At first glance it seemed the Spar board was moving to address issues raised in the media recently: allegations of fictitious and fraudulent loans and of discrimination against some of its retailers; a legal battle with one of its biggest retailers; and, finally, its board composition.
But a closer look at the Sens announcement of last week revealed there’s no plan to address anything, except to get a lawyer to check whether some of its accounting is “dodgy”, as alleged. That a lawyer will be checking this, and not an accountant, suggests the group is looking not at securing its accounting policies but at pursuing legal action against whoever made the allegation.
A second Sens announcement, made just an hour after the first, did hold out hope of action, but nothing too vigorous. The board, we were told, is going to “focus on the current allegations facing the company”. And to ensure the board will be allowed to do that focusing, Graham O’Connor is stepping aside from his role as chair.
But — and here’s the fun part — O’Connor will continue to serve as a nonexecutive director of Spar.
Only a board that thought it was appropriate for a long-serving, powerful CEO to seamlessly move into the role of chair would consider this change to represent some form of progress. The reality is that the allegations the board is focusing on relate to events that occurred while O’Connor was CEO or chair. It hardly seems possible that the other directors will be able to focus on anything while O’Connor is looking over their shoulders.
Which brings us to what was noticeably absent from both Sens announcements, namely O’Connor’s conflicts of interests. These have been disclosed to the board, but perhaps now would be a good time to interrogate them a little closer as well as allegations of favouritism. Just to put shareholders’ minds at ease.
Of course, it could be, as the board would have us believe, that Spar’s challenges are minor in number and scale, that the alleged fictitious and fraudulent loans were “an isolated matter” and that a supposedly independent and rigorous investigation has already found there was no deliberate or intentional practice of discrimination on the part of Spar, as alleged. Yes, the board accepts that some “internal business-related practices” did need to be reviewed, but notes that the necessary changes were made.
There is one thing everyone probably agrees on — South Africa needs a competitive Spar
Even the bitter legal battle with the Giannacopoulos family might have just been a disagreement that got out of hand (though the court papers point to something a lot more ominous).
Unfortunately for Spar, its current challenges aren’t restricted to the allegations carried in the media. Most of its key financial measurements are moving in the wrong direction, and the company is heavily constricted by severe debt covenants resulting from an ill-considered international acquisition spree.
So, whichever way you look at it, now would be a good time for vigorous focus by an independent board. Because there is one thing everyone probably agrees on — South Africa needs a competitive Spar.
As it says itself: “There’s something different about shopping at Spar.” And it’s a good “different”. Unlike most of the other major grocery retailers, customers tend to have stories about their local Spar — how it caters for the surrounding community, how its range of goods includes “out of the ordinary” produce and, invariably, how the owner-manager seems to be on hand 24/7.
Spar outlets are chameleon-like in the way they slot into whatever neighbourhood they’re in — lush affairs in the fancy suburbs, modest operations in lower-income areas.
And it’s not just the customers and entrepreneurial owner-managers who benefit from having a vigorously competitive Spar. It’s also very good for suppliers, particularly the smaller suppliers that struggle to find room in the crush of big food manufacturers feeding the huge distribution centres at Shoprite/Checkers and Pick n Pay.
Because of the voluntary nature of the franchise relationship between Spar and its retailers and the encouragement to have some regional variation, there is scope for smaller suppliers to deliver direct to individual stores. It doesn’t all have to come from one of Spar’s six regional distribution centres.
This means smaller players get some access to the market. It also means customers get access to a more varied range.
It’s an excellent system but utterly more complex than the one used by Shoprite/Checkers and Pick n Pay. The wisdom of Solomon is required to manage the at times competing interests of Spar and its retailers.
For decades the Spar Guild was sufficiently wise and effective, but it isn’t any longer.
A few years ago this taut system seems to have been knocked out of kilter. An independent board needs to move fast and vigorously to rebalance it, or we’ll all be worse off.
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