Pick n Pay – Customised Enterprise and Supplier Development Solutions briefing; Petition

Small Business Development

02 November 2022
Chairperson: Ms V Siwela (ANC)
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Meeting Summary

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The Portfolio Committee on Small Business Development convened on a virtual platform to receive a briefing by the Pick n Pay Group on its customised enterprise and supplier development solutions for Small, Medium and Micro Enterprises (SMMEs). The presentation highlighted the Group’s contribution to the growth of SMMEs, the various interventions it provided to them and the success stories of SMME owners who became suppliers to Pick n Pay.

Most Committee Members believed that although Pick n Pay had done some good work in empowering and giving back to the communities, it certainly could do more. One Member differed with that view and criticised the Committee’s lack of appreciation for the good work he said the Group had done.

Members enquired about the state of Pick n Pay market stores because they were concerned that these stores were not being prioritised in Pick n Pay’s business development model. Members referred to allegations that Pick n Pay distributed sub-standard food items to market stores while charging consumers the same prices. They said Pick n Pay lacked a footprint in rural and township areas, and there were allegations of bullying of its black franchisees. Specifically, members questioned whether Pick n Pay had a footprint in areas such as Umtata in the Eastern Cape, Vhembe in Limpopo and Isidingo in KwaZulu-Natal. They said small business owners in those areas were struggling and in need of the assistance of big corporations.

Members were particularly interested to know the types of assistance Pick n Pay provided to communities. For instance, concerning the President’s localisation project, Members wanted to know how many of the products on the shelves at Pick n Pay stores were locally manufactured, whether Pick n Pay procured supplies from small-scale farmers and producers, and where it sourced its clothing brand. They wanted to know whether Pick n Pay had removed items not made locally from its shelves to promote local businesses. Members also enquired about the Group’s mentorship programme.

Members were concerned about the lack of previously disadvantaged beneficiaries in the various Pick n Pay initiatives, as less than 4.3 percent of the R50 billion spent on SMMEs had gone to those populations. They said many members of the public believed big retailers were deliberately deterring the growth of small businesses whilst they were busy amassing fortunes. They urged Pick n Pay and other big corporations to build meaningful engagement with the government to share the gains more equally and grow the economy together.

Meeting report

The Pick n Pay Group was represented by Ms Mishinga Seyuba Kombo, Director: Customised Enterprise and Supplier Development Solutions, and Mr Vaughan Pierce, Executive: Environment Social Governance (ESG) and SMMEs.

The Committee heard that the ESG framework consists of 1) partnering with SMMEs to shift the food system towards greater inclusion and resilience; 2) reducing environmental impact; 3) investing in people and communities.

Mr Pierce introduced Pick n Pay’s Enterprise and Supplier Development Programme which assists selected diverse and ethical small businesses to enter the retail market.

Committee Members were told that the mentorship plan at Pick n Pay had over 150 mentors and over 220 mentees. The programme produced more than 40 successful stories that saw small businesses grow and thrive. Pick n Pay assisted those small businesses in four aspects: 1) sales marketing and buying plans; 2) financial management plans; 3) administrative compliance plans; and 4) supply chain, logistics and delivery management plans.

In 2021 and 2022, the company spent R4.5 billion and R4.3 billion, respectively, to help SMMEs. The total numbers of beneficiaries were 2 123 in 2021 and 2 178 in 2022.

A number of Jobs Fund beneficiaries’ stories were shared. Those included Urban Grown which is a vegetable producer; COMESSA Food Services which makes oven-fresh bakes; Sihle Coffee; Eden All Natural peanut butter; Malie’s Ice Cream; Bakers Creationz which is a company started by a Durban-based entrepreneur; Cushy Lush which makes toilet paper; and Treasure Trove Farms.

Mr Pierce urged the Committee to help reduce red tape for small businesses and provide small amounts of funding for small business owners.

Discussion

The Chairperson thanked the presenters for their excellent presentation. She appreciated Pick n Pay’s good work in helping communities and townships and agreed with their view that the government should work in partnership with Pick n Pay to assist its good work. Funding and red tape were thorny issues.

Mr G Hendricks (Al Jama-ah) remarked that although it was encouraging that macro-business such as Pick n Pay were supporting the growth of small businesses, he was not satisfied with the footprint of Pick n Pay in rural villages and townships where people still remained in poverty. Whilst Pick n Pay stores were thriving in urban and metro areas, the Group must not forget about rural areas. He urged them to intensify their pace to help more poor people and communities.

