Don’t blame the government for retailers coming a cropper
Even a benign economy with a trouble-free Eskom would not save Edcon, Massmart and Woolworths
Without doubt, running a business in SA requires enormous skill, energy and perseverance. Sadly, it seems that running a large one profitably is out of the reach of growing numbers of JSE-listed companies. 2020 is just a few weeks old and already three major retail chains have reminded us of how tough things are.
But even benign economic conditions with a trouble-free Eskom would not have saved Edcon, Massmart and Woolworths from the headline-grabbing announcements made in the past 10 days. Each of these major retailers is suffering from self-inflicted wounds, which, in the case of Woolworths, have been festering for five years, and much longer at Edcon and Massmart.
At Edcon successive management teams have failed to recapture the glory days that came to a gruesome halt in 2007. That was the year Bain Capital led a R25bn private equity deal that left the clothing retailer struggling in a sea of debt. Despite being paid staggeringly well, none of these management teams came close to addressing the debt burden or dealing with the rapidly changing trading environment they faced...