryheid – which experienced a severe drought in the year in question and had to employ water tankers – the vacancy rate is 30.5%. Rustenburg’s wastewater management stood at a staggering 69%. Road transport, which is often the cause of community grievance, turned up some alarming numbers. In Mangaung, 74% of vacant posts were unfilled and Masilonyana (also in the Free State) stood at 69%. Although the vacancy rate in electricity came down from 20.2% to 13.7% last year, it is still considered high.

Unemployment crisis

The third was the release of the Quarterly Labour Force Survey, which revealed that South Africa’s unemployment rate now stood at 27.7% – its highest since 2003. Ironically, this was in the quarter in which 144 000 new jobs were created in the economy, a number offset by the entry of 433 000 jobseekers. The survey said 58% of these new jobseekers were between 18 and 34 years of age, thus pushing the youth unemployment rate to 38.6%.

The unemployment rate among those without matric was 33.1%, while among graduates, it was 7.3%. If you use the expanded definition of unemployment by including those who have just given up on looking for work, the figure goes to 36.4%, almost a 10% increase. And if you want it in raw figures, we are talking about 9.3 million South Africans who cannot find work.

Why, I hear you ask, are we talking about such seemingly mundane matters when there are so many more fascinating subjects, such as Duduzane’s complicated love life and the saucy pictures that dropped into his inbox? Why should we be concerned about boring issues when there is such scintillating stuff in the political world – from emails to motions of no confidence and a president who threatens his executive not to “push him too far”?

Well, it is because these are the issues that should be consuming us. In a society that is serious about solving problems, the content of these reports would spell crisis in capital letters. A citizenry that lives in constant fear in a free country is not enjoying its freedom.

Municipalities and government departments that deprive residents of quality services because they are unable to fill vacancies are also depriving people of the tangible fruits of freedom.

The same can be said with regard to the unemployment crisis, which deprives families and individuals of a decent standard of living.

There has to come a time when these are the big issues on the minds of South Africans, both in the state and outside of government.

But then, as the Zuma/Gupta mafia is busy plundering, the country has no choice but to be consumed by their criminal behaviour.

By Mondli Makhanya for News24

Government wants to keep tabs on emigration

Government has unveiled plans to limit emigration by tracking those leaving SA for more than three months.

Despite working on building a more inclusive South Africa with opportunities for all, the government’s solution is to try and limit the number of South Africans leaving the country.

Sounds unbelievable? Well, it is.

On Sunday, Rapport reported that cabinet has approved a piece of legislation – don’t worry, it’s not law yet – that would allow the department of home affairs to put a trace on all South African citizens planning to leave the country for more than three months.

According to BusinessTech, the Department of Home Affairs’ White Paper on international migration would be used as a means of keeping tabs on folks outside of the country and to try and limit the number of people looking to leave.

The document also outlines the department of home affairs’ plans on how to deal with the massive influx of African immigrants looking for greener pastures in Mzansi, with the controversial ‘open borders policy’ forming the backbone of said strategy.

Since Jacob Zuma wrestled control of South Africa away from Thabo Mbeki we’ve seen an upswing in South Africans emigrating to the UK and Australia and, according to the paper approved by cabinet, emigration has been increasing by about 9% year-on-year, with more and more black professionals looking to leave.

Following Jacob Zuma’s latest cabinet reshuffle and the subsequent ratings downgrade, the number of South Africans enquiring about emigration options has surged significantly… no surprises there.

So what does government propose: limit those leaving and track the rest, instead of focusing on inclusive economic growth.

The white paper is, reportedly, the first of its kind put forward by the department of home affairs, aimed at preventing – or limiting — South Africans from emigrating.

By Ezra Claymore for www.thesouthafrican.com

Terrorists get SA passports

Fifteen unused South African passports, some containing pictures of South Africans on an international terrorist watch list, have been seized from an al-Shabab courier in Tanzania.

A police crime intelligence source told The Times that at least one of the passports, some of which had visas for European countries, contains a photograph that might be that of international terror fugitive Samantha Lewthwaite, also known as “the White Widow”.

The passports were seized from a man believed to have dual South African and Tanzanian citizenship. Officers from the Hawks’ crimes against the state unit and State Security Agency were dispatched to Dar es Salaam, the capital of Tanzania.

The team returned last week after interviewing the alleged courier and examining the passports.

Hawks spokesman Hangwani Mulaudzi refused to comment on the circumstances of the arrest, the charges the man faced, and whether he would be brought back to South Africa.

He said the Hawks were alerted after the man was found in possession of a “number of our passports”. The matter was receiving “serious” attention in both countries and at Interpol.

