Partnership

In many other spheres, private sector partnership with government could prove a highly effective means of leveraging South Africa's national potential. To facilitate the partnership, both parties should have a clear understanding of their roles.

Government's major role is surely that of infrastructure provider, using tax receipts to create the infrastructure necessary to support long-term growth. This level of investment would normally be beyond the means of any private-sector player. The initially low level of returns is also a disincentive to private-sector investment in major items of national infrastructure. However, once the investment has been made, business is in a position to utilise the infrastructure to derive profit and create jobs. For its part, government can then maintain its income stream through taxes on resultant profits and wages.

In South Africa, confusion arises because government does not restrict itself to infrastructure provision. In many cases it lays out the "pitch" and then decides to play on it.

In the process, business models become confused. State-owned operations try to measure themselves according to criteria used by private-enterprise players. They seek a return on investment and profit growth when they should measure their performance on the quality and extent of the infrastructure they provide.

For example, profitability is not necessarily the best measure of performance at a monopoly power provider such as Eskom. A more appropriate measure, in my view, would be its ability to produce power at the lowest cost while assuring reliability of supply.

A government that concentrated on its role as a facilitator of growth through focused infrastructure provision would be the natural partner of businesses looking to create jobs. At the moment in South Africa, the state is both a possible partner and a potential competitor.

Interest rates

What can be done in the short term to foster growth and employment in South Africa? One form of stimulus is readily at hand – interest rates.

Between December 2008 and September 2010, the South African Reserve Bank cut interest rates eight times to 6,0%. This is helpful, but there are grounds for arguing that rates are still too high in comparison with Europe and North America.

In this environment, the rand has enjoyed a prolonged period of strength, undermining the pricing advantages South Africa's manufactured exports should enjoy on world markets. Further rate cuts would address the issue while encouraging business to invest in new capacity and take on new workers.

Holding our headcount high

Bidvest makes a significant economic contribution to the communities in which it operates. Families depend on the jobs created by Bidvest companies, and I am pleased to report that despite consolidation, our headcount still totals 105 752.

In southern Africa, we continue to redress the legacy of economic disenfranchisement, improving to a level 4 contributor under the DTI Codes. Half of our procurement in South Africa is now spent with BEE suppliers, a significant contribution to broad-based black economic empowerment. Equitable employment remains a challenge. However, our junior management pipeline, now more than half black, bodes well for the future.

Decent work through training focus

In this year of consolidation, resignation and absenteeism rates fell. Top of the list of staff issues are financial security and career development. At Bidvest, a key factor is training in order to unlock the potential of our people in line with our view that skills drive growth – personal, organisational and national. Our companies responded with a 17% increase in the number of training hours. Bidvest companies in South Africa concentrated on the lifeskills required to qualify for higher learning and career advancement. Our policy is to promote from within and we take pride in the progress made by workers into supervisory grades and management. Our companies are often their industry's training leader.

Health, safety and HIV/Aids

Companies operating in hazardous environments invest conscientiously in safety awareness programmes. However, it is with regret that we recorded four fatalities, half the loss of the previous year, but four too many. HIV/Aids continues to present a serious challenge. Our prevalence rate is still high at an estimated 15% and we are bewildered by the low uptake of VCT programmes made available through regular campaigns.

Environmental impacts and performance

Climate change is no longer in question. Legislative pressures from governments trying to meet emission reduction targets have had significant impact on our infrastructure and markets. Physical risks from changing weather patterns require a nimble response, a quality we cultivate. Bidvest companies are positioning themselves to achieve competitive advantage.

Our third carbon footprint reveals a slight increase in the intensity of greenhouse gas emissions to 6,6 tonnes CO₂e (using staff as the denominator), placing us ahead of our South African competitors. We are concentrating on improved monitoring and measurement of energy sources and resources, a prerequisite for the identification of profitable green business opportunities.

