STOCK TAKE | Karooooo grows its Os and Ackerman states it like it is

OPINION

Karooooo keeps adding Os

Vowel trackers rejoice

Karooooo (five Os), the holding company for Cartrack (zero Os), has both an eye-catching name and also generates some eye-catching numbers. This makes the job of catching an errant O a little more difficult, though not impossible.

In corporate reporting, an extra zero (or O), a misplaced decimal point, or a wrong word can actually be a big deal. But to err is to be human, and the odd grammatical error or misspelt word in an extensive financial report isn’t unknown.

Generally, at issue is whether the error is a material one, or, whether the mistake can reasonably be expected to alter the decision-making of those relying on such reports for reliable information. Ultimately, it’s not simply a case of missing a zero being bad, or adding one being bad, although both are bad - how bad and for whom depends entirely on the circumstances.

A company getting its own name wrong isn’t likely to qualify for a restatement. But how material is the error? Karooooo misspelt its own name once in its report for the second quarter to end-August, with only one extra O (total: 6), which results in 12% too much name, or 20% too much "O". It was also spelt incorrectly once out of 84 times, an error rate of 1.2%, and is probably worth mentioning it was spelt correctly at first mention, and the error rate in its 2022 annual report was zero, off 126 mentions. (The person writing this doesn’t know their error rate for spelling Karooooo, but can confirm that it is not zero).

Further mitigating factors could be the sheer volume of reporting involved, even though, of course, the excuse of "we were just growing so fast, it was hard to keep up with the zeros" is unlikely to go down well, even if the explanation is being given to a shareholder, let alone a regulator.

But it’s worth considering how much management has on its plate, at least in fairness. Nasdaq-listed Karooooo operates technology that allows for better decision-making for customers in areas of transport and logistics, for example, reducing fuel consumption, improving supply chain management or improving driver safety.

Karoooooo’s (sic) Operations Cloud collects over 100 billion data points per month through system integrations, workforce tools and advanced telemetry and video-based Internet of Things devices which "empower customers with insights that deliver real business impact". So, busy then.

Subscriber numbers are also picking up rapidly, as are profits. Before Covid-19, Cartrack achieved compound annual growth in its subscriber base of 22% for a five-year streak, and has continued a double-digit trend since then, most recently growing subscribers 14% to 1.6 million as of its half-year to end-August. Lots of other numbers involved in this as well, so again, complex.

A further mitigating factor (in this case a subjective non-binary one) is clear signs Karooooo is willing to forgive its own customers errors regarding spelling its name, even forking out on their behalf. It has taken out multiple domain names, which allows for confused (or time pressured) information seekers to add up to nine Os to its name while still being redirected to its home page. While a clear motivating factor may be that of driving website traffic, still, it’s not nothing.

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Frank talk is good business

The key points about the state of SA

When quizzed about the state of the nation and the pace of structural reforms and other urgent interventions needed to put SA on a proper growth path, too often top executives and company board members respond with kowtowing to the government. Afraid to say what they really think, the answers usually follow the line that government is making the right calls, but that it must just get better at execution.

What a relief then this week to hear Gareth Ackerman, chairperson of Pick n Pay and co-chair of the Consumer Goods Council of South Africa (CGCSA), tell it like it is. 

Speaking to delegates at the CGCSA’s annual summit in Johannesburg on Wednesday, Ackerman repeatedly told the audience how often government simply seems unable to fix the problems – from the seeming sabotage at power stations due to the delivery of sub-standard coal to securing end-to-end supply chains in the country. While the government will often listen and say it will consider the suggestions made by the private sector, many of them very helpful; at the end of the day, this is invariably followed up with non-action. Then, of course, the private sector has to step in and sort out problems. Time and again. 

Ackerman also made it clear that what he had to say was not intended to simply bash the government. He emphasised the private sector wants to work with the state in addressing the crises facing the country on multiple fronts, whether it be infrastructure maintenance and repair, or securing supply chains by managing the ports and rail for the state.

The big question though and this seemed to be echoed by others at the summit, is whether government will allow the private sector to actually help it. Whether this means actually following through on input from business on how to fix problems, or by making use of the strong pool of technical expertise available in the private sector.

One good example raised by Ackerman related to the distribution centres of the major South African grocery groups. Following the July 2021 civil unrest and wanton destruction to some of the facilities of the country’s top retailers, Ackerman said the CGCSA had suggested the government declare these properties national key points. This would mean that in the event of a repeat of any similar unrest, the army would be deployed immediately to protect them and ensure the safety of food supplies and other key goods. The government of course said it would consider this, but since then has done nothing to effect any changes so that this becomes a reality.

As we all know, food security, especially in such an unequal society as SA’s, is essential component of economic and political stability. If this goes out the window, it helps create fertile ground for revolution – something no sane South African would want to see.

Another suggestion from the CGCSA was to move the Mooi River Toll Plaza to prevent the shutdowns of the N3 whