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COVER STORY: Whitey Basson

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Shining South African role model manages ‘by embarrassment’

In December 2010, a host of accolades was encapsulated in the conferment by Stellenbosch University on Whitey Basson of the degree Doctor in Commerce (DComm) honoris causa. The degree recognised Basson’s outstanding leadership qualities; his excellent achievements as a business leader and job creator; and his continued support of and investment in the development of human potential in the disadvantaged sectors of society.

He retired at the end of 2016, bringing to a close a remarkable career of nearly 45 years, virtually all of which was spent with the group.

It was a period during which he was largely responsible for the business growing from a small eight-store chain with a value of R1 million to a globally admired retailer with a market capitalisation of R114 billion and more than 140 000 employees today.

It is a measure of his highly positive impact on the South African business scene that there is not a single reader unaware of the identity of the individual in question – no other than James Wellwood ‘Whitey’ Basson, until 31 December 2016 the Managing Director and Chief Executive of Shoprite Holdings Ltd.

Shoprite, Africa’s largest food retailer, boasts a turnover of more than R130 billion gleaned from 1 855 corporate stores in various brands; and 359 convenience grocery and liquor franchise stores in 15 countries.

Whitey Basson was born on the family farm Dasbosch in the Porterville district on 8 January 1946 to Jack and Maude Basson. He attended school in Porterville and completed his secondary education at Rondebosch Boys High School in Cape Town, where he matriculated in 1963.

After considering a career in medicine, Basson opted for a life in business and completed his BCom CTA at Stellenbosch University. In 1970 he qualified as a CA(SA) after serving his articles with Ernst & Young Chartered Accountants, at the time known as ER Syfret & Co.

From mid-1970 and in 1971 he practised as a chartered accountant with the then Brink, Roos & Du Toit in Cape Town (now PricewaterhouseCoopers), after which he joined Pep Stores Ltd, a client, as financial manager. In 1974 he was appointed to the board and remained a member until 2004.

Basson’s career at Pep Stores provided him with many challenges and opportunities. He switched from financial director to the head of operations in 1974, an office he held until late 1978, during which time he was responsible for all operations and actively involved in building the Pep Stores brand and company.

Partly thanks to his training as a CA(SA), he identified the potential inherent in rebuilding troubled companies – a penchant that triggered his first major acquisition of the Half Price Group, which he integrated into Pep Stores.

During 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. It was an agreement that dovetailed neatly with his enthusiasm for trading in fast-moving consumer goods – an appetite that was partly assuaged by his acquisition of Shoprite, a small eight-store Western Cape grocer.

The seedling then planted subsequently mushroomed into today’s Shoprite – a huge organisation with which every South African is readily familiar.

During 1980 the company was restructured; some of the old stores were closed and new stores were opened. Drawing again on his CA(SA) background, Basson concluded that if his company was to achieve optimum growth, its emphasis had to shift towards the middle-to-lower LSM market as it represented the largest segment of South Africa’s economically active population.

It was then that the penny dropped: acquisitions and turnarounds of struggling companies had to be a priority.

Basson’s first acquisition, in 1984, was six old Ackermans food stores, which were controlled by the Edgars Group. That was the start of a process that saw Shoprite enter rural markets while slowly closing in on urban opportunities.

By 1998 the company had tentacles out in the northwestern Cape and as far afield as northern Mpumalanga and other areas where the market was big enough to quietly creep in under the radar screens of the major supermarkets – at that time Pick n Pay, OK Bazaars and Checkers.

With reasonable market dominance in the Western Cape, Shoprite now had a platform from which it could accelerate its growth. On two occasions the Checkers Group, which was running into financial troubles, was approached.

The first acquisition attempt was unsuccessful because, in retrospect, Basson observes, the sellers held unrealistic perceptions of the value of inefficient and unfocused retail stores.

In 1986, Shoprite was listed on the JSE, even though its capital base still consisted of the R1 million originally paid for the eight initial stores plus the accumulated profits.

Basson pursued Checkers a second time and as a result of Basson’s personal relationship with the then chairman of Sanlam, a deal was struck which saw Shoprite reversed into Checkers’ holding company. Majority control was obtained of what became the Shoprite Checkers Group. Few recall that the transaction saved as many as 16 500 jobs.

Turning around the loss-making Checkers was a formidable task, as Checkers at that stage comprised 169 stores, while its losses equalled Shoprite’s turnover.

It took a short nine months for Basson to revive the Checkers chain. Shoprite Checkers became a profitable company trading across all LSMs with a total of 241 stores. For the first time Shoprite was sufficiently large to be offered the opportunity to compete in the modern shopping centres that were being developed.

