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Basson’s brilliant business acumenJames Wellwood Basson, better known as “Whitey”, is the managing director and chief executive of Shoprite Holdings Ltd, the largest food retailer in Africa. For the financial year end of June 2009, the group had a turnover of over R59 billion, operated 1 413 stores in 17 countries and had a staff complement of 89 000 people.
None of these staggering facts would have been true if Whitey had decided to pursue medicine instead, a decision he had considered.
Fortunately, for Shoprite Holdings shareholders and the millions of customers to whom he caters, a career in business held more appeal for the boytjie from a farm called Dasbosch.
In 1970 he qualified as a chartered accountant and practised at Brink, Roos & Du Toit in Cape Town – today known as PricewaterhouseCoopers – where one of his client companies was Pep Stores.
Not long afterward, he would become that group’s financial manager and in 1974, was appointed to Pep’s Board where he remained as a member until 2004.
It was Basson’s career at Pep Stores that set him on the road which eventually would see him responsible for R59bn in turnover.
The post led to his becoming enamoured with fast-moving goods and in 1979, Basson reached an agreement with the Pep Stores board to actively identify acquisition opportunities or start a new venture in the food retailing business.
During November of that year, a small eight-store grocer in the Western Cape garnered his attention. He acquired the family-owned Shoprite from the Rogut family; and that acquisition was the beginning of the most dominant supermarket group in Africa.
During 1980, the company was restructured; some of the old stores were closed and new stores were opened. In that period, he realised that the corporate identity of the company had to be changed and that to grow the company at its maximum speed, the focus had to be targeted toward the middle to lower LSM market – which by far represented the largest portion of the economically active population of South Africa.
He realised, however, that to achieve his goals, acquisitions and turnarounds of struggling companies had to be a priority. At the same time, Shoprite lacked the growth potential for new openings, as it was not considered by the majority of property developers as an anchor tenant due to its size and limited advertising spend.
Basson’s first acquisition, in 1984, was the six old Ackermans food stores that were controlled by the Edgars Group.
During the late 1980s, one of the most dominant players in the Western Cape, the 27-store Grand Bazaars Group, came up for sale and a deal with Shoprite was almost concluded. But the opportunity was lost in the closing stages when it was sold to Basson’s good friend Carlos dos Santos, who then operated a wholesale company out of Gauteng.
During the 1980s, the company tested the waters in rural markets and began slowly closing in on cities. By 1988, the company had tentacles out in the northwestern Cape and as far afield as the most northern areas in Mpumalanga and other areas where the market was big enough to creep in quietly under the radar screens of the major supermarkets, which at that stage was dominated by Pick n Pay, OK Bazaars and Checkers.
In 1990, Basson approached Dos Santos and eventually bought Grand Bazaars at what was considered an even better price than the original deal.
With reasonable market dominance in the Western Cape, Shoprite now had a platform from which it could accelerate its growth and on two occasions, the Checkers Group – which was running into financial troubles – was approached. The first acquisition attempt was unsuccessful due to, what Basson describes, as too many people having unrealistic views of the value of some of the Checkers chain.
As a result of Basson’s personal relationship with then chairperson of Sanlam, a deal was struck later which saw Shoprite reversed into the holding company of the Checkers Group and majority control was obtained of the total, which now became Shoprite Checkers.
To turn around the loss-making Checkers Group was a mammoth task, as Checkers at that stage comprised 169 stores and its losses equalled the turnover of Shoprite. With the purchase of Checkers, Basson saved 16 500 jobs.
Within a period of nine months, the Checkers chain was turned around and Shoprite Checkers became a profitable company trading across all LSMs with a total of 241 stores.
For the first time, Shoprite was offered the opportunity to compete in the modern shopping centres that were being developed.
Despite being operated under two brand names, the company was able to trade selectively in the different markets targeted by the stores in the Shoprite or Checkers brands respectively.
The real break for Shoprite came at the end of 1997 when OK Bazaars, which then was losing more than the profits made by the Shoprite Checkers Group, ran into major financial difficulties and a R1 deal was struck with South African Breweries – the sole shareholder of the OK Bazaars chain.
Once again, the management of Shoprite was able to return OK to profitability and a process was embarked upon to separate the brands according to the specific catchment areas and markets where the stores were located. The OK brand was kept alive and turned into the OK Franchise Division, while the OK Furniture and House & Home branches were consolidated into an OK Furniture division. The Hyperama stores were converted to Checkers Hyper stores.
The OK takeover was a mammoth task, as more than 150 stores had to be converted and modernised. At the same time, 33 252 jobs were saved.
