Empowerment South Africa Presentation to Parliament’s Portfolio Committee: Economic Development on Walmart-Massmart Merger 21 July 2011 Presented by Mr Mphuthi MPHUTHI Chairman: Empowerment South Africa Cell:

Who is Empowerment South Africa Empowerment South Africa, EmpowermentSA, is a business linkages network. We do linkages between: ◦ Procurement managers and BEE suppliers; ◦ White companies and BEE investors; ◦ BEE companies and investors or financiers; ◦ Associate member companies with tender opportunities.

1 We have access to over creditworthy suppliers. 2.So far, EmpowermentSA has published over tenders from government and corporates. 3.We have been approached by over 20 White companies looking for BEE partners. 4.Over 100 members have wanted bridging finance for tenders that have come through EmpowermentSA. 5.Since establishment, we have been the source of BEE investment opportunities worth over R150 mil. Our Access to Suppliers Nationally

Empowerment South Africa Views on the SMME Sector In South Africa

Our hard-working President Zuma’s Travels in First 7 Months of 2010 January: Angola, Maputo, Switzerland March: UK, Zimbabwe, Namibia, Uganda April: USA, Brazil, Namibia May: Tanzania, Algeria, France June: India, Canada July: Uganda. August: Russia, Lesotho, Namibia, China Red = Dangerous & Aggressive Exporters South Africa is Part of A Global Economy

Highlights of President Zuma’s deal with China: (24/07/10) a.SA imports more from China than most other African countries. b.Total trade between the two countries stood at R119,7-billion (2009) c.Imports from South Africa are resources heavy. d.China exports a wide range of manufactured goods: electrical machinery electronic equipment appliances Computers & printing equipment. This makes China the bigger export beneficiary in this partnership Challenges Posed By Pres Zuma’s Travels

Small businesses are key as they create by far the most jobs the world over. In SA between 1985 and 2005, 90% of all new jobs were created by small, micro and medium companies, according to the Finscope Small Business Survey Report of Brazil last year revealed that between 1995 and 2000, 96% of new jobs were created by enterprises with fewer than 100 employees. According to Finmark Trust’s Finscope 2010 survey, small businesses could create 2,5-million jobs in SA by Added to this, Finmark believes the government could take about people off social grant schemes if it supported small businesses more actively. SMMEs Are Job Creators

Focus on & concentration on retail: adding no value. Proliferation of shopping malls and Somalis into townships. Shopping malls anchored by JSE-listed companies. Metcash closing 51 stores to open hybrid retail stores. Cambridge’s loss-leader pricing model. Shoprite opening cash and carry “franchises” in townships. Big retailers hunger for cheap imports. Mobi-shops through MTN (like UK’s Tesco). Pick and pay’s online ordering and direct delivery to homes. Challenges Faced by Township Businesses

Massmart growth through acquisition (e.g. the Fruit Spot). Attaining BEE targets through acquisitions. International suppliers having global deals with Walmart. Cambridge’s loss-leader price undercutting model. Big retailers importation of cheap imports. Big retailers selling “our traditional foods”. They should be buying them from our “mothers”. Challenges with Current Massmart Model

Empowerment South Africa Supports the Establishment of The R100 million Supplier Fund By Massmart/Walmart This Is Our View on The Impact Of its Disbursement & Utilisation

1. Partnership towards the African Renaissance (export to Africa). 2. Partnership opportunity to fight UNPATRIOTIC supplier monopolies. 3. R100m to cover OTHER SECTORS beyond just farming. 4. The Fund to partner with IDC’s R500m for venture capital to open WALMART FRANCHISES in the townships and rural areas. 5. Massmart to set up A DISCOUNTED ACCOUNT for BEE contractors to buy their construction-related goods to build schools, houses, etc. 6. Use the fund for the GREEN ECONOMY (e.g. bricks from fly ash) which can be sold through Builders’ Warehouse. Proposal To This Committee: Massmart Supplier Incubator & Fund

1. Minister Tokyo Sexwale to receive R121.9bn this year. 2. Expenditure from R102.1bn in 2010 to R138.4bn in The upgrade of houses in informal settlements by Another R2.1bn is to support informal settlement upgrades through the new urban settlements development grant. 5. R972m is to build affordable rental units. The Fund Can be A Seed For SMMEs for R121 Billion For Housing Industry

There should be a broad-based consultation on benefits to SMMEs from: 1. FDC, LIBSA, etc.(Credit-worthy farming SMMEs) 2. The SMME Forum 3. The Business Place 4. NAFCOC, BMF, and FABCOS 5. Shanduka Black Umbrella SMME Beneficiary Partners We Recommend to the Committee

January: Angola, Maputo, Switzerland March: UK, Zimbabwe, Namibia, Uganda April: USA, Brazil, Namibia May: Tanzania, Algeria, France June: India, Canada July: Uganda, August: Russia, Lesotho, Namibia, China Red = Dangerous & Aggressive Exporters PARTNERSHIP to Export to Trade Partners Including Traditional Exporters

THANK YOU!! Mr. Mphuthi MPHUTHI Chairman: Empowerment South Africa Cell: