Pick n Pay On your side? By Michelle Taal, LRS, South Africa

Transcription

1 Pick n Pay On your side? By Michelle Taal, LRS, South Africa 1

2 PUBLISHED IN JUNE 2012 BY FRIEDRICH-EBERT-STIFTUNG, P.O. BOX , CRAIGHALL PARK, 2024, ZA- SOUTH AFRICA, PHONE: , FAX: , SOUTHAFRICA IN COLLABORATION WITH LABOUR RESEARCH SERVICE 7 COMMUNITY HOUSE 41 SALT RIVER SALT RIVER 7925 CAPE TOWN, SOUTH AFRICA PHONE: FAX: LRS@LRS.ORG.ZA AND UNION NETWORK INTERNATIONAL (UNI) AVENUE REVERDIL 8-10 BOX CH-1260 NYON 2, SWITZERLAND PHONE: FAX: CONTACT@UNION-NETWORK.ORG ALL RIGHTS RESERVED: THE MATERIAL IN THIS PUBLICATION MAY NOT BE REPRODUCED, STORED OR TRANSMITTED WITHOUT THE PRIOR PERMISSION OF THE PUBLISHERS. THE VIEWS EXPRESSED IN THIS PUBLICATION ARE NOT NECESSARILY THE ONES OF THE PUBLISHERS OR OF THE ORGANIZATION FOR WHICH THE AUTHOR WORKS. 2

3 Contents Preface by LRS... 3 Foreword by Gerd Botterweck... 4 Geographical Spread of Pick n Pay The Pick n Pay Shop Steward Alliance... 5 Pick n Pay Company Analysis... 6 Spread and Strategy... 6 Structure... 7 Strategy... 8 Financials... 8 Directors... 9 Employment Industrial action Current strategies to organise Challenges for the Pick n Pay Alliance Ownership and control Corporate Governance Franchises Management style Financial Expansion Nature and conditions of employment The Way Forward Pick n Pay claims to be there for you, on your side. This is one of their logos. The title of this report challenges the assertion that the company is on the side of their workers. Retail unions in Africa can be proud of forming the Pick n Pay Shop Steward Alliance to push the company to sign a Global Agreement. The Alliance will build solidarity between workers of Pick n Pay across Africa to improve wages and conditions, make management more responsive to social responsibility and monitor company operations to build equitable regional economic integration. UNI Global Union leads and supports this Alliance to achieve its goal of decent work and a decent life for all. The Labour Research Service conducted research with the Pick n Pay Alliance. This report critically examines Pick n Pay, identifying challenges for unions in the Alliance to pursue with the company. 3

4 Friedrich Ebert Stiftung (FES) has supported the Alliance financially as well as practically assisting with the collection of information in various African countries where they have offices. Objectives of the Pick n Pay Shop Steward Alliance: To engage in dialogue with Pick n Pay on a regional level to improve the conditions of workers To develop campaigns for improving conditions of employment, wages and working conditions at Pick n Pay To serve as a resource/information network for the unions involved. To enable building solidarity between unions in the region. Labour Research Service, Cape Town, South Africa, June 2012 Foreword In June 2011 trade union representatives and Shop Stewards of the South African Retail Multinational Pick n Pay from the Southern African Region assembled under the leadership of UNI- Africa and the support of the Friedrich-Ebert-Stiftung (FES) to establish an Alliance which aimed to engage the company on signing an International Framework Agreement (IFA) to cover both corporate and franchise stores. At that meeting a regional Shop Steward/Trade Union structure for the company was also set up in order to exchange information and to develop strategies for a cross border cooperation. Beyond this and also with the assistance of the FES, the Cape Town based Labour Research Service (LRS) conducted a study which gave an in depth analysis of the Company, the degree of unionisation and other labour related issues and highlighted the Key issues and Challenges for the Pick n Pay Alliance (for the whole text of the study please click the website of the Trade union Competence Centre of the FES: click TU Competence Centre and then click under publications) The publication in hand is a summary of the major findings of the Study and the major challenges ahead of the Alliance. It should give first hand information to Shop Stewards and Trade Unionists and should be a base for their negotiations with the company to improve the terms and conditions of employment for the employees of the company. We trust that this publication will be of value in pursuing these objectives. The Friedrich-Ebert-Stiftung is a German political Foundation committed to the values of social democracy and has deep roots in the German Labour movement. The Foundation bears the name of the first democratically elected president of Germany, Friedrich Ebert, and seeks to preserve his political legacy: the promotion of freedom, solidarity and social justice. The foundation pursues these aims through its programmes of political education, international cooperation, scholarships and research in Germany and abroad. Gerd Botterweck Director FES Trade Union Competence Centre, Sub Sahara Africa Johannesburg, South Africa, June

