Sustainability and stakeholder review  
 

Product range

The Group offers a wide spectrum of products and services, ranging from household furniture to a broad selection of major home appliances, audio/visual equipment and computer products. These are complemented by a comprehensive range of financial services products. Over and above the aforementioned, the Group conducts debt recovery and telephone marketing via its state-of-the-art contact centres.

Where appropriate, furniture sales across the eight southern African furniture Chains are financed through credit offerings to customers in the form of a secured term loan. Linked to the credit sales, product insurance that covers the loss, theft or damage to the merchandise sold on credit, as well as credit life insurance, which covers the insured’s debt in the case of death, temporary or permanent disability or retrenchment. JD Group recently introduced funeral products, as well as legal access products marketed via the Blake outbound contact centre to the Russells clientbase.

Another ancillary product offering is the Club subscription. Part of the Group’s customer acquisition and retention strategy resides in the Club offering, whereby customers can become members for a nominal fee per month. In return, they receive consistently high value in the benefits which more than compensate for the outlay. These benefits include funeral cover, discounts, cash and product prizes, as well as educational grants and lifestyle enhancers.

Competitive shopping exercises are carried out from time to time in order to compare the Group’s product and price offerings within the industry.

Customer service – Art of Service

The various Chains in the Group have conducted individual mystery shopping initiatives on an ad hoc basis using external service providers. These programmes range from short-term investigations to establish service levels in specific branches, to regular ongoing monthly shop-outs to raise service delivery and improve the in-store shopping experience.

In addition, Group Merchandise carries out ongoing competitive shopping exercises in order to compare product and price offerings within the industry.

Communication

The Group strives to communicate with its customers in such a manner that each customer feels as though he/she is the only customer. This approach is core to the Art of Service initiative and the ultimate objective is to differentiate the Group from its competitors through the delivery of excellent service to customers. The first steps towards improved communication with customers have been taken through the Group’s contact centre in Randburg. Each customer who enters into a credit transaction with the Group receives a “Welcome” follow-up call once the customer has received delivery of the purchased goods. The purpose of the call is first and foremost to establish the customers’ perception of the service received. Secondly, assurance is obtained that the customer understands the financial and contractual elements and obligations of the transaction. Thirdly, early notice is gained of possible dissatisfaction, which enables the Group to timeously escalate complaints and queries for specialist intervention. For protection of the rights of both the customer and the Group, all calls from the contact centres are recorded. A specialist team of quality assurers assesses a weekly sample of calls to determine the level of service and whether any further training is required.

In addition to the aforementioned and various other Contact Centre initiatives, a host of other channels are being utilised to communicate with customers. General business communication is conducted via telephone and electronic channels from head office and regional or local Chain offices, as well as face-to-face engagements between customers and employees at store level, where credit agreements and purchase documentation are concluded.

Marketing communication channels focus mainly on monthly catalogues, displaying merchandise ranges and special offers, event-driven pamphlets and in-store display material. Existing customers are also reached via their account statements, Club magazines and mobile channels.

For purposes of arrear collections, the Group makes use of statement messages, follow-up letters and personal visits by collectors to facilitate rehabilitation. Electronic-enabled customers also have access to the Group’s website (www.jdgroup.co.za), where a multitude of Group information is hosted, including Customer Care contact numbers for facilitating the lodgement of customer complaints.

Contractors and suppliers of merchandise and products

The Group’s policy to support locally-based suppliers is evidenced by the fact that 97% of its approved suppliers are locally based, thereby promoting a positive indirect impact on the economy by supporting the growth, development and wealth creation of locally-based businesses. Suppliers and contractors have not been subjected to formal human rights screening, however, the Group has ongoing engagements with suppliers and contractors, where its stance against all forms of discrimination is conveyed, as well as its expectation that human rights should be upheld. The Group furthermore ensures that the appointment of suppliers and contractors is in accordance with legislation and encourages non-racial, crime-free working environments.

Suppliers’ compliance to B-BBEE principles is monitored on an ongoing basis and where there is a need for assistance, the Group’s Transformation department offers support to suppliers. The Group promotes the purchase of material from B-BBEE and SMME suppliers and enterprises. In respect of services such as safety and security, cleaning and common-area infrastructure maintenance, the Group makes use of external contractors who source their labour from South African citizens, with a focus on individuals with a previously disadvantage background. During new store developments, labour is sourced and used from the local geographical area. National suppliers of store development material, such as carpets, tiles and office furniture, make use of locally-based business to effect deliveries.