“This is very worrying,” said Johan Kruger, head of the UN’s eastern Africa drugs, transnational crimes and terrorism programme. “We are focusing on strengthening our capacity in eastern Africa around terrorism prevention. This includes crimes related to terrorism such as the use of illicitly obtained travel documents, fraudulent travel documents and terrorism financing.”

The arrest is a major breakthrough in the fight against terrorism in Africa. According to Hawks sources, it will help in anti-terrorism operations under way in South Africa.

A Hawks source said the suspect had been under observation after Tanzanian authorities were tipped off about his arrival in Dar es Salaam. The officer, who cannot be named, said it was understood that he was due to deliver the passports to another al-Shabaab operative when he was arrested.

‘White Widow’ trail has gone cold: Kenya police
“All of the recovered passports are legitimate. They contain the images of several South Africans on international terror watch lists. Among the photographs is one of a woman who might very well be Lewthwaite.”

Lewthwaite, a UK citizen, lived in South Africa between 2009 and 2011 under a false South African identity. She fled South Africa on a fake South African passport.

She has been linked to numerous terror attacks, including the Westgate Mall assault in Kenya in 2013.

Her husband, Germaine Lindsay, was one of the suicide bombers involved in the 2007 London bombings.

In 2015 it was reported that Lewthwaite had been killed in the Ukraine, but Hawks sources say the latest arrest suggests that she is still alive.

White Widow’s Joburg love story
Questions are now being asked about how the passports, which are not forgeries, came into the possessin of Islamic terrorist group al-Shabab. Applicants for a South African passport must submit biometric data, including fingerprints.

Home Affairs spokesman Thabo Mokgola refused to comment.

A police crime intelligence source said the 15 passports were issued recently. He said they contained pictures of terror suspects wanted in Europe and Africa who were believed to be linked to al-Shabab.

He said the courier had numerous links to Lewthwaite. He used the same networks as she while in South Africa to obtain passports.

“He is also believed to be linked to an al-Qaeda operative killed in Mali early last year. That man was also found with South African passports.”

‘White Widow’ linked to hits
The source said the authorities, through Interpol, were investigating the suspect’s movements into, out of, and around South Africa.

“He has been placed in Port Elizabeth and Cape Town. His travels from South Africa to Tanzania, and the people he met travelling to Dar es Salaam, are being investigated.”

Koffi Kouakou, of the Wits School of Governance, said the “wealth” a passport provided was immeasurable.

“It’s a powerful key. South Africans can travel to scores of countries without a visa.”

He said the fact that the suspect was arrested with so many passports called into question the security of South Africa’s passports.

‘White widow’ passport probe
“It shows South Africa’s security cluster systems are compromised. The only way such people can access our passports is through corrupt officials,” said Kouakou.

Terrorism expert Jasmine Opperman said members of al-Shabaab and Nigerian terrorist group Boko Haram in South Africa all had access to genuine South African passports, for which they paid up to R60,000 each.

“It’s exactly how Lewthwaite travelled,” said Opperman.

SA probe into ‘White Widow’ passport ongoing
Opperman said interviews she had with Boko Haram and al-Shabab operatives showed that although South Africa was, for now, regarded as a base at which to recoup from, finance and plan terrorism attacks, the country was vulnerable to exploitation by extremists operating in Africa and the Middle East.

By Graeme Hosken for www.timeslive.co.za

SA extends trade surplus

South Africa recorded an R11,4-billion trade surplus in March, continuing the trend of strong net inflows into SA.
The rand closed weaker on Friday despite the surplus, as fears mounted of a US Government shutdown.

As expected, US lawmakers reached a $1-trillion budget deal, which will keep the economy ticking until September.

The agreement should give the rand breathing room for strength today. It’s a busy 4-day week, with the US Fed statement and local manufacturing data out tomorrow and US job numbers the highlight out on Friday.

Everyone is online, so why aren’t you?

We’ve been told for nearly a decade now that this is the digital age – a golden time of instant information.

Smartphones, tablets and desktops are everywhere and the role of traditional media and content sharing has rapidly changed in the age of the internet-driven 24-hour news and social media sharing.

A global trend, South Africa is on track and seeing rapid changes in how readers consume information.
The days of mass-market print publications are declining and we are looking at a new era from print to digital and beyond.

According to We Are Social’s Digital in 2017 report, an average South African spends a significantly longer portion of their day engaging with digital than with any other medium.

Effective Measure’s November 2016 statistics, based on 331,042 online surveys completed by local internet users, reveal the same trend when comparing digital to print or even radio and TV.