During 2001, the decision finally was taken to market the companies under the Shoprite and Checkers brands separately and strategic plans were adopted to reposition the Checkers brand as closely as possible to its major rival, Pick n Pay.
The success of the Checkers repositioning resulted in its becoming the fastest growing brand in South Africa and while forfeiting almost 4% in market share due to the closure of unprofitable OK Bazaars stores, the Group’s core business slowly increased market share and is enjoying 30% market share in the formal retail food market of South Africa. In both February and March this year, the Shoprite Group was the only supermarket retailer in the country to grow market share.
One of Basson’s most ambitious dreams was to extend Shoprite’s operation to countries on the continent beyond South Africa’s borders and after the release of Nelson Mandela in 1994, Shoprite opened up new stores in Africa – the first being Lusaka, Zambia.
His personal dream was to drive down food prices in Africa and to ensure that the food security in the major cities on the African continent would bring Shoprite the approval and support of African leaders. Probably the Group’s greatest achievement up to now is its investment into modern supermarkets in countries as far north as Nigeria and Ghana.
The fairly rapid and positive growth has not been without failure. Restrictive legislation and red tape in Egypt lead to Basson having to close down the Group’s supermarket business in the country.
Despite the loss in that venture, Basson has remained adamant that for a retail company to grow, it needs to invest risk capital because retail companies must develop new markets.
The Shoprite Group is internationally recognised as the 130th biggest supermarket in terms of sales. But that level of success has not seen the Group resting on its laurels. Basson remains persistent in his dream to expand even further on the African continent and he is constantly on the lookout for turnaround companies across the globe.
During the early ‘90s, you spearheaded a series of massive acquisitions. You did Grand Bazaars, Checkers and OK which nearly trebled the group size. That many acquisitions in such a short space of time could have had a ruinous effect. Was that not an incredibly stressful time for you as an individual?
Yes, it was. I acquired a liking for acquisitions in my early years at Pep Stores, and my first big acquisition was when I bought Half Price Stores for the Pep Stores Group.
If you have the guts and if you have the right people working with you, your returns are absolutely fantastic.
It does create stress, but it’s like flying a plane. Once you’ve landed it 20 times, the stress becomes less.
In the past, you expressed an appetite for risk as a requirement for business. How does one equate risk?
For us, risk is a predetermined formula. Risk equals reward and obviously, the higher the risk, the higher reward, or higher the failure.
So we had a very defined process where we said, “Okay, now we’re a big company so we cannot go and do something unfeasible, but if we take a percentage of our net profits and we invest it in, let’s say, Nigeria, DRC or wherever it is, and it doesn’t work for us, it is not the end of the world.”
We’re not scared to walk away from failures. We had a failure in Egypt and we closed it down. Failure is also calculated for and is actually part of the process of success.
Christo Wiese said that you could be very abrasive and yet, at the same time, your senior management has been very static, with many of them being with you for 15 years or more. You clearly have loyal colleagues.
Yes, we have wonderful loyal staff. The majority of our senior management has been with me for many years. I also have two assistants: one has been with me for 20 years, and the other for 16.
Subsequent to the takeovers, we quite obviously have lost people, as sometimes the cultures don’t fit, or the new job description doesn’t fit. But our core team has remained the same for many years, which gives us stability and familiarity with each other.
As far as being abrasive is concerned, I guess I am abrasive at times, but I mean it without malice.
If someone doesn’t do a job properly and is not earning their keep or doing their bit for the team, I’m not merely abrasive, I’m actually ruthless.
However, I don’t think I’ve ever gone to sleep at night worrying that I haven’t solved a personal problem with staff, and it’s probably because I am very straight, but fair.
Apparently, you are an avid fisherman. What does Whitey Basson do in his leisure time?
I don’t have much leisure time, but I have a boat which I think I used twice last year. For the rest, the guys in the company use it.
I play a bit of golf with friends or my children, perhaps on a Sunday afternoon for nine holes and I love to ride horses from time to time.
I have an instructor to keep me fit and she told me last month that I managed to see her four times this year (laughs), so I don’t know how fit I could be. But if there’s business to be done, I go and do the business.
So I guess you could call me an erratic relaxer.
What would Whitey Basson’s advice be to tomorrow’s leaders?
I think the first thing that you must do if you want to become a leader, or an entrepreneur, is you must evaluate yourself ‘genetically’ to establish if a certain field is one in which you can excel.
It’s like the Du Plessis’s and rugby – they have a track record of making the Springbok teams, but I don’t think a Basson has ever played professional rugby.
So one needs to evaluate oneself first; secondly, it must all be about passion. If you’re married and you have children, you actually have to get the commitment of those around you, as it affects them, too.
