Cosatu on Friday called out pharmaceuticals retailer Dis-Chem Pharmacies for lack of transformation of its corporate structure, saying it was only paying lip service to Black Economic Empowerment (BEE).
The pharmaceutical firm reportedly failed to account to shareholders this week at its annual general meeting (AGM) by shareholders when pressed on why it has no black people in its top management structure and only 14.5% at senior management-level.
Dis-Chem shareholders are the Saltzman family, which has a 35% stake; Coronation Asset Management with 15.01%; the Public Investment Corporation with 18.6%; Royal Bafokeng Holdings with 6.62%; and Stansha with 4.64%.
This also comes amid concerns that the new draft regulation amendments effected earlier this year intended to gauge compliance through five-year numerical targets that employers must aim for, gave companies longer leeway still but they lacked measures for enforcement.
The targets are to be reported on in the annual financial reports of companies, also including progress made at management-levels; including top, senior, professionally qualified and middle as well as skilled technical management-levels.
Cosatu has waded into the matter after Dis-Chem CEO Rui Morais, responding to written questions at the AGM as reported on by Media24, said the group historically had limited turnover at an executive senior management-level, which had created “long levels of employment of senior management”.
Cosatu said the 2024 Commission for Employment Equity report confirmed that South African companies were mostly led by whites making up 62.1% of all top management positions. African people on the other hand represent only 17.2% of top management even though they account for 80.7% of the economically active population. Indians represent 11.6% of top management positions, and coloureds 6.1%.
“It is clear Dis-Chem is among the culprits responsible for the dismal pace of transformation in corporate South Africa. The group started as a single store in Mondeor, south of Johannesburg in 1978. Nearly half a century later, the neighbourhood around the store has completely transformed but the business hasn’t followed suit,“ Cosatu said.
Cosatu charged that Dis-Chem’s B-BBEE certificate reflected that it is a Level 6 contributor that meets only one out of the five minimum requirements set for the various elements.
It said, “The minimum requirement for ownership is 25%, but Dis-Chem scores a paltry 18.25%; for management control the pharmaceutical group scored a shameful 6.89% as opposed to the 19% minimum requirement; the company also failed on the skills development front, delivering a lowly 15.26% compared to the 20% set minimum; enterprise and supplier development was a disappointing 27.9% in contrast to the 42% minimum expected.
“The only minimum requirement Dis-Chem managed to reach was the 5% for socio-economic development. A quick glance at its retail outlets reveals that the company’s customer facing staff is majority black, but this is not enough. Dis-Chem must make meaningful strides towards transformation and begin to reflect the demographics of the market from which it earns its profits if it is to be sustainable,” Cosatu said.
Dis-Chem and the Public Investment Corporation failed to comment at the time of publication.
In a separate interview, Cosatu’s Parliamentary spokesperson Matthew Parks said the enforcement of compliance could be executed through prescribed equity targets and the withholding of compliance certificates to companies seeking to obtain government contracts.
“I am not sure if Dis-Chem goes to seek government tenders, but these are the two ways companies can currently be made to comply. The law has just come into effect this year, I do not expect that in the next three to four years there would be strict measures. This gives employers a long leeway. Five years is a long time to make progress. Though they will have to show in their annual reports the progress they make, perhaps that gives some space to squeeze them,” Parks remarked.
Government sources said departments are contemplating penalties they can levy on businesses that are slow to transform.
“The JSE also needs to take its role on pushing transformation seriously. Ordinary consumers can also vote with their feet and stop buying from businesses that refuse to transform,” a source said.
Dis-Chem said on Monday, "There has been limited senior executive management movement and exits from Dis-Chem which has resulted in long executive tenure. The value this brings is the benefit of deep experience and understanding across the senior management cohort."
"The group is supportive of transformation as positions become available. Diversity targets and transformation are a constant agenda item and are addressed as opportunities present themselves throughout all management levels. Transformation levels at the company at senior, middle and junior management levels across gender and racial diversity, improve year on year," it said
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