South Africa’s Massmart could cut over 1,400 jobs

Employees work at the checkout counters of a Walmart store in Secaucus, New Jersey, November 11, 2015. [REUTERS/Lucas Jackson/File Photo]

South Africa’s Massmart Holdings could cut up to 1,440 jobs under a plan to close some stores, the retailer said on Monday as it struggles to grow sales in a tough economy.

Massmart, majority owned by US retail giant Walmart, swung to its first half-year trading loss in two decades last August, as low growth, high unemployment and a rising cost of living hurt South Africans’ spending power.

The retailer said in a statement it had started consultations with unions and other stakeholders around the closure of up to 34 stores, following a review that identified a number of outlets that were underperforming.

“A total of 34 Dion-Wired and Masscash stores and approximately 1,440 employees are potentially affected by this process,” it said.

Dion-Wired is Massmart’s electronics and appliances subsidiary, while Masscash is its wholesale division including cash and carry, food and cosmetics outlets.

Massmart shares, which sunk to a 13-year low last year after the retailer issued a profit warning, were up 2.4 per cent by yesterday morning.

A number of Massmart’s rivals, such as Shoprite, are also struggling in the difficult market conditions, and both retailers have also had to battle currency weakness elsewhere in Africa, especially Zimbabwe and Nigeria.

Meanwhile, the chairman of struggling South African state-owned utility Eskom, Jabu Mabuza, resigned on Friday after apologising for failing to halt power cuts over the Christmas and New Year public holidays, President Cyril Ramaphosa’s office said.

Eskom implemented severe nationwide power cuts in several bursts last year and again sporadically this week, despite low power demand as many businesses and factories were closed for the holidays.

Eskom officials had told Ramaphosa at a meeting at the company’s headquarters in Johannesburg on December 11 that there would be no power cuts from mid-December until mid-January.

“In the wake of Mr Mabuza’s resignation, government will soon announce a re-configured Eskom board with the appropriate mix of electricity industry, engineering and corporate governance experience,” Ramaphosa’s office said.

The power cuts implemented by Eskom dented economic output last year and sapped investor confidence in Ramaphosa’s efforts to turn around Africa’s most industrialised economy. Eskom supplies more than 90 per cent of the country’s power, but repeated faults at its creaking fleet of coal-fired power plants mean it struggles to meet electricity demand.