Mr Hendricks recalled his early shopping experience at the Pick n Pay store in District Six when he was still at school. He said that he had been one of those that had helped Pick n Pay to set up its first online store, so he was quite familiar with the business model and work environment at the Group.

Mr Hendricks said he was captivated by Pick n Pay’s peanut butter project. He indicated to Pick n Pay that the community in Groutville in KwaZulu-Natal was blessed with peanuts in abundance. A cooperative in that community was considering manufacturing peanut butter. He asked the Pick n Pay Group to consider procuring peanut butter from them.

Mr Hendricks referred to the 1 000 products that must be marketed and manufactured by rural villages and townships as part of the President’s localisation project. He wanted to know which types of products on that list were now on the shelves at Pick n Pay stores. Further, he wanted to know whether the Group had instructed its stores to remove products not being manufactured locally. He emphasised the importance of enforcing the localisation project.

Ms B Mathulelwa (EFF) stressed to the Pick n Pay Group that she represented her constituents in rural areas and townships. Very few people were aware of those projects which Pick n Pay had just presented to the Committee. She said many small businesses in those areas were struggling and asked how many SMMEs in Umtata in the Eastern Cape, Vhembe in Limpopo and Isipingo in KZN had been assisted by the Group. 

Ms Mathulelwa said that both Mr Pierce and Ms Kombo needed to know that it was not only the Minister and the Chairperson who were permitted to ask questions in the Committee; Members were also allowed to ask questions. She noted that Mr Pierce’s greeting had been directed only at the Minister and the Chairperson. Members should not be undermined.

The Chairperson reminded Members to zoom in on the actual projects in the presentation and not veer off the topic.

Ms M Lubengo (ANC) sought more details on the ESG mentorship. She asked for an example of how it worked and the timeframe of such programmes. Given the recent KZN floods, she further wanted to know whether, in scenarios such as unpredictable extreme weather that affected producers, the Group would move to the next available supplier. She asked how many projects the Group had assisted in Vhembe in Limpopo.

Mr J De Villiers (DA) remarked that some of the comments made by his colleagues were disappointing, though not surprising. He commended what Pick n Pay had done and said that the Group had empowered more small businesses than this Committee and government had done combined. He criticised some of the comments by his colleagues as unconstructive. 

Mr De Villiers agreed with Pick n Pay that the government needed to reduce its red tape and create an enabling business environment for small, informal and micro-businesses. He asked whether Pick n Pay could provide the Committee with a list of red tape measures and some practical examples of how the government processes had made it more difficult for small businesses.

Mr Hendricks raised a point of order and accused Mr De Villiers of misleading the Committee. As his network was cut off, he was unable to complete his statement.

Mr H April (ANC) raised a point of order and said that it was unparliamentary and also misleading to the public for Mr De Villiers to have made a remark that Pick n Pay was doing more than the government did. He demanded that Mr De Villiers withdraw that statement with immediate effect. 

The Chairperson reminded Members that they needed to steer clear of what was irrelevant to the meeting and come up with real recommendations for Pick n Pay, as that was the agenda of the meeting. She confirmed that every Member had the right to speak in this Committee but they were also obliged to stick to the content of the presentation to have a meaningful engagement to assist the Committee’s work and the work of Pick n Pay.

Mr April referred to Appendix A of the presentation and indicated that over 50 percent of the SMMEs did not keep financial records. That requirement remained a barrier for many SMMEs, especially those of previously disadvantaged South Africans.

Mr April said he was concerned that the Pick n Pay Group seemed to be distributing soon-to-be expired food items at its market stores, whereas high-quality items were distributed only to affluent areas. He found it very unfair that those less affluent areas were being turned into drop off areas for expired goods while consumers paid the same prices. 

Mr April said the presenters, due to their position as representatives of the Pick n Pay Group, would highlight their achievements, but he was also aware of a different song being sung by other stakeholders regarding the Group’s achievements.

Mr F Jacobs (ANC) acknowledged the Group’s good work and emphasised the importance of mutual appreciation between the government and the private sector.

Mr Jacobs also noted the reputation and prestige of Pick n Pay as one of the top five retail companies in South Africa and one of the Proudly South African brands. In the previous year, Pick n Pay had revenue of approximately R900 billion, accounting for 16 percent of the market share. Given the company’s tremendous success, Mr Jacobs was of the view that Pick n Pay could return more to the communities. Bearing in mind the events of July that year, there was growing resentment among the broader populace that big companies were amassing massive profits while not benefiting. He urged big corporations such as Pick n Pay to cultivate genuine and meaningful partnerships with the government and communities. In particular, they needed to do more for the historically disadvantaged communities.

