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The environment we operate in

The general context in which we operate impacts on our ability to achieve our strategic goal to create sustainable value for all stakeholders.

This report discusses the emerging as well as existing trends which prevail in our industry and market, the effect they have on our business, and our strategic response – which is aimed at mitigating or managing any negative impact, and wherever possible, capitalising on opportunities presented.

Increasingly, disruption (industry reconfiguration, social change, technology or other factors) and diversity (cross-cultural, gender, intergenerational), are becoming commonplace, alongside volatility, uncertainty, complexity and ambiguity.

Economy impacting our industry and customers

Global economy

  • shipping constraints, freight rates and international supply chain disruptions have normalised
  • subdued global demand is driving suppliers to new markets and intensifying margin pressure locally

Local economy features

  • high inflation (affecting basic living costs and product and building costs)
  • high interest rates
  • high unemployment, indebtedness and low wage inflation
  • negative consumer and investor sentiment evidenced by weak demand
  • country-specific risks: energy instability; deteriorating infrastructure; social unrest; government mismanagement; endemic crime and corruption – worsening in the construction industry
  • strained consumers purchasing lower-cost alternatives, affecting production mix
  • disposable income diverted to electricity replacement alternatives to mitigate power interruptions

Competitive landscape

  • reduced freight costs and low product pricing due to weaker global demand has improved feasibility of importing product, which declined during the pandemic
  • expansion of offerings and production capacity by existing local competitors
  • proliferation of new entrants in the retail and manufacturing segments
  • SADC-based ceramic competitors exporting at low prices to South Africa
  • increased global competition with market dynamics favouring low-margin imports

Human capital and skills

  • shortage of retail and manufacturing-specialist skills. Causes include: emigration, poor standard of education and historical inequities
  • the Group's demanding high-performance culture proves challenging for certain recruits
  • poor productivity of local labour (cost vs output)

Climate change and carbon footprint

  • key components of ESG considerations for investors and customers
  • carbon tax increasing in line with government's drive to reduce emissions
  • growing impact is driving awareness and responsiveness of appropriate policies and practices

Disruptive technology and digital adoption

  • online sales as a proportion of total sales rising globally
  • IT risk management and cybersecurity are global concerns
  • higher levels of digital adoption and changing consumer behaviour require more focus on data analytics and business intelligence
  • artificial intelligence ("AI") and machine learning ("ML") will become increasingly commonplace and demand investment to keep pace
  • digital marketing increasingly important and complex

Inequality and transformation

  • social imbalances, income inequality and poverty prevail
  • disparity in gender and race representation
  • historical inequities and slow pace of government reforms continue to cause socio-political instability
  • transformation (diversity, equity and inclusion) is a key business imperative, but hampered by the small pool of employable skills due to underperforming education system
  • widespread and growing dissatisfaction with the state's poor basic service delivery record

Regulation and governance

  • carbon tax
  • shareholder and legislative pressures on remuneration
  • legislative pressure on transformation