For example, my daughter is starting a business now and before she started out, I told her she has to have the passion to realise it may cost her holidays and weekends. She’s now going to work Fridays and Saturdays and possibly Sundays, and is she prepared to do that? And is her husband prepared to accept the fact that if she wants to be successful, that for her, it’s a total commitment?
It’s all about hard work and much commitment. Not merely your commitment, but the commitment of your family, co-starters, co-people with whom you work.
Then thirdly, the best way to get results is to be under pressure. To appreciate the upside, one always must be aware of the downside.
What do you feel about some of the senior executives of the Eskom’s and SAA’s in our land – where the company has been driven into the ground – walking off with these huge payouts, yet have not done anything to create any wealth there?
I’m certainly against being compensated for mediocre management.
I think that people should be rewarded on the extra things they bring to a business; you just don’t come to work from eight to five and get rewarded.
People earn bonuses in Shoprite, they have targets and they are measured – and if they don’t make it, bad luck.
If it’s to do with people who actually were not doing their job properly, or were slack, or simply not taking the business seriously, we will act against them. If it was the nature of the business, then it’s a different story, but most certainly, I’m dead against people being paid massive bonuses and then having a failure of a company.
I think it’s wrong, it’s not in the interest of the shareholders and even more so, it’s not in the interest of the rest of the staff.
In Shoprite, if you look at our value-added statements, you can see that 57% of the total value we earn a year goes to 88 000 people. Senior executives do take a big chunk of that, but I have a big boat that I must steer, so it’s all market-related – but certainly no handouts.
Wiese has described the two of you as strong Afro-optimists, and says that you are a real Boer in that sense. Given the recent murder of ET and the chants of “Kill the Boer”, do you still have a positive attitude about the country?
I grew up in South Africa with a farming background, a poor farming background. I started off on my own: my father didn’t leave me a business or an inheritance of a few million rands like some people who amass great wealth.
So I am not afraid of going through difficult times and I’m not worried about the small cyclical things that may happen in a specific year.
I look at it over a period of time and I think the government has done a good job. If you take the dramatic changes that have happened since 1994, there always were going to be aftershocks.
What I do worry about is when those things don’t come to an end. Where there’s misappropriation of funds in a department, it should be solved and the people responsible should be acted against.
I am worried that the administration of some of the monies that we spend in South Africa – be it business, semi-private business or the government – is not properly accounted for and not spent wisely. That is a concern because South Africa cannot afford to have an economy which is bankrupt, or which is only a third-world economy. Accountability is crucial.
Be that as it may, all my children are still in the country and I think they will all stay here. So I’m optimistic that as time goes on, things will get better; and those things that I now worry about, probably because I’m over 60, will get better.
What can be expect from Shoprite in the future? There has been expansion into Africa, which must come with its fair share of trials and tribulations?
We are always looking out for more business opportunities, and have been as far as Egypt, albeit it prematurely. We also went to India prematurely. It’s very difficult for us in the South African context to buy anything now because competition commissions probably will rule against us for everything we touch, so we have to look at other markets.
Now, Africa is the most natural progression for us because it’s ‘an easy border to cross’, if I can call it that, with many challenges. But it’s a leap on the same side of the equator.
We do look for acquisitions in other parts of the world, it simply means a different mode of running the business and we’re shaping people now whom we can send out to go do a job like that.
So I think there’s enough young blood now that we can say, “Okay, maybe you should go and have a shot at a market like India, if the market opens up.”
We actually proved to ourselves that we could run a business very efficiently and very well in the Indian market, and if that market would open up with foreign investment, I’m sure the guys would take it back out there. They’re capable of doing it, because our failures in India had nothing to do with our failure as a business model. It was simply an economy that had too many constraints which made us reconsider at the time.
Do you still have many personal goals that you want to pursue? Is there any chance of Whitey Basson slowing down at all?
No, I would only leave or retire if I would let down the team; if I’m no good as a flyhalf anymore. But I can be the coach and I can support the team by being good at it. Then I would stay on, and I still have my place in the team.
I like being in the fight, I like being in the ring and as long as my energy levels can handle it, I would stay in the game. Unless my team were to tell me, “Listen, you’re useless. You must go now.”
There are many young guys with whom I work, guys half my age, who are actually my friends and I always say to them, the one thing that you must do is, “If I become too slow for your pace, just tell me”, so that I could move to the side to allow the guys to come past.
But simply to say, “Okay, 65, I’ve made enough money. I must retire” – I don’t think that I will be able to go and sit idly in a café or golf club.
I don’t think that being used to being on board this very fast flying plane, I would be able to get off and say, “Okay, I’ll walk from here”. ▲
Robbie Stammers
Kind Regards
Barry Swart
0835269837