5 Pick n Pay is one of Africa's largest and currently South Africa s second largest retailer of food, general merchandise and clothing. According to the 2012 company report it has a total of 891 stores, made up of Hypermarkets, Supermarkets, Clothing, Liquor, Pharmacy and Boxer Family Stores. It also holds a 49 per cent holding in 50 TM Supermarkets in Zimbabwe. It operates in eight African countries outside of South Africa. The Group employs over people, and generates an annual turnover of ZAR 55.6billion. Unlike its local competitor Shoprite Checkers, Pick n Pay has been slower in expanding into Africa and in the move towards Centralised Distribution Centres (CDCs) that are becoming the norm for the retail industry globally. This has apparently cost it in market-share and in financial performance. However, this is set to change. As Pick n Pay sets up to drive into Africa, it is essential that labour rights, good corporate governance and social responsibility move with it. Unions that have members working in Pick n Pay have joined together to form an alliance to engage with the company towards this end. Geographical Spread of Pick n Pay 2012 OPERATIONS South Africa Namibia - 17 Zimbabwe - 50 Botswana - 9 Swaziland - 1 Lesotho - 10 Mozambique - 1 Zambia - 4 Mauritius - 2 UPCOMING OPERATIONS Malawi DRC Angola Mauri The Pick n Pay Shop Steward Alliance 5

6 A meeting in Johannesburg, South Africa in July 2011 saw unions organising in Pick n Pay operations across Southern Africa come together to form the Pick n Pay Shop Steward Alliance. Supported by UNI Global Union, the aim is to engage the company on signing a Global Agreement to cover both corporate and franchise stores. The process is in the early stages and key to unions engaging with management is an understanding of the company, its management structure and style, financial performance and attitude to unions. It is also important to know about the unions organising within the company, their density, challenges and victories to successfully draw on these in the campaign for a Global Agreement. Figure 1: Unions participating in the Pick n Pay Shop Steward Alliance COUNTRY UNION Lesotho National Union of Commerce, Catering and Allied Workers NUCCAW Mozambique Sindicato Nacional Dos Empregados De Comercio Seguros E Servicos SINECOSSE Namibia Namibian Food and Allied Workers Union NAFAU South Africa South African Commercial, Catering and Allied Workers Union SACCAWU Zambia National Union of Commercial and Industrial Workers NUCIW Zimbabwe Commercial Workers Union of Zimbabwe CWUZ Pick n Pay Company Analysis Spread and Strategy Latest available company documentation at the year-end (February 2012) notes that it has 941 stores excluding in-store pharmacies and auto-centres. It notes 94 stores ex-south Africa: four in Zambia, 17 in Namibia, nine in Botswana, ten in Swaziland, one in Lesotho and two in Mauritius and one Mozambique, and 50 TM Supermarkets in Zimbabwe. In February 2012 the company bought 24 per cent of Zimbabwe operation TM Supermarkets, bringing its total shareholding in the 50 store network to 49 per cent, the maximum foreign ownership allowed under Zimbabwean law. More than 100 store openings are planned for 2012/2013. These include two in Zambia and Mauritius and one in Mozambique. PNP also announced stores in DRC, and Malawi in the next 12 months. The strategy is to double the number of stores in the rest of Africa in the next 5 to 10 years. Figure 2: Store growth at PNP 6