Although several analysts were critical of the group for operating under two brand names, Basson saw to it that the group was able to trade selectively in the different markets targeted by the Shoprite and Checkers brands.

The end of 1997 witnessed an OK Bazaars watershed. The beleaguered yesteryear leader, which was losing more than the profits made by the Shoprite Checkers Group, suffered financial difficulties so insurmountable that sole shareholder SA Breweries disposed of its stake to Shoprite for a paltry R1.

In the process, Shoprite acquired 139 OK stores, 18 Hyperamas and 21 House & Homes, while this time saving

14 091 jobs. The deal was audacious in several respects, principal among them being that OK was bigger than Shoprite and that OK was in poor shape.

It was said that within a week of acquiring OK for R1, Basson made more changes to the company than SAB had done in a decade.

Following through on his inspired philosophy of matching brands to markets, Basson returned OK to profitability through separating the brands according to the stores’ specific catchment areas and markets.

The OK brand, created in Eloff Street, Johannesburg, in 1927, was kept alive and turned into the OK Franchise Division, while the OK Furniture and House & Home branches were consolidated into an OK Furniture company. The Hyperama stores were converted to Checkers Hyper stores. More than 150 food stores were converted and modernised.

During 2001, the Shoprite and Checkers brands were separately marketed and strategic plans were adopted to reposition the Checkers brand as close as possible to Pick n Pay, its major rival.

Basson had always expressed an interest in low-cost, limited assortment stores like Europe’s Aldi’s. Hence the creation of the Usave chain, which trades in even lower LSMs than Shoprite. The Usave cost structure was such that it could reduce its gross margin by 50% while still offering excellent returns on investment.

The success of the Checkers repositioning has resulted in it becoming the fastest-growing brand in South Africa. While forfeiting almost 4% in market share owing to the closure of unviable OK Bazaars stores, the group’s core business steadily increased market share. Today it enjoys close on 30% market share in South Africa’s formal retail food market.

One of Basson’s most ambitious dreams was to extend Shoprite’s continental reach. In 1995, Shoprite opened the doors of a new store in Lusaka, Zambia. Basson’s African philosophy was to drive down food prices such that food security on the continent would earn Shoprite the approval and support of African leaders.

Today’s continental reach extends to modern supermarkets as far north as Nigeria and Ghana.

Every business venture – small or large – encounters headwinds from time to time. In this context, Basson admits to having to close down the group’s supermarket businesses in Egypt owing to restrictive legislation and red tape. Later on, operations in India and Tanzania suffered similar fates.

Even so, such setbacks have been more than offset by successes on the west coast of Africa, where the group is increasingly strengthening its position.

Reflecting on his African setbacks, Basson considers that for a retailer to grow it needs to earmark a portion of its earnings as risk capital with a view to developing new markets.

On his management style, the Financial Mail recently remarked: ‘Basson doesn’t like small talk or corporate politics – and he doesn’t like to follow the herd. If he did, he wouldn’t have acquired OK Bazaars for R1. He wouldn’t allocate a percentage of annual profits to high-risk projects.

‘”If we can’t expose ourselves to risk, we shouldn’t be in business,” he says.

‘And he wouldn’t spend a portion of his weekend sourcing, of all things, sausage casings. “For fun I stick my neck into every area of the business, just to keep the pace of the business up. I manage by embarrassment.”’

Reflecting on Basson’s huge contribution to Shoprite, Christo Wiese, the chairman, observed: ‘Whitey has been a very strong and charismatic leader, who has managed the company through market transitions and challenging times, taking calculated risks to turn the supermarket group into the leading retailer on the continent.

‘He accelerated the growth of the business and inter alia spearheaded Shoprite’s pioneering expansion into the rest of Africa after 1994. He also successfully acquired and integrated Grand Bazaars, Checkers and OK Bazaars. He fully deserves his reputation as one of South Africa’s “retail giants”.

‘The board is immensely grateful for his innumerable contributions to the company and his distinguished tenure as CEO over almost four decades.

‘His continuous service to the company, its employees and shareholders, as well as to the broader South African business community has been remarkable.’

Shoprite still trades from its corporate offices in the Western Cape. Its main JSE listing has been supplemented by listings on the Namibian and Zambian stock exchanges.

Following his retirement, Basson will remain available to management for a further period of nine months and will continue to serve on the Shoprite Holdings board as non-executive vice-chairman to ensure an orderly leadership transition.

He regards himself privileged to have led the Shoprite Group from small beginnings to one of the continent’s greatest companies and given the quality of Shoprite’s current management team and their exceptional track record, has a firm belief that the company will continue to grow consistently and sustainably.

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