SAMANTHA ENSLIN-PAYNE: Massmart's new man faces odds stacked against foreign CEOs
It's a bit of an indictment of top business talent in SA that Walmart is parachuting in a new CEO for its local business, Massmart. It also puts an entirely different spin on the resignation earlier this month of CEO Guy Hayward. Massmart's share price nose-dived on Thursday, but this likely had little to do with the news of the new CEO and more to do with a trading update in which the company warned that headline earnings for the six months to June might be at least 50% lower than the prior period.
The new CEO, Mitchell Slape, has worked for Walmart since 1995 and held senior positions in the US, India, Mexico and, most recently, Japan, where he heads Walmart's operations.
Slape will know what a grim business retail has become in SA. The growth that retailers are eking out is anaemic, and businesses that supply retailers aren't doing well either. It's not clear how he will do much better: unemployment is high, and those who are earning are being squeezed from every angle, with the rising cost of fuel, medical aid, school fees and administered prices.
Perhaps there is one area where Massmart could finally deliver. When Walmart bought Massmart in 2011, among the benefits of the deal touted by the two companies was that Massmart would be able to plug into Walmart's huge global supply chain and by doing so would offer low prices to consumers in SA.
Even the competition authorities at the time seemed sceptical, with the tribunal saying 'the extent of this consumer benefit is by no means clear - Walmart itself has not been able to put a number to this claim [of lower prices], only that it is likely'.
Lower prices have not materialised. It may be due to import duties. If so, Slape can cut costs, which usually comes with staff cuts.
Massmart, with its Makro, Game and Builders brands, was meant to be the springboard for Walmart to expand into other countries in Africa. The expansion plans have perhaps not been as aggressive as its US parent would have liked. Massmart, according to its 2018 annual report, has 47 stores outside SA, up from 27 stores in 2012.
For all Slape's obvious credentials, few foreign CEOs have cracked it in SA, especially when it comes to retail. Bernie Brookes, who had experience at big-name Australian retailers, was at the helm of Edcon from September 2015 until January 2018. He took over from Jurgen Schreiber, who headed Edcon for four years. Neither managed to right that sinking ship, and it is now up to Grant Pattison (a former Massmart CEO who oversaw the Walmart deal) to keep Edcon afloat.
At Truworths, Jean-Christophe Garbino was appointed CEO-designate to succeed long-serving CEO Michael Mark. He lasted about five minutes, leaving the business before he took up the position. Then there is Ian Moir at Woolworths who, until the acquisition of Australian retailer David Jones, did lift Woolworths's performance. But as the company struggles to fix David Jones and its local fashion division, Moir's time is almost up.Steve Ross, who had a long innings as CEO of Edcon, can be credited with significantly boosting sales. He did, however, support Bain's buyout of Edcon, which is where all the trouble started. It's taken a while but Richard Brasher, Pick n Pay CEO, is now delivering.Some analysts expect Slape to focus on assessing the merits of Walmart taking full control of Massmart at the current low share price. But his tenure in SA may be Walmart's last bid to extract value from the deal that cost it R148 a Massmart share (Massmart shares are now trading at around R66). If that doesn't work, Massmart may be up for sale. Ultimately for Walmart, a small market such as SA, with limited growth prospects, would at some point just not be worth the effort.• Enslin-Payne is acting editor of Business Times