Basson’s courage points way forward for Shoprite
Whitey Basson led the group he started for 40 years. Now that he's gone, management will have to find a way to grow beyond local economic growth
Years ago, I was asked to contribute to a book on SA’s greatest entrepreneurs. I suggested doing a chapter on Whitey Basson, then CEO of Shoprite. I had no idea at the time that Basson never gave press interviews and by nature didn’t like the limelight. The only reason I think I got the interview was that Basson’s corporate relations consultant, who didn’t even live in SA, was an old Business Day colleague.
The interview itself was a slightly dry affair, and the books editor, Moky Makura, who now works for the Bill & Melinda Gates Foundation, castigated me, somewhat justifiably, for including so few personal details and anecdotes.But that was Basson – a canny, behind-the-scenes kind of tactician who felt a bit uncomfortable in public spaces. When he did let loose at financial presentations, the results were often disastrous. Like the time he was borderline sexist about Shoprite’s all-male executive. Hence, Shoprite’s press relations team was extremely cautious about personality interviews. Even finding the headquarters in Brackenfell was a bit of an ordeal; a city-centre, concrete-and-glass temple to modernity it is not.
Basson opened the interview with a chip-on-the-shoulder offhand remark, saying he was born in Porterville but he always told people he was from Tulbagh because everybody knows (in other words, all you wine-drinking snobs) where Tulbagh is, but nobody knows where Porterville is.
But for me, even as a moderately informed observer of Shoprite over the years, the interview was an eye opener. I knew that the group had bought and turned around two loss-making retailers, Checkers and OK, famously buying the latter for R1.
What I didn’t realise was that when Shoprite had bought both stores, it was making less in profit than both chains were losing. Both acquisitions were, in other words, massive bets which could have put the entire group at risk.
I also didn’t realise that it was Basson who brought his former employer, Christo Wiese, into the first purchase of the six Shoprite stores in Cape Town that started the group. It now has 2,843 outlets in 14 countries, with a total staff complement of about 150,000. He spent almost 40 years running the company he effectively started. I told Makura that whenever I asked him about himself, he kept telling me about Shoprite. His life was the store.
It’s difficult to discern someone’s character accurately in a short interview, but I have no doubt that Basson richly deserved his place in a book on SA’s greatest entrepreneurs. He was also a bit naughty. He told me a story about advertising huge discounts on pool chlorine, mainly because Shoprite customers didn’t own swimming pools and it forced Pick n Pay to offer discounts too. But it sold more because its customers did have pools.
Such are the dark arts of retailing.Why was he so successful? As always, it’s a hard question to answer. Some of it was circumstantial. Shoprite’s rise was built on the move to suburbs with their expansive malls and spacious, massively stocked stores. Being a latecomer was something of an advantage here. The out-of-town store taught Shoprite how to run a depot-centred operation, which is so crucial to running a huge retailer. The mega-trend was the government’s massively increasing social grants payouts, which went straight into Shoprite’s pockets.
But like everything in life, luck is often earned. The group was also breathtakingly brave at times, not just buying Checkers and OK but also in its move into Africa. While Pick n Pay was trying and failing in Australia, Basson had been quietly developing a sizeable African operation. I got a sense that this was Basson’s biggest disappointment – not starting the operation but failing to get the volumes he knew he needed to make it really work. Still, Shoprite’s presence in African countries is helping bring cheap goods to African consumers on the back of its local logistics operation, something Pick n Pay obviously couldn’t do in Oz. In time that will shine through.
Basson left the group in January 2017, selling a mountainous bundle of shares, worth about R1.6bn, in Shoprite shortly after departing. I’m speculating here, but I have an inkling about why he did it. There were always rumours that he didn’t get along with Markus Jooste, effectively his rival in the Wiese empire. If that is true, it’s massively to his credit, particularly given what happened not long afterwards.
Basson left the group in the hands of Pieter Engelbrecht, who was lumped with a perfect storm of problems revealed in the results this week. The VAT increase, record fuel prices, sugar tax, listeriosis and currency movements all resulted in lower earnings and a rare dividend decline.
All of these are sporadic, but they point to a bigger problem: Shoprite is now a function of the South African and African economy, and that is a mixed blessing. It is possible that economic growth in Africa will turn around, which will be fabulous. But management has a new challenge: how to grow beyond local economic growth.
It’s a tough ask. But then, buying two bankrupt retailers was, too.