The Group prides itself on the integrated nature with which it engages with its supplier network thereby ensuring that quality standards are maintained. Not only has the Group strengthened its relationships with its suppliers of merchandise and services, it also assists them in becoming more concerned corporate citizens. Many of the Group’s suppliers have already adopted sustainability strategies and are limiting their impact on the environment through environmental-friendly approaches in their production processes and product provisioning practices. In this regard the Group has implemented a screening questionnaire for suppliers and contractors that enquires about their use of environmental-friendly raw materials, recycling of raw materials for the manufacture of end products such as carpets, tiles, office furniture, paint, etc, as well as their practices around the disposal of waste materials.

The Group is committed to fair trade with its suppliers via service level agreements (SLAs) that contain fair terms and conditions. As a consequence the Group is able to provide more affordable and quality merchandise to customers by virtue of its strong relationships with its suppliers. In anticipation of the implications that the Consumer Protection Act’s (CPA) product-return regime will have, the Merchandise department is in the process of negotiating more suitable product guarantees and return terms with the suppliers and manufacturers. Whilst the Group has in selected instances acquired the right to sole distribution of certain quality branded products within South Africa, it is not involved in any price fixing or other market practices that could be construed as being in breach of the Competition Act or any related legislation.

Government and Regulators

The Group engages frequently with the National Credit Regulator, the Registrar of Financial Services, the Johannesburg Stock Exchange, Strate, the South African Revenue Services, the Master of the High Court, the Registrar of Companies, the Registrar of Trademarks, the Wholesale and Retail Sector Education Training Authority, the Department of Trade and Industries and the Deeds Office. The Group persistently and proactively meets its obligations in respect of legislative and regulatory requirements and timeously pays its licences and files the required submissions. Subject-matter experts representing the Group have taken part in and driven industry initiatives to the benefit of both government, regulators and the retail industry as a whole. Among others, government has this year received R712 million as tax and other payments ensuing from the Group’s operations. The Group maintains good relationships with Government and all Regulators and has built sustainable working relationships with most of the aforementioned institutions. This stance and proactive approach assist in amicable resolution of any impasse that may arise, and the Group will continue to promote mutually beneficial relationships going forward. The Group’s dialogue with Government departments and Regulators occurs through prescribed compliance and regulatory filings, applications, renewals
of licences and marks, letters, telephonic conversations, business negotiations and formal meetings, among others.

The newly incorporated insurance companies were subjected to Regulatory inspections during the year. No concerns of a material nature were raised. The Group is not aware of any material penalties as a result of any legislative or regulatory breach.

In addition to the Group’s Code of Ethics and various related corporate policies, as well as the Board Charter and the terms of reference that have been adopted for each of the Board committees, the Group has adopted the following Codes and Charters of note:

  • King III;
  • The National Debt Mediation Association’s Code of Conduct for affiliated credit providers;
  • The Credit Providers Association’s Constitution for affiliated credit providers;
  • The Consumer Goods Council of South Africa’s Charter; and
  • The Southern African Fraud Prevention Service’s Code of Conduct for affiliated credit providers.

Corporate social interaction and initiatives

The Group continuously increases its involvement in the communities within which it conducts business. Through the implementation of its strategy, assisted by numerous corporate policies, processes and practices, the Group has inculcated
a need among its employees to closely associate themselves with the Group’s stakeholders and for the social upliftment of communities. The nine Chains within the Group are individually accountable and responsible for engaging with local communities within which they trade and conduct business. However, for purposes of community engagement optimisation, these engagements are planned and financed centrally at Group level.

Corporate social investment and socio-economic development

The Group’s corporate social investment (CSI) and socio-economic development (SED) strategy is managed within the dimensions of enterprise development projects, direct donations and deserving ‘sweat equity’ community initiatives. A budget of R4 million was allocated during 2010 for CSI activities and a further R5 million for enterprise development initiatives.

During the year under review, the Group was involved in two major SED projects, namely the JD ADRS Collectors’ initiative and the Isaac Isaac/Techno-agricultural Innovation for Poverty Alleviation (TIPA) project. The ADRS initiative was born out of the operational requirements exercise conducted to establish JDG Financial Services and where collectors were identified as affected employees. The Group assisted these employees to acquire vehicles at reduced prices, provided them with an opportunity to continue their profession as debt collectors and at the same time to become independent entrepreneurs. An amount of R1,1 million was contributed to this project.

The TIPA project is an agricultural initiative with the aim of alleviating poverty, creating employment and empowering communities. The Group has been involved in the project for a number of years and has made significant financial contributions. It revolves around the concept of the African Garden Market, part of the Food Security for Africa initiative presented in 2002 at the World Summit for Sustainable Development. Projects are run in Diepsloot, Hazyview, Kokstad, King William’s Town and Durban. The Group contributed R2,2 million to this project over the past year.