Society

At Bidvest, ethical behaviour is a way of life rather than a set of rules. However, in the face of growing concerns around crime and corruption, we have to entrench our code of conduct and reduce the risk of our staff being exposed to, or succumbing to, temptation. We routinely declare conflicts of interest, keep registers of gifts and bring new legislation to the attention of employees. Internal audit provides oversight and records any contingent liabilities. No material issues were escalated to Group level or remained unresolved at year-end.

Product responsibility

Food safety and the fair treatment of customers are critical to our businesses. In our domestic market, enactment of South Africa's new Consumer Protection Act underlines the point. Companies across the Group are proactive in their response to tightening legislation and changing consumer demands. We are turning risks into opportunities to strengthen our brand and create competitive advantage for our product and service offerings.

Sustainability

Inside Bidvest, credit is also due for the way in which our people have taken ownership of sustainability practice. We gave them a framework and exposed them to the issues. The development and implementation of sustainability initiatives were then left to each business. This has resulted in a bottom-up approach to sustainability.

Visit Bidvest offices anywhere in the world and you will find a wide variety of initiatives under way; strategic interventions that shape these businesses – measurement and data collation, recycling, better waste management, water- and energy-saving, tree-planting and lots more. There's no one template, but lots of individual commitment.

Looking at the wider picture, it is apparent that climate change and global warming are getting worse, not better. Every business has a responsibility to reduce the total environmental impact of its actions and operations. It's equally apparent that there is no one silver-bullet solution. Building critical mass will require a host of small improvements, business by business and individual by individual.

This is the path intuitively taken by Bidvest people. Our people drive the sustainability process rather than senior management. They treat the wider environment like their home environment, which is how it should be. There's no coercion. Our people don't need persuading. They are determined to make a difference and I'm sure they will.

Appreciation

Bidvest did remarkably well to return to pre-recession performance levels. The recovery demanded teamwork and dedication of a high order.

I am privileged to work alongside extremely able senior managers and a highly accomplished board of directors. In common with several other regions, South Africa suffers from a dearth of talent, but you would never guess it when dealing with the directors, executives and people of Bidvest. I thank you all for your help and salute you for your efforts in challenging times.

Our customers and suppliers drive the continuing success of our Group. I thank you for your support and your contribution to our growth.

Future

Purchase any item and you will almost certainly come across a notice telling you "terms and conditions apply". In 2011, the same notice should be attached to the future. There are no guarantees and uncertainties prevail. It's up to us to make the best of conditions as they change and adapt as we go along. Bidvest has already made big strides along this path.

One pitfall to avoid is that of corporate denial, a phenomenon that occurs when businesses deny change is happening or think they are so big they can control the changes that are taking place. This is an illusion.

Being big may enable you to absorb some punches, but if you are small and nimble you might avoid them altogether. In some key respects, many of our operations have downscaled by simplifying structures and reporting lines. The process puts us in better shape for the changeable trading conditions to come.

In uncertain times, "terms and conditions" also apply to forecasting. For example, in 2010 Bidvest failed to reach its five-year target of doubling profit, but we came close. The period included an unprecedented post-war recession that affected every geography in which we operate. Bidvest's last five years were also characterised by accelerating internationalisation.

Today, approximately 40% of Group earnings come from international markets. The fortunes of the rand, sterling, euro and Australian dollar have a material effect on our results. The impact was significant in 2010, creating little prospect that we would reach our stretch target.

What is our target for the year ahead? Bidvest intends to achieve real growth.

We have a strong balance sheet, enabling us to pursue selected opportunities for acquisitive growth as they occur.

We have developed growing insight into the markets in emerging Europe and believe further potential can be unlocked. Some African markets have also impressed over the last 18 months. Sub-Saharan Africa's low correlation with developed markets holds a certain attraction as it helps bring balance to earnings when recession affects the northern hemisphere. South America is another region of growing promise.

Our geographic reach may change, but our vision will not. We will develop our people, grow our business and seek sustained growth in shareholder value, in 2011 and beyond.

Brian Joffe
Chief executive