Page 134 - Risk Report 2024

1. Functional State 2. Politics

Service delivery failures and a lack of the rule of law make Most sector players are invested in international markets
retailers constant targets, with spiralling response costs or source from them, which impacts local supply chains.
exacerbated by socio-economic woes. Supply chains rely on Geopolitical tensions, unrest, strikes, and coalition politics
well-functioning, secure logistics and infrastructure. Providing create uncertainty. As a key growth opportunity, increased
uninterrupted goods and services while investing in security, African regulatory requirements need continued focus.
water recycling, and alternative energy from production to Instability caused by well-designed but poorly executed
shelf, increase costs to consumers and the economy. Food policy, inefficiencies, and international relations breeding poor
security, safety, and hygiene specifically affect operational, investor confidence, hampers international supply chains,
financial, and consumer behaviour leading to stock level affecting the ability to trade for the best products at lowest costs
misalignments and wastage. The mood, wellbeing and welfare with dependable supply – all of which require international
of consumers depend on basic services, failing which their investment. Retailers respond by building strong local supply
ability to work, generate income, and consume reduce, which in bases, and increasing security, insurance, and continuity.
turn constrains retail profits. This increases competition in the
sector excessively to an unhealthy state (by reducing quality of
products and service delivery in order to survive as opposed to
maintaining sustainable profits with integrity).

3. Economy 4. Social Security
During economic hardship, crime and supply vulnerabilities Robust consumer spending is the cornerstone of the sector,
increase, and long-term retail sustainability prospects suffer. which is also a primary employer with significant effort to skill
Retailers are further affected by increased rental, municipal resources to meet demand. Lack of consumer spending power
services, supply, security, legislative, and infrastructure is a direct consequence of poor social security, quality of life,
maintenance costs which cannot be recovered fully from an unemployment and inequality and breeds general dissatisfaction
already constrained consumer base. Due to eroded investor which leads to unrest, destruction, violence, damage of already
confidence, market volatility, rising costs, inflation, and poor infrastructure, thereby disrupting the ability to trade
interest rate fluctuations, businesses delay major decisions, consistently, safely, and securely. Preventing losses incurred
and consumers alter spend behaviour. Retailers adapt to through domestic violence and unrest, and investment in
manage the impact on staff, optimise the value chain, reduce reactive repairs and maintenance increase cost, which is not
cost, manage cash flows, modernise through technology, and covered by increased sales, but by stricter cost management,
develop innovative products and services, while addressing reduced product quality, and increased unemployment (i.e.
customer and investor concerns to maintain trust. do more work with less people). This domino effect continues
with poor service delivery by an overworked and poorly paid
workforce. These challenges cannot be overcome by increased
investment and reduced profitability within the sector alone.

5. Rule of Law 6. Water
Crime is pervasive and ultimately increase costs for the Deteriorating water infrastructure forces the sector to build
consumer, thus compounding other socio-economic woes. alternate infrastructure to ensure adequate water supply along
Robberies, burglaries, and shrinkage impact store security, the value chain. Water is required to meet production, sanitary,
while fraud and corruption require resources to build a risk and hygiene requirements, with some sub-sectors such as
culture that includes anti-bribery and -corruption policies and beverage and produce most strongly impacted. The concept of
processes, staff awareness, and consequence management. ‘eco-co-opetition’ allows for water infrastructure solutions to
Shrinkage can only be curtailed through strengthened internal be shared within the sector and reduce consumption in support
controls to safeguard receipt, storage, display, sale, and of the SDGs.
distribution of stock (such as monitoring, verification, spot
checks, auditing, and discipline). Planned or opportunistic
robberies threaten the safety of staff and customers, increase
fear amongst consumers, reduce the shopping experience,
and affect spend patterns. This must be managed through
reducing the economic benefit to be derived by perpetrators
through reducing access to cash and safeguarding high value
movable items at high cost. Burglaries occurring after hours are
mitigated by increased physical preventative security measures
and timely reactive response to events.