What is Walmart’s R200m worth?

Barrie Terblanche

When the Competition Appeal Court ordered Massmart to establish a fund of up to R200-million to help small and medium businesses gain access to its supply chain, the final hurdle to the retailer's merger with US juggernaut Walmart was overcome.

Massmart, the owner of Game, Makro and Builder's Warehouse, told the Mail & Guardian its lawyers were still evaluating the impact of Judge Dennis Davis's ruling before details could be divulged about how the fund will work.

Davis's judgment sketched the bare outlines: Massmart will choose the individual beneficiaries of R40-million worth of supplier-development support for the next five years and the company will administer and implement the support. Existing and potential suppliers, and "clusters of micro-enterprises" (most likely small farmers) must be targeted for expansion.

The fund will be externally audited and guided by an advisory board of seven, including representatives of government departments and trade unions, which opposed the merger out of fear that Walmart would wreak havoc among local manufacturers by flooding South Africa with cheap goods through its giant $400-billion global supply network.

But Walmart's hasty efforts to set up examples of what it can do for the local economy provides an intriguing glimpse of another possibility: lucrative opportunities for local suppliers to use Massmart as a springboard to supply Walmart world-wide.

In fact, "hasty" does not really apply to the case of Vivian Kleynhans, whose Stellenbosch-based wine-trading company, African Roots, has been an occasional supplier to Sam's Club, a subsidiary of Walmart in the US, since 2007.

Kleynhans says getting her Seven Sisters label stocked in Sam's Club stores was easier than her struggles to gain a foothold in the wine industry in South Africa, where there was an entrenched attitude of "we haven't built this industry for over 350 years so that a newcomer can come and disrupt it".

Today, her strong relationship with top South African wine farms is a crucial aspect of her ability to scale up supply once orders for her label start growing. It is a far cry from manning her tiny exhibit in 2005 at the Soweto Wine Show, where she met Selena Cuffe, an American entrepreneur who decided to start her own wine-importing business by building Seven Sisters as a brand in the US.

Key to their success in the US, says Cuffe, is the inspiring story of the seven Brutus sisters (Kleynhans's maiden name) who grew up deprived after losing their family home in Paternoster on the West Coast, and reunited years later to build African Roots as a family business.

The controversy around the Walmart-Massmart merger has since spurred the company to fast-track African Roots as a supplier, and Kleynhans was allowed to stock her product in Makro stores under a one-year programme in which the company subsidises her distribution and shelf rental costs. Her label has also been included in broadsheet advertising and in in-store tasting promotions.

This move probably forms part of a support programme of about R40-million that Massmart pledged during the drawn-out merger negotiations. Judge Davis ruled that the pledge may not form part of the R200-million fund.

Hazy view obscures the cloud for small businesses

Johann Barnard

Only 9% of local businesses polled in the SME Survey 2012 make use of commercial cloud services.

"The uptake is still very low, but another 9% are expected to be making use of cloud services in the next year, so by 2013 one in five SMEs will be using cloud [solutions]," says Arthur Goldstuck, managing director of World Wide Worx, the company which produces the SME Survey every year.

The lag might be because comprehension of the phrase "cloud computing" (it broadly refers to online storage and computer processing) has remained as elusive as the fluffy white clouds this important technological development is named after.

And that is unfortunate, because cloud computing's cost benefits, scalability and flexibility have enabled thousands of companies to operate on unprecedented levels without incurring crippling capital costs during the start-up phase. In South Africa the adoption rate among the big corporations is growing, with an estimated 52% of them making use of cloud services in some form, growing to 56% next year. Small and medium enterprises (SMEs) however, are completely missing this boat. One of the main causes for the slow adoption of the technology, despite its ability to cut costs and improve efficiency, is sheer incomprehension, says Goldstuck.

"The language of the cloud environment is too obscure, so business owners don't understand what the [cloud computing] vendors are talking about," he says.

He suggests that vendors do more to educate this sector of the market because the lack of understanding translates into fear of adopting a technology or system over which they seemingly do not have complete control.

"Were [the owners of small and medium businesses] more familiar with the benefits of the cloud, they would be able to reap greater benefits in terms of costs and savings, but also efficiency and data security.

"There is a widespread misconception that the cloud is insecure and that data is more secure on your own system, but too many SMEs don't protect their own data adequately," Goldstuck says.

Internet connectivity costs and speed are, invariably, flagged as discouraging greater adoption of a service so dependent on a fast and reliable line, although that picture is improving as competition increases between providers.

The survey also showed that the age of the business plays a role in the likelihood of adoption, with only 5% of new companies indicating that they use the cloud. Among all other age categories of SMEs, more than 8% have taken to the cloud, which shows that start-ups are more cautious about adopting cloud services.Goldstuck says they have the most to gain from the cloud.

"There is certainly evidence that cloud computing offers more benefits than drawbacks to SMEs, yet a lack of understanding of these bene-fits means uptake continues to be slow. Despite this, there is a clear edge for those who do make use of it. After all, cloud computing is an enormous cost saver to any business, and cutting costs is a key element of profitability."

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