7 Structure Pick n Pay was founded in 1967 as a family controlled business with four stores in the Western Cape. It listed on the Johannesburg Stock Exchange the following year. Figure 3: Major Shareholdings in Pick n Pay Stores and Pick n Pay Holdings Shareholder - Pick n Pay Stores Percentage Owned at year-end 2011 Pick n Pay Holdings Limited 53.6 Government Employees Pension Fund 10.2 Liberty Life Assurance of Africa Ltd 1.7 Sanlam 1.0 Shareholder Pick n Pay Holdings Percentage Owned at year-end 2011 Ackerman Family Trust 48.3 Investec Opportunity Fund 2.2 Pick n Pay Employee Share Trust 1.7 Nedgroup Investments Value Fund 1.1 Liberty Group 1.0 Symmetry Inflation Plus Fund No. 1.0 The Mistral Trust (Ackerman family) 1.0 Pick n Pay, despite being a publicly listed company is in fact owned and controlled by the founding Ackerman Family. The Ackerman Family Trust owns 48.3 per cent of Pick n Pay Holdings which holds 53.6 per cent of the Pick n Pay Stores (the operational company). The family has operational control over the company and also collects the majority of dividends which have continued to pay over the years despite the company s poor financial performance. 7

8 Following the departure of the CEO, Nick Badminton, in early 2012, executive control has reverted back to the Ackerman family more formally as the Chairman, Gareth Ackerman, assumes temporary control of company strategy. There is no word on a permanent replacement for the position. The Government Employee Pension Fund, which includes South African union members on the board of trustees, is the second largest shareholder in Pick n Pay Stores. Can these trustees be engaged in any way to assist in challenging the current corporate governance of the company? Strategy In the last months Pick n Pay has escalated its drive into Africa as it has seen this as the growth opportunity that could bring the business out of trouble. Its strategy of opening both corporate and franchise stores is set to continue with the expansion of the company. Pick n Pay's business as well as the expansion into Africa is predicted to be easier now that it has established a centralised distribution system. While the system and the IT to support it are not yet fully functional, funds released from the sale of Franklins will be used to complete this process. Management reports that at the end of 2012 financial year the system is now improved and moving 1.6 million cases a week from Longmeadow DC in Johannesburg. These lessons are to be implemented in Western Cape Philippi DC in the year to come. Financials The annual report reveals that the 2010/2011 financial year ended 28 February was exceptionally tough. The company puts this down to a combination of a difficult trading environment and some internal challenges. Pick n Pay again fared poorly in the 2011/12 financial cycle. Figure 4: Revenue at Pick n Pay Figure 5: Profit at Pick n Pay 8

9 While revenues at the company recovered from the dip experienced in 2010, profits at Pick n Pay are down for a second year, by 15 per cent on the previous year. This dip is not mirrored in the dividend payments to shareholders (the majority of whom are the Ackerman family). Despite the poor performance, PNP paid out 75 per cent of earnings in dividends, rather than funding growth. The reason for poor performance in 2011 was ascribed by analysts to the delay in selling the lossmaking Australian subsidiary, Franklins; its slowness in centralising distribution centres; an overspend on store remodelling that has not paid off; non-closure of loss-making operations; losing market share to both Shoprite and Woolworths; reliance on franchises; slow expansion into Africa In 2012 the reason for the performance has been put down to investment in change: most notably the upfront launch costs of Smartshopper, implementation of specialist category buying and the continued investment in CD capability Analysts believe that if sufficient has been done, 2014 is the earliest the results will really reflect this. This does not put PNP in a good position to fight for market share at a time when Wal-Mart s entry into Africa will make that battle even more ruthless. Directors Given the poor performance of the company over the last period it is perhaps encouraging to note that the CEO and executive directors have not received bonuses in 2010/2011, given that they are nominally meant to be performance bonuses. The CEO still received a seven per cent increase in his salary taking it to over R3.5 million for the year, as well as R860, 900 in benefits. He also cashed in some of his shares and received R10.5 million for them. Just before the 2012 year end in February, CEO Nick Badminton stepped down from his position. A replacement is yet to be appointed. At the time of publication it is not yet disclosed how much he received in his final year or how much he collected on departure from the company. 9

10 Figure 6: CEO fees at Pick n Pay Figure 7: Executive Director Remuneration at Pick n Pay When these figures are compared to the wages of workers at PNP, South African workers seem to come off the best. At R3, 800 per month, R45,600 per year in 2010 they earned more than double what workers in the operations outside of South Africa took home. However, this amount still means that a worker would need to work for nearly one hundred years to earn the CEOs annual package excluding the value of the shares he sold in the year and those he still holds. At operations beyond the borders of South African the situation is even more serious. 10

11 Figure 8: The Wage gap at Pick n Pay how many years a worker would need to earn the CEOs 2010/2011 fees Employment The 2011 annual report counts 49,200 company employees across operations at Pick n Pay (figures for 2012 not yet released). For the first time in 2009, and increasingly now, the number of Pick n Pay operations is growing as the number of workers is decreasing. Part of the reason for this change is that while employee numbers include casual employees they do not include outsourced / labour brokered employees who may be increasing with the expansion of operations. This has been noted by unions as management claims stores are overstaffed but are using these workers every day in all stores. In 2011 Pick n Pay management cancelled the labour flexibility and mobility agreement which had been in place since While management reports that the termination of this agreement has been settled, only an agreement to resolve the contemplated 3000 retrenchments has been finalised. SACCAWU has in fact challenged the unilateral withdrawal of the fleximob agreement through the Labour Court in a case which is still pending. Management hopes the termination of this agreement will give it more flexibility and efficiency with regards to staffing. In reality, it is the staff that is being forced to be increasingly flexible at the expense of decent working conditions. Workers are clearly seen as a cost to a struggling business and are being forced to accept less and less or be threatened with retrenchments. This hardening of 11

12 attitude of management at a central level will make engaging on workers rights particularly challenging and a strong campaign based on clear demands must be coordinated across the alliance. Industrial action In the last three years there have been three nation-wide strikes in South African operations engaging on issues from racism and the wage gap in 2009 (an issue which remains unresolved), to the call for centralised bargaining in the retail sector which was an industry wide strike and likewise remains unresolved. No other countries have recorded strikes; Namibia in particular noted that there have never been strikes at the Pick n Pay operations. The strikes in South Africa however, cover a wide range of issues that will impact on other operations as the company expands: South Africa 2009: The action concerned racism and the closure of Apartheid wage gap. While 87 per cent of workers went on strike and the issue was highlighted, it remains, as far as the union is concerned, unresolved. South Africa 2010: The first strike in October/November 2010 occurred as workers tired of the deliberate delaying tactics and the disdain shown by the company in wage negotiations which had been unresolved after many months of bargaining. Over 100 workers were dismissed before a compromise agreement was finally reached. Pick n Pay members also supported SACCAWU s one day strike in November 2010 demanding the end of the use of labour brokers and the establishment of a Centralised Bargaining Forum for the Retail and Wholesale sector. About 76 per cent of workers were involved although the issue remains unresolved. Current strategies to organise Strategies for organising range from waiting outside the stores for workers to finish work more common where operations are new and the union is not yet recognised, as in Lesotho, and the more formal processes noted in Namibia where there are Monday morning forums for workers initiated by both shop stewards and local management. SACCAWU in South Africa is the majority union in Pick n Pay and as such has an Agency Shop agreement and is seeking a Closed Shop Agreement. Further, it has managed to sign an agreement extending benefits of full timers to part - timers/casuals. Key challenges noted by unions show a spread of issues from wages to dealing with poor skills training and empowering women in the union. The challenge of organising part-time and casual workers has been noted. This is particularly important in the company as more and more workers are of this category. Further, accomplished shop stewards are routinely promoted to managerial roles and new shop stewards have to be continually trained and capacitated; branch managers are not allowing shop stewards to meet workers, and shop stewards are being victimised. What has been identified across the board is that there is a need for information sharing, and training for organising, collective bargaining and solidarity actions. Challenges for the Pick n Pay Alliance Ownership and control With the bulk of shares in the hands of the founding family, their interests dominate and become the interests of the company as a whole. While other shareholders have to actively protect themselves within the little space provided in company law, unions have no space to challenge these dominant interests other than relying on their organised power. Be it for the signing of the Global 12

