While scenes of lawlessness in parts of KwaZulu-Natal and Gauteng play out on TV and social media around the country, the JSE – in particular the retail sector – has shown a remarkably muted reaction. This may well change.
The OBC Group is a supermarket franchise that has been serving township and commuter populations for the past 35 years – long before malls and big supermarket chains saw the value in the mass market.
Ten of its stores – a fifth of its nationwide network – have been looted, gutted with pick axes for copper wire and, in some cases, burnt to the ground. Of those destroyed, just two are company-owned – the other eight are owned by franchisees who live in the communities they serve.
“I have no words for you,” says Tony Da Fonseca, CEO of the OBC Group and a past chairman of the Franchise Association of SA.
“We did not sleep last night. We are just devastated… our owners and staff are devastated. These are community businesses, it will take them months to get back up and running. What will happen to their jobs? Where will people get food? We will work alongside them, but it won’t be easy.”
Da Fonseca echoed the thoughts of hundreds of retailers – some big chains, some small independent businesses – who were in full crisis mode amid the ongoing free-for-all looting.
Consider the Bridge Shopping Centre in KwaMashu, with 16,000sqm of retail space and which took a full, unhindered 12 hours to reduce to a virtual pile of rubble. Its anchor tenants include Woolworths, Pep, Ackermans, Truworths, Markham, Total Sports, Sportscene, Webbers, Nedbank, Absa, Capitec, FNB, Chicken Licken, KFC, Spur and Nando’s. In all, probably 5,000 people were employed there – none will be going to work tomorrow, the next day or even next month.
With no end to the looting in sight, few franchise owners and retailers were prepared to put numbers to the damage, with Massmart alone confirming that at least 15 stores and a distribution centre had been attacked.
At least 250 of Shoprite’s 900-odd South African stores were hit, as well as its big logistics centre in Mooi River, but the company would not confirm this number. Spar has lost at least 50 stores in KZN, as has Dis-Chem, which has also closed its vaccination centres in the province.
Alarmingly, major distribution and logistics centres at the Cornubia development, south of King Shaka airport, were also attacked and looted, threatening supply chains across the country.
“All we know is that over 500 supermarkets – and probably more by now – have already been looted nationally. And that number excludes the many small franchises like Oasis Water that were just in the wrong place,” Da Fonseca says.
“If not stopped immediately and urgently, the looting is going to escalate nationally overnight. Food security is going to be an issue in the coming weeks as retailers are forced to close, which will impact all communities across the country.
“The destruction, not only to retailers and property, but to the very infrastructure and basic services such as supplies to hospitals and water security in the coming days is cause for alarm.”
The Small Business Association (SBA), which represents more than 114,000 SMEs, also raised its voice in alarm. “The mayhem threatens to worsen unemployment, poverty, hunger and inequality and food security of millions of South Africans,” says John Dludlu, CEO of the SBA.
“The damage to supply chains will delay badly needed economic recovery and reconstruction and dampen investor sentiment. Also, if not immediately arrested, the mayhem will undermine the fight against the covid-19 pandemic. This should not be allowed.”
With vital cogs in the logistics chain having ground to a halt, from Transnet Port Terminals, the N3 corridor and Natcor container line, to trucks carrying oxygen, it’s a matter of time before Gauteng begins running out of critical supplies. At the same time, cash-in-transit deliveries have been interrupted and ATM and Sassa networks have been destroyed in hotspot areas.
Surprisingly, retail and logistics stocks on the JSE had, by Tuesday evening, not reacted as negatively as one might have expected. Massmart was down 5.5%, perhaps because, out of all the retailers, the group has been the most transparent about the extent of the damage suffered. Spar was down 3.09%, again, perhaps because of its relative strength in KwaZulu-Natal.
“The market is taking the volatility in its stride. But it’s going to be dependent on the duration of this chaotic situation. If it carries on for longer, it could signal to the market that the government cannot bring it under control that easily,” says Zwelakhe Mnguni, CIO of Benguela Global Fund Managers.
That said, “the retailers will probably come under pressure, particularly those with exposure to the townships, because they will have to close their shops to fix them”.
“That loss of retail spend could be material to their businesses. But in the short term we may have to ride out further volatility and wait and see.” DM/BM