Direct donations

The Group’s direct donations policy is focused on providing as many applicants as possible with financial assistance to address challenges pertaining to poverty and community development, education, crime, health, art and agriculture and is steeply leaned towards disadvantaged children and the youth. The following four are merely a few of the strong relationships and bonds that the Group has fostered with caring organisations:

  • The Lerato Love home provides accommodation and care for babies, children and young adults, who have generally been the victims of abuse, abandonment and neglect and orphaned due to HIV/Aids.
  • The Mitzvah School is a registered school and examination centre which provides tutoring for disadvantaged students in their final year of schooling and who have consistently produced pass rates in excess of 90% every year.
  • St Enda’s Community Centre is a secondary school in Joubert Park with whom the Group has held a proud and time-honoured association since commencing this project in one of the Group’s warehouses in 1985.
  • Africa Community Trust provides the township feeding scheme and clothing for approximately 200 underprivileged youth. The targeted youths include those orphaned through HIV/Aids, child-headed families and displaced persons.

In addition to the above, the Group’s computer retailing Chain, Incredible Connection, made 177 charity donations during the year totalling R195 500 in value, comprising 63 personal computers, 64 monitors and two notebooks, to name but a few of the articles donated to the needy.

The Group’s socio-economic development spend and donations are reflected below:

  Category   Amount    
  Community development   R1 562 273    
  Skills upliftment and education   R847 000    
  Health (including disability)  R187 500    
  Sports development   R6 000    
  Arts and culture   R260 000    
  Other   R218 019    
  Total   R3 080 792    

Environmental sustainability

The Group has been classified as having an overall medium environmental impact because it is involved in “retailer business operations and financial services, not elsewhere classified”. In line with this classification, the Group’s efforts in sustaining the environment were mainly focused on reducing its overall carbon footprint by interventions through water and electricity consumption and savings, recycling of paper products, reducing of greenhouse gas emissions, as well as other interventions in the area of wildlife conservation.

Water consumption  

The Group is acutely aware of the fact that water is a scarce resource in South Africa and has issued a number of internal directives to its stores regarding water usage. Push-type demand taps have been installed in all shops that have been renovated during the past two years. This has not only resulted in reducing water wastage, but as a secondary benefit, has also reduced the incidence of water damage as taps can no longer be left open absent-mindedly. Investigations are under way for the possible use of grey-water tanks for toilets, backed up by rainwater tanks. The Group relies totally on municipal water supply and does not withdraw any water from the environment.

Electricity consumption

The Group’s total electricity consumption at its head office in Braamfontein for the past financial year amounted to 3 990 154 kW. During the year under review, the National Energy Regulator of South Africa (Nersa) approved electricity tariff increases, spread over a three-year period, that will have a potential threefold increase in energy costs in real terms. This could increase the Group’s annual electricity costs to an estimated R200 million by 2012. In an effort to minimise its exposure to these increases, the Group has embarked on the following four-pronged strategy:

  • Ensure that the electricity consumption charge is accurate/legitimate – to validate consumption, independent electrical metering systems, parallel to those being used by landlords/suppliers, are being installed in stores and warehouses. In a trial run it has been ascertained that overcharging by as much as 20% has occurred in the past.
  • Ensure that the correct rate per unit consumed is charged – this is done by analysing the reports gleaned from the independent metering exercise and comparing data with approved rates versus rates charged.
  • Ensure that stores adhere to the basic operational disciplines with regard to energy savings such as not firing up lighting, air-conditioning and computers simultaneously, disconnecting geysers, not using heaters and hot plates, switching off non-essential lights and appliances after trading hours, etc.
  • Employing proven, cost-effective energy-saving technology such as fitting low wattage light fittings.

During store renovations or when new stores are established, energy-saving is high on the agenda. A rigorous approach has been established, which entails the installation of 1 200 x 600 prismatic three-lamp electronic ballast light fittings that has the potential of achieving savings on consumption of between 5% and 15%. In addition, these light fittings produce a lower ambient temperature which reduces the risk of fire.

The following energy-conservation and efficiency improvements were effected at the Group head office building during the past years:  

  • Upgraded the centralised air-conditioning system;
  • Overhauled the electrical reticulation;
  • Installed energy-efficient lighting throughout the building;
  • Installed timers and motion sensors throughout the building, in the parkade and in the basements to regulate lights;
  • Reduced the number of lights in the parkade
  • upgraded the lifts to more electrical-sufficient lifts.

Following these actions, a report from an independent electrical consultant was obtained, indicating a 20% saving against the 2007 baseline energy usage statistics.

An agreement has been concluded with an external service provider who specialises in power metering to independently monitor/measure actual electricity usage in all Hi-Fi Corporation stores. Negotiations are under way to roll-out this technology to all JDG Trading properties. The appointment of a Group Energy Manager is also being considered.

Future energy-efficient or renewable energy-based initiatives to reduce energy requirements include an investigation into solar water heating to replace the heaters in the boilers and an investigation into the possible usage of hydro boilers in the kitchens.