Mr Jacobs said that the statistics for the SMMEs did not look good. In 2020, the Pick n Pay Group had spent R50 billion on SMMEs of which only 4.3 percent went to the beneficiaries of broad based black economic empowerment. Many Pick n Pay consumers came from the historically disadvantaged population. It was a big problem because the company was basically promoting white economic empowerment.

Mr Jacobs said there was a general perception that the Pick n Pay Group bullied black owners of its franchises. The issue had been flagged by the Competition Commission. He himself personally knew of two such incidents in Langa township. The provinces of KZN, Western Cape and Gauteng all reported similar bullying cases. He said the Group had a huge role to play in the process of re-vitalising and boosting township economies.

Mr Jacobs asked for an overview of the market stores in the townships in the Western Cape.

He asked the Group to share with the Committee an actual programme on how it aimed to pursue the 40 percent localisation project. For instance, he noted that the Pick n Pay clothing brand had invested in local manufacturers and commended the fact that 40 percent of the clothing on its shelves was now being made in South Africa. He wanted to know the latest figure for the current financial year and asked from where the remaining 60 percent of its clothing was sourced.

Mr Jacobs addressed Mr De Villiers directly concerning his earlier remark. He pointed out that retail companies in South Africa were now operating in a very competitive market and very often, there were various types of collusion. The general feeling of the public was that big retailers were deliberately manipulating prices to keep small businesses out. The Portfolio Committee had a constitutional oversight responsibility to not only look after the interests of big corporations by creating an enabling environment, but also an obligation to those who could not look after themselves. He urged the cultivation of meaningful public-private partnerships.

The Chairperson noted the opening remark in the presentation that as a retail store, Pick n Pay was where people lived. She commented that it might be untrue and pointed out the unequal distribution of Pick n Pay stores in the country, especially in rural areas and townships.

Responses

Mr Pierce said he appreciated Members’ inputs and acknowledged that there was room for improvement in terms of what Pick n Pay could do to assist the growth and expansion of SMMEs and give back to communities.

Mr Pierce said that Boxer, one of the store formats of Pick n Pay, was doing a lot and had a huge impact in rural areas. There were currently over 400 Boxer stores and the footprint was expanding. The concept that underpinned Boxer stores was community-centred and involved bettering and growing infrastructure in communities. To assist Members’ understanding of those stores, Mr Pierce strongly suggested that Boxer store owners be invited to the Committee to illustrate their activities and to show members what Pick n Pay had done in rural communities and townships.

Mr Pierce confirmed that Pick n Pay did assist micro- and informal businesses, small-scale farmers and roadside producers. Many Boxer stores directly procured their fresh vegetables and produce from those businesses. As many of those business owners fell outside the banking system, Boxers paid them directly in cash and tried their best to help them to circumvent the scrutiny of legislation.

Mr Pierce acknowledged that Pick n Pay needed to re-work its franchise and market store model and confirmed that it was in discussion with almost 900 franchisees, BP Express store owners, and its 36 market store owners. Pick n Pay valued the support and the role of franchisees in the Pick n Pay brand. The Group had two brands: one was Pick n Pay and the other was Pick n Pay QualiSave. Mr Pierce acknowledged that a significant amount of work needed to be done on its franchisee business model. The Group had a franchise forum where franchisee representatives participated in the remodelling process.

Mr Pierce addressed the charge that the Group’s market stores received substandard treatment. He confirmed that the Group was negotiating with the EFF and market store owners and said this was an ongoing process. Nevertheless, he wished to point out that many of the accusations that Members had made earlier were incorrect. Although he was not at liberty to discuss those issues, he assured the Committee that the Pick n Pay Group was engaging with stakeholders to address them. Furthermore, he clarified that Boxer stores were not Pick n Pay stores but were being sponsored by the Pick n Pay Group as philanthropy. Market store owners choose which products to procure from Pick n Pay.

The challenge related to the perceived substandard treatment was that every market store had a different factual scenario. Some store owners were paying themselves between R100 000 and R250 000 a month during the COVID lockdown while they were not even working. During the lockdown, the provincial governments of Gauteng and the Western Cape and the Pick n Pay Group, had tremendously assisted those market store owners as they battled the consequences of lockdown. He assured the Committee that the Group did not deliberately take advantage of SMMEs or deter their growth. Given the red tape in regulations and legislation, the Pick n Pay Group was of the view that the Boxer business model was the easiest way to provide a start-up in business to rural communities that could not comply with relevant legislation.

