Bidvest Properties

The property sales and rental industry is experiencing increasing pressure, both nationally and internationally, as standards are continually raised and laws tightened. Rentals have remained fairly static over the last two years owing to an oversupply which was compounded by the economic downturn. Energy costs look set to rise worldwide with carbon taxes imminent. All these factors create an incentive for greener approaches to building in the form of energy-efficient lighting and air conditioning, in addition to the environmental justifications.

High basic rental and property rates coupled with the requirements of standards for green building, fire safety, employee health and safety and the environment are becoming increasingly demanding in South Africa, making it more complicated to deliver affordable developments. This creates consequential demands on our capital development programme into the future.

Acquisition

Tough times produce acquisition opportunities and every Bidvest operation remained alert for them. Both strategic and bolt-on acquisitions took place.

In the UK, the acquisition of Seafood Holdings complements existing operations and creates a new area of growth. In addition, a hospitality wholesaler was acquired by Deli XL in Belgium.

I welcome the Seafood team and all the other newcomers to Bidvest. You join us in interesting times and I look forward to your contribution.

Reinvention

Bidvest does not engage in stop-start strategic change. We continually reassess and reinvent.

Realignments within our foodservice businesses were well advanced at the start of Bidvest’s 2011 year. In the third quarter, a fundamental realignment of non-food businesses within South Africa was carried out.

Ten focused divisions were created under the Bidvest South Africa banner. Areas of activity were defined and reinvigorated teams were given the task of seeking renewed growth in areas of core competence.

Structural change is not accompanied by changes in business philosophy.

Reinvention across both our food and non-food businesses has largely been driven by rededication to core elements of the strategy that has shaped Bidvest since inception.

Our strategy, as before, is to invest in diversified trading, distribution and services businesses, with limited involvement in light manufacturing. A decentralised business model is retained while growth is entrusted to autonomous teams that are close to local markets and opportunities.

The strategic goal, in the main, remains 100% ownership of businesses, ensuring full control of cash flows. This enables further investment in acquisitions and infrastructure with the aim of achieving leadership in chosen areas of activity.

We empower and incentivise our managers and people to encourage personal growth along with business growth. In this process, returns on funds employed and profitability are the key benchmarks as we prefer sustained development to a one-off ‘win’.

We continue to prefer simplicity to complexity and build businesses by disciplined application of the basics. This includes the prudent use of debt.

This approach is well understood by Bidvest people. They have implemented new structures at pace without dislocation and I congratulate them on their success.

Internal strength

Staff numbers Group-wide remained relatively stable at 105 057.

A characteristic common to both the Bidvest Foodservice and Bidvest South Africa realignments is recourse to internal talent. Bidvest directors, managers and staff developed Proudly Bidvest solutions that enjoyed general buy-in from the outset.

Expansion into 10 South African divisions was achieved with only one exception from outside the ranks of Bidvest people. This is an important signal to all staff members, not only managers and supervisors. Their development into senior positions is a strategic priority. As Bidvest grows, they can grow with it.

Bidvest has never neglected succession planning and talent identification. The proof came through strongly in our recent acts of reinvention.

We are very disappointed at this year’s increase in fatalities and have expressed our condolances to the families concerned. Enquiries into the causes of these fatalities have been conducted.

Building for the future

Change at Bidvest reflects a changing world. We are putting building blocks in place which will support continued, long-term growth. We are entering a period in which businesses will not be able to rely on favourable economic conditions to drive future growth. The primary drivers will be innovation and the competitive advantage created by resourceful teams that respond rapidly to changing demands.

In a challenging business climate, staying lean and nimble is a prerequisite for staying successful.

Bidvest is dedicated to sustained growth. In our view, adverse economic factors can never become a justification for poor results. They may prompt reassessments and foster new initiatives; they do not enforce a standstill.

If underlying conditions in some areas of activity will not support continued growth, it is up to our managers to identify the dead-end, avoid it and move the business in a new direction.

Happily, I can report that our managers and their teams successfully applied these principles to reduce costs, improve asset utilisation and achieve overall growth.

Dinatla transaction

Bidvest strengthened its cash position even after committing R1,6 billion to repurchase 12 million shares from our Dinatla empowerment partners. The arrangement has enabled Dinatla consortium members to repay their total bank loans well ahead of settlement date in March 2012.