Nearly everyone is online. For the consumer, we can take news anywhere with us in the world and are connected to and by technology throughout the day. Digital media also allows companies to reach the right audience at their convenience and create lasting experiences with customers. Having a finger on the digital versus print pulse allows a company to transform itself in step with consumers’ changing habits.

“There’s no doubt that it’s time to fully embrace the digital age” says the CEO of AutoTrader South Africa, George Mienie. “We launched our magazine in 1992 and our website in 1998, and it was in 2008 that we realised our magazine had a shelf-life. The internet was developing so fast, and the possibilities of what could be done online were so vast.” AutoTrader, the number one motoring marketplace in South Africa, is one of the businesses who have made the transition from print to digital successfully. This week they announced they had printed the final issue of their magazine & are fully digital.

To put the power of the internet into perspective, compared to the 1,4 million magazines AutoTrader sold in 2006, in 2016 the website had over 50 million visits, and the company sent over 3 million leads connecting serious car buyers and sellers. One magazine could host 8 – 10,000 cars in total. Today 68,000 cars are listed at any one time on the website.

The move from print to digital should never be taken lightly and should be right for your company. The journey from analog and print to digital can be hazardous, regardless of what industry, technology, product, or service your company is in. Just ask industry giants like Kodak or Financial Times who also struggled for years in transforming. AutoTrader’s full digital move was a result of 10 years of research and monitoring of changing consumer preference.

“We put it in our car buying customers hands … by creating two unique sets of telephone response numbers, one printed in the magazine and the other on the website. We then knew whether our users were responding via the magazine or the website, and through tracking it month-by-month we could see how quickly their preference was changing,” says Mienie. Tracking changes in customer behaviour is key for online success. As the only niche vertical that is transparent with the sellers contact details they have seen that consumers want to be more and more anonymous with more than 50% of car buyers taking the address of their site and going directly to a dealership without calling or mailing first.

Online has also enabled the company to empower buyers and sellers to a remarkable degree, and in a way the magazine never could. Through financing, insurance, history checks, buyer and seller validation, geographic location services, and a dedicated content hub that houses motoring news, reviews & videos.
For this company it was a clear way forward to say #ByeByePrint and move forward as fully digital, to aid them in reaching their company goal – for a user to be able to conduct an entire sale, online, perfectly.

SA’s R1 trillion nuclear plans kick off in June

South Africa’s new nuclear programme will start in June, according to a report by the City Press.

A confidential document reveals that a formal request for proposals from companies will be issued, with the total contract worth an estimated R1 trillion.

The nuclear deal going forward is directly related to President Jacob Zuma firing finance minister Pravin Gordhan, as Gordhan was against the project, stated the report.

The Sunday Times also reported that Eskom tabled a presentation to the National Treasury indicating it was ready to buy nuclear power two days before Zuma fired Gordhan.

The successful bidder will be appointed in March 2018.

“Ratings agencies Fitch and S&P Global Ratings have cited the nuclear project as one of the reasons for South Africa’s downgrade,” stated the report.

A concern from Treasury officials is that the nuclear plan allows for “turnkey procurement”, which “is often used to hide corruption”.

This allows the management company to appoint all contractors and service providers.

National Treasury recently denied allegations that a nuclear deal was signed by new finance minister Malusi Gigaba, following a post on Facebook by an ANC member.

The member also alleged that Zuma’s nephew Khulubuse Zuma would benefit from nuclear plants being built.

Source: www.businesstech.co.za

World War Water

Former World Bank vice-president Ismail Serageldin famously predicted that “the wars of the 21st century will be fought over water”.

But now a plan has emerged to ensure that if violence erupts, it bypasses South Africa. It has been put together by the World Wide Fund for Nature and the Boston Consulting Group.

Among the steps suggested in the report are:

  • Water-use compliance and disclosure reporting requirements for JSE-listed companies;
  • Equipping communities with the skills to fix leaks;
  • Strictly enforced penalties for abuse of water; and
  • Incentives for the private sector to save water.

WWF’s senior manager for fresh water, Christine Colvin, said the worst drought for 20 years had taught some harsh lessons.

“Although the Cape is still in the grip of a deepening disaster, a greater danger may be that the floods in the rest of the country wash away the good resolutions to be better prepared and strengthen water governance,” she said.

South Africa would face a water deficit of 17% by 2030, the report said. By then demand for water was expected to have grown from 15-billion cubic metres to 18-billion cubic metres.