Mr Pierce said there was no timeframe for the mentorship programme. It was provided whenever people needed assistance. For instance, the Group used its own market company to share information with start-up business owners to support the growth of SMMEs. Although he agreed that the Group certainly could do more for the communities, he believed it had given slightly more than 4.3 percent to the previously disadvantaged populations. Mr Pierce urged the Committee to provide the Group with more data on this figure. 

Mr Pierce furnished the Committee with more information about the initiatives and funds the Pick n Pay Group had set up to help communities. For instance, the Group had set up a bursary fund. Because it was a trust, it was not reflected in the financial statements of Pick n Pay. The Group has assisted a lot of graduates over the past 40 years. It had spent R56 million on bursaries in the past 15 years. The Group also had collaborations such as learnership programmes with the University of Johannesburg and the UCT business school.

Ms Kombo reminded the Committee that everyone on the virtual platform should bear in mind that the world had significantly changed since COVID-19. Both the Group and the Committee needed to be self-critical. She affirmed that Pick n Pay was cognisant that it could do more to help communities. She personally had left her role as an attorney to help grow the economy. She highlighted the mutual relationship between the private sector and the government. 

Ms Kombo indicated to Mr Jacobs that the SARS tax relief measures intended to provide financial relief for SMMEs during the COVID pandemic were cumbersome and difficult. She personally could not recall one SMME owner who had successfully applied and qualified for the funding.

Ms Kombo agreed with Mr Hendricks that big corporations should partner with small-scale business people. She highlighted that Mr Hendricks’s point was exactly Mr Raymond Ackermann’s motto which was, “go where the tea is being made”. However, she reminded the Committee that the COVID border restriction measures had made it difficult for the Group to import peanuts for small business owners to produce peanut butter.

Ms Kombo assured the Committee that the Group was working on the localisation project. Her colleague, Ms Hazel Pillay, had been partnering with local clothing manufacturers for the past three to four years to put more locally made clothing on the shelves.

Ms Kombo indicated to Ms Mathulelwa that the Group did assist market stores in the areas she had mentioned.

Ms Kombo responded to Ms Lubengo’s question on what specific support the Group had provided to rural areas and townships. She reminded the Committee of the COVID-19 hard lockdown under which the sale of liquor was banned. The Pick n Pay Group had inspected and assessed the impact on the Boxer stores it assisted and stepped in to provide grant funding for affected businesses.

Ms Kombo thanked Mr de Villiers for acknowledging the Group’s contribution to society.

In terms of the mentorship programme, she told the Committee of the success story of an entrepreneur and Pick n Pay supplier who tripled her revenue every year, having attended every single training programme. She continued to find immense value in training. The Group partnered with big businesses to help small business owners keep track of their financial records.

Ms Kombo again urged the government to review the tax incentives for small business owners.

Ms Kombo concluded her response by asking Mr Jacobs to think about his time when he worked at Pick n Pay. She remarked that Mr Ackerman was a legend in his own way. Pick n Pay was humble about what it did, for example, the bursary funding which was not known to the public. Of course, the Group could always do more, but she reminded the Committee that this was not a competition but rather a collaboration with the government to create an enabling environment for small businesses to flourish.

The Chairperson and Mr Pierce exchanged mutual appreciation of the inputs by both the Committee and the Pick n Pay Group. There was consensus that small business was the key to economic development and combating poverty. The Chairperson apologised to Mr Pierce if some Committee Members came across as too brash and hoped that he would understand that Members only wished to help the communities in need of assistance.

Telkom petition

The Committee was briefed on a draft report on a petition against Telkom Openserve concerning contractual disputes and allegations of corporate bullying brought by the directors of Sundance Projects, Mzansi Broadband, ACCS Telecoms and Folo Electricals.

The Chairperson suggested that Members reflect on the content and consider the petition later.

Mr H Kruger (DA) disagreed with the Chairperson’s approach. He said that the allegations were too serious to water down and he believed that the Committee should debate this matter and find a way forward.

The Chairperson said her understanding was that since Members had just received the draft report and had not had much time to apply their minds, it would be better to deliberate on the matter in the next meeting before its final adoption.

Mr Kruger agreed with that proposal. He requested sufficient time to debate the issue because he was not 100 percent comfortable with the case being treated as if it had been closed. In fact, the case was far from being closed. Mr Kruger accused Telkom of putting blindfolds on Members’ eyes.

The meeting was adjourned.

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