Chairman's review

On behalf of the board, management and staff, it gives me great pleasure to present to all our stakeholders another set of good results from the Group, notwithstanding a difficult macro-economic environment.

Lorato Phalatse Chairman

The year under review

The Group fared well despite adverse market conditions, delivering healthy growth in headline earnings per share, which is up 11,1% at 1 733,9 cents.

The Group continued its acquisitive activities and I am pleased to welcome new members to the Bidvest family. Following the successful acquisition of Home of Living Brands, we further consolidated our position in Mvelaserve. Both made positive contributions to Group results. The Group also acquired a significant interest in Adcock Ingram, giving Bidvest an opportunity to enter South Africa’s important healthcare sector.

Internationally, we acquired a 60% stake in the Brazilian company, Distribuitora E Importadora Irmãos Avelino Limitada, adding impetus to our entry into the South American market. Post-year-end we also increased our footprint in Europe, taking a controlling interest in the leading Italian Foodservice provider Gruppo Dac S.p.A and PLC24/7 Limited, a chilled logistics operation. These activities create a platform for further expansion while contributing to earnings diversity.

South Africa emerged from the second quarter of 2014 experiencing one of its worst economic disruptions since pre-1994. As a result, South Africa was downgraded by global rating agencies. We have yet to feel the impact of the downgrade. One key consequence will be an increase in the cost of South Africa’s planned, and much-needed, infrastructure development programme.

A corollary to this is worsening unemployment, particularly among our most treasured asset, the youth. Social disorder and service delivery protests also contribute to a challenging environment.

Despite these difficulties, many key sectors remain relatively resilient.

South Africa again proved itself as a leader of democratic Africa as it successfully concluded another free and fair election and changes to governing executives. We have achieved many milestones of which we can be proud.

South Africa’s growth prospects are nevertheless expected to be marginally positive (around 1,5% for 2014 and 2,8% for 2015), but fall short of the levels required by the National Development Plan for meaningful impact on job creation and other social challenges.

The IMF, in its World Economic Outlook, has an affirmative perspective on the larger developed economies (USA, Europe), with prospects expected to improve further in 2014/15. Global growth has been projected to move higher in 2014, at around 3,7%, rising to 3,9% in 2015.

This outlook bodes well for South Africa as we should positively trend Europe and the USA. Added to this, membership of the BRICS provides significant opportunities which need to be capitalised upon.

South Africans are united by a common vision of a peaceful and prosperous South Africa, free from poverty, race-based policies and legacy-based income and wealth disparities; a united nation that is eager to rectify historical imbalances by developing an all-inclusive economy.

Recent changes in the B-BBEE codes of good practice seemingly move the goalpost beyond the original targets. A major challenge for companies is the increase in ownership points.

Bidvest is engaged in a process of alignment.

Within the nation at large, the catalyst for productive dialogue could be government’s planned programme of wide-ranging infrastructure development. South Africa has the resources to make significant inroads on the current infrastructure gap while effective PPPs have the potential to limit the fiscal burden and provide effective delivery.

Working in partnership with respect to CSI initiatives often enables resources to be more effectively applied. However, there is still scope for individual interventions.

For its part, Bidvest has invested more than R542 million over the past decade in a wide range of initiatives designed to underpin development at community level. We report the annual allocations, but people often fail to appreciate the cumulative, long-term impact of sustained investment on this scale on such a large number of needy individuals.

We touch many lives and have made a material difference, however, this work goes on.

In future, increased attention will be given to quantifying the gains that are being made while ensuring that every rand works to the utmost and delivers the optimum return in terms of community upliftment.

South Africa (and the rest of Africa) has a major challenge with its youth. Many of our young people are poorly educated. As a consequence they are largely unskilled and unemployable in a modern economy. South Africa’s youth comprises 40% of the population, of which about 60% is unemployed.

Thankfully, awareness of the challenge is growing and government has begun to deploy various tools, including new policies, grants and employment/entrepreneurship schemes, to tackle the problem.

These initiatives notwithstanding, we are unlikely to see a fall in youth unemployment unless government and the private sector increase their investment in collaborative job-creation schemes for young people.

I am confident there is sufficient scope within the Group for an innovative approach to youth employment and the encouragement of our young people’s entrepreneurial skills. We will look closely at initiatives emerging from various government ministries with a view to exploring collaborative opportunities. This subject will be included in my engagement with various businesses within Bidvest.

In conclusion

The continued growth of our business translates into greater responsibilities for the board. I am pleased therefore that we took the opportunity to strengthen the Bidvest board ahead of recent acquisitions.

It gives me great pleasure to welcome our new members: Mrs Bongi Masinga, Mrs Nolwandle Mantashe and Mrs Mpumi Madisa. Their appointments bring further skills to the Group, add to overall diversity and further strengthen the board representation of women.

On behalf of the board, I wish to express our sincere appreciation to Brian Joffe, his executive and management for their continued stewardship of Group activities and the work this past year. We look forward to your continued contribution to the growth and success of the Group.

Lorato Phalatse
Chairman