Delegates at the Future of Water workshop in January imagined four scenarios:

  1. Ample water across the country but excessive waste due to decaying infrastructure, and a depressed socioeconomic environment;
  2. Adequate water and a booming economy leading to growing demand;
  3. High economic growth but water scarcity due to drought and pollution; and
  4. Severe drought coupled with recession.

Four key goals emerged: becoming a water-conscious country; implementing strong water governance; managing water supply and demand; and becoming “water smart” by commercialising low-water technologies for industry and agriculture.

Drops in the bucket

  • Average annual rainfall is 490mm; the worldwide average is 814mm;
  • Agriculture uses 63% of water, households 26% and industry 11%;
  • 35% of household water is used in gardens, 29% to flush toilets and 13% on laundry;
  • R700-billion is needed to upgrade water infrastructure;
  • 46% of South Africans have a tap at home; and
  • 25% is lost to leaks in municipal systems.

By Dave Chambers for www.timeslive.co.za

The future of South African retail

The South African Council of Shopping Centres (SACSC) recently invited Daniel Silke, one of the country’s leading political analysts and futurists, to speak to South African retailers and property management teams at a recent networking breakfast.

Silke shared about his insights for the 2017 economic year, highlighting that South Africa’s near-term future remains in the balance.

“This is a year in which South Africa will either emerge from the bonds that have held us back, or it will be a year that will continue to provide concern and even possibly set the scene for a fairly combustible near future in advance of the 2019 general election,” Silke says.

Silke also adds that South African retail was changing and retailers need to “buck up” and accommodate these methods of retail.

“Previous warnings and predictions about retail going online are becoming true. The use of technology across the board, not just in retail, in every aspect of society is changing the bricks and mortar offerings of retailers.

“In South Africa, we are behind in terms of Internet connectivity. When we do embrace this technological wave like the United States has, we will see how dramatic technology affects every aspect of business in the country. The shopping centre and retail industries in SA need to ‘buck up’ and realise that internet-based retail such as Amazon is going to enter the country in a very big way. Retailers need to tailor their products for the future.”

Speaking about the recent Budget Speech, Silke said that Gordhan’s speech didn’t offer anything stimulatory for the economy with regards to retailers.

“Many were hoping for leniency; unfortunately more money is going to be taken from not only the wealthy, but from all citizens earning within the tax bracket. Middle class income earners will also see their contributions to SARS upped this year simply because the tax brackets have not kept up pace against rising inflation; we call this ‘bracket creep’. This means subtly that the middle-income earners will contribute, if not more, than the ‘super rich’. This will certainly have a dampening effect with regards to their retail spend. The good news is that there was no VAT increase this year-if there was, then I would argue that it would be a very poor year for retail in South Africa.”

Silke believes that the country needs to become investor-friendly again if the economy is to improve and unemployment is to decrease.

“We need both domestic and international investors. Domestic investors are ‘sitting on piles of cash’ and are reluctant to invest that cash because they are uncertain about the policy framework within the country. We have also seen a reduction in foreign investment over the past 18 months or so. With regards to making the country viable for investors, I get concerned about the reliance on the State to get things right. The history of the country mentions that the State is in charge of making South Africa equitable.

“I do not have a problem with that. I have a problem with the fact that State-owned enterprises and the like have proven to be inefficient and they have proven to sap money out of the pockets of the South African tax payer. We need a de-regulation on State-owned enterprises. We need to make these enterprises efficient in order to free up spend and curb the current government’s ‘heavy hand’ with regards to spending and make South Africa investor-friendly again.”

Supermarkets are a key route to market for many suppliers of food and household consumable products. The growth of supermarket chains in southern Africa presents important opportunities for suppliers, as it potentially opens up much larger regional markets for them. Supermarkets can therefore be a strong catalyst to stimulate suppliers in food processing and light manufacturing industries in southern Africa.

But even the most efficient suppliers with competitively priced, high-quality products are unlikely to succeed if they can’t get their products to consumers. Here, large supermarkets play a key role. Onerous requirements and exertion of buyer power by large supermarket chains can result in small- and medium-sized suppliers and entrepreneurs failing to enter and participate in the economy.

We examined the obstacles to accessing shelf space in supermarkets in Botswana, South Africa, Zambia and Zimbabwe. The research revealed a range of costs that suppliers incur even before a single unit of their product is sold off supermarket shelves in each country.

Supplier development initiatives have been put in place by supermarkets and governments. But these have had limited success because they are restricted in scale and scope, are largely ad hoc, and don’t have a regional development perspective in mind.

There is a need for more co-ordinated, sustainable and regionally focused interventions to increase the participation of suppliers in supermarket supply chains. These should aim to reduce barriers to entry by, for example, curbing supermarket buyer power and building capabilities of suppliers.