Our relationship with Dinatla began in 2003 when Bidvest shareholders gave up a net 27 million shares at a value of R60 per share for a total consideration of R1,6 billion – a farsighted decision that has enabled Bidvest to entrench its position within South African communities while supporting long-term sustainability through broad-based empowerment.

In the last eight years, it is estimated that real value in excess of R2 billion has been delivered to Dinatla stakeholders, a considerable transfer of wealth. Benefits, however, extend beyond accounting calculations. Lives and communities have been transformed as well.

More than 40 000 small businesses and micro-enterprises are supported by Dinatla consortium members. On average, each entrepreneur supports an immediate family of four members, which means 160 000 broad-based beneficiaries are assisted in communities across South Africa.

We take pride in this achievement and in the growing impact of our corporate social responsibility initiatives.

In 2011, corporate social investment across the Group amounted to R59,3 million, up from R47,2 million, while our enterprise development contribution rose from R51,9 million to R118,8 million.

Broad-based empowerment remains a key strategic objective of our South African businesses. The Group attained Level 3 B-BBEE status in the first half, laying the groundwork for further transformation gains.

Development of black managers at senior level remains a challenge. As this problem is experienced by many businesses, a common approach will be investigated, allowing all operations to share experience and ideas.

New world, old values

Our businesses work in a new world where established economic powers are fading and new economic powers are emerging fast. It may be a new world, but it is one in which the old values of prudence, hard work and living within one’s means have been rediscovered.

In this changing world, South Africa is positioned as the Gateway to Africa, a continent with huge growth potential, not only thanks to its commodities, but because of the growth in sub-Saharan consumer markets. Africa now has a population of more than one billion, supporting growth in many service categories.

South Africa remains Africa’s largest economy and its importance was underlined by recent membership to the Brics bloc of Brazil, Russia, India and China. Within this new club of emerging nations we should acknowledge that South Africa has the smallest economy, lowest population and most modest rate of economic growth. South Africa also has serious rivals for African leadership.

A recent African Economic Outlook report by the African Development Bank put South Africa among the continent’s 10 slowest growing economies while highlighting Nigeria’s position among the top 10.

South Africa’s main natural assets – platinum, gold and coal – will be depleted over time. If South Africa really is serious about its status as an emerging economic power, it has to develop a sustainable asset that adds enduring value. This means developing South Africa’s people through an effective system of education.

Bidvest Academy

Since 2003, 550 graduates have benefited from Academy exposure. As the business landscape has undergone radical change it was decided to institute a comprehensive review of course content and the Academy’s overall structure. Divisional heads are being consulted about the needs of their businesses as the first step in the development of a new curriculum.

Education the building block

As a business with a growing base in Asia Pacific, we know that this region’s economic success is underpinned by the spirit of innovation and the unremitting effort of an extremely well-educated population. Commitment to education is total across Asia, not just by governments but by families and the children themselves.

In contrast, education in South Africa is in crisis. The ill-fated experiment with outcomes-based education was scrapped early in our 2011 financial year to be replaced by a new approach, Schooling 2025.

Hopefully, this approach marks the beginning of significant improvement in educational standards. Improvement is long overdue. For years, pass marks have moved lower while pass rates have fallen. There is now a danger that a ‘pass’ at school simply passes on the job of education to an employer.

Bidvest’s South African businesses continue to invest large sums in training, not only to develop skills but to fill fundamental gaps in the state education of our staff members.

Investment in adult basic education and training (Abet) for our staff was absolutely vital to address the damage to our young people inflicted by apartheid-era education. The Abet effort continues and in many cases is being stepped up.

The need should be falling away. Unfortunately, the need persists because of continuing problems within the state education system.

Bidvest will continue to invest in the development of our people. Our companies will continue to make educational projects a priority in their social investment initiatives.

At the same time, South Africa’s public education system has to fulfil its mandate and give young people the start in life they deserve. At the moment, substantial investment goes into state education, but poor results come out. This situation cannot continue if South Africa hopes to succeed as a nation. Excuses don’t build businesses and they don’t build nations.

The education system must do better and the time to start is now.