13 Agreement, impacting on corporate governance or harmonising conditions of employment, it is only through solidarity and organising that the union will win space for dialogue, access to information and a voice for workers interests. Corporate Governance The company has supplied very little documentation on the regional operations of Pick n Pay, including worker numbers, union density and CSI initiatives. As a growing regional company, Pick n Pay should be pressed into being more transparent in its information sharing on operations. Franchises Pick n Pay is fond of the franchise model, some of which, as in Namibia, are centrally organised and some of which, as in South Africa, are not. This needs to be addressed both in the Global Agreement and in engaging with the company generally. Organising workers at franchises must be a priority as well as knowing how many and under what conditions they are working. Workers at franchises should also be included in organising activity for corporate stores and a resolution proposed that workers at corporate stores will engage in solidarity action with workers at franchises. Management style Unions have raised that management needs to be more responsive to workers and local issues. This should be done through creating consultative processes at branch and national level as well as the appointment of managers that understand local dynamics, respect workers and are prepared to engage with the union as a partner. To date the company has shown little enthusiasm for embracing consultation and dialogue and it will require huge efforts on the part of trade unions to bring about this change. Financial Pick n Pay remain in financial disarray following poor financial and strategic leadership for many years. Unions will have to guard against workers being made to further pay for these management problems in their wages and conditions of employment. Expansion The company s expansion strategy is focussed on catching up to its rivals and so rapid expansion is to be expected. Unions will not find it easy to introduce corporate social responsibility and the decent work agenda in a company where the current bottom line is catch up, cut costs, shareholder dividends. Nature and conditions of employment Conditions of employment are coming under pressure at Pick n Pay as the company tries to cut costs and emulate the Wal-Mart model in the face of falling market share and increased competition. Trade unions will have an uphill battle to get the company to introduce full-time employment, pension schemes, reduced hours of work and other benefits. The Way Forward The Pick n Pay Shop Steward Alliance is committed to seizing the moment to challenge the company on these issues for workers and have committed to strategies for education, organising, information and communication: Education 13

14 Educational material for shop stewards is to be sourced or developed and a forum for sharing skills, or workshops with more experienced shop stewards to be developed by the alliance. Many of the unions engaging with Pick n Pay are the same unions as are involved in the Shoprite alliance, the opportunity to learn from the Shoprite GFA campaign and network building will be planned and used. Organising As Pick n Pay expands, unions will monitor the opening of stores in new regions and deploy organisers to recruit new employees to increase union representation and defend the rights of the new employees. This includes workers at franchises and workers across all possible grades and job functions to combat the divide and rule tactics of Pick n Pay. While the increased use of casual and contracted labour should be resisted, the fact that these workers are increasingly being used in operations cannot be ignored. Strategies to organise these workers will be devised and shared. Information and Communication The Alliance cannot work without a means to communicate ideas and experiences, information and share skills. UNI and the Alliance will develop appropriate communication systems and tools to raise awareness among Pick n Pay workers and the broader public about the struggle of the Alliance for decent work and decent life. The campaign for a Global Agreement takes place against the background of the recently threatened retrenchments, the Wal-Mart entry into Africa, the rumours of take-over interest in the company, the departure of the CEO, Pick n Pay s loss of market share and uncertain outlook. It will not be easy. Particularly now as labour costs are seen as the easiest way to ease the bottom line, an increased organisation of workers may be seen as endangering that. The GA campaign will keep this in mind and use it to promote the cause of social dialogue, improved corporate governance and engagement rather than closing it down. 14