Supermarket buyer power
The formal South African supermarket industry is concentrated, with only a handful of large chains holding more than 70% of the national market share. South African supermarket chains also have a strong and growing presence in each of the other countries assessed, although recent years have seen the emergence of other African and global chains too.

Large supermarket chains therefore have considerable buyer power, and are often able to control pricing and trading terms with suppliers. This can include a range of fees such as listing or support fees paid by suppliers to get their products listed in supermarket books.

These fees can be prohibitive for small suppliers. Estimates of listing fees in South Africa range from US$350 to $3,500 per year for a single product line of a basic food item on the shelf. They can go as high as $17,000 to $20,000 for prime till positions for products like sweets and lollipops for a limited time period.

In Zimbabwe, listing fees can be up to $2,500 per product line, with $50 to $100 for the introduction of additional new product lines by the same supplier.

Suppliers are also often required to offer supermarkets settlement discounts for paying them within the number of days stipulated in the trading terms. This varies depending on the supplier.

Long payment periods put considerable pressure on suppliers’ cash flow and working capital which is problematic particularly for small suppliers. Local suppliers in Zambia raised this as a key reason for non-participation in supermarket value chains although it was a concern in all the countries studied.

Over and above the advertising costs faced by suppliers themselves in creating brand awareness for their products, supermarkets require them to make a host of additional payments. These can include:

  • Discounts off the purchase price for indirect advertising;
  • Contributing towards promotions. Our research showed that it can cost anything from $2,500 to $7,000 to promote a single product line as a contribution to the costs of the supermarket advertising through TV, newspapers and flyers; and
  • Paying to participate in different promotions held by supermarkets such as Easter and Christmas promotions.
    A range of other fees also apply, varying by supplier and according to industry. These include general discounts, fixed or variable rebates based on sales volumes, transport discounts and swell or wastage allowances.

Cumulatively, the various fees can add up to at least 10-15% off the price of the product sold to supermarkets, placing considerable strain on supplier margins.

Other obstacles to accessing shelf space
General access to good shelf space often comes at further costs. It is critical for successful sales that products are displayed where shoppers can easily see them. Eye-level shelf space is often taken up by dominant suppliers.

Similarly, access to refrigeration space is important for suppliers of cold products such as soft drinks, ice creams and frozen food. There have been competition cases globally and in South Africa that have recognised the harm to competition of dominant suppliers imposing exclusivity requirements on fridge space.

Over and above legal requirements such as compliance with national standards, food safety, labelling and packaging requirements, suppliers also have to adhere to private standards imposed by supermarkets. These can include barcoding and specific packaging requirements as well as sustainability criteria and religious requirements (such as halal and kosher certifications).

These can also include higher accreditation standards which often involve on-going audits at the supplier’s cost.

Helping emerging suppliers
Codes of conduct between suppliers and supermarkets can be a useful way to control the exertion of buyer power.

In the UK, for example, the Groceries Supply Code of Practice was set up specifically to oversee the relationship between supermarkets and their suppliers following an inquiry by the former Office of Fair Trading.

Similarly, in Ireland and Spain, there are plans to institute voluntary or mandatory codes of conduct in the grocery sector to govern commercial relations between suppliers and supermarkets in the food chain.

We recommend that such codes also be set up in southern Africa. Given the multinational nature of supermarkets in the region, these codes can be harmonised across the region.

Supermarkets can also play an active role in building the capabilities of suppliers. Almost all supermarkets in South Africa have some form of voluntary supplier development program in place.

In some instances, large supermarkets have been mandated to set up supplier development programs. For example, as part of the merger between Walmart and Massmart, the merged entity was required to set up a supplier development fund. Around $16.7 million was allocated to be spent over five years to develop suppliers.

Some aspects of the program involving farmers were unsuccessful. But there have been positive outcomes for some black entrepreneurs in food processing. One beneficiary, Lethabo Milling, a new entrant producing maize meal, received around $110,000 towards refurbishing his plant.

And the company was able to secure a loan from a commercial bank on the back of a guaranteed route to market through supplying Massmart stores in South Africa. Lethabo Milling also received additional support through training, waived listing fees and fast-track payments.

Successfully developing supplier capabilities in the region requires a much larger, long-term and commercially oriented approach by supermarkets in partnership with governments. This can be done through the creation of supplier development funds similar to the Massmart/Walmart programme. Funding can also come from fines levied by the competition authorities in abuse of dominance or cartel matters in each country.

By Reena Das Nair  for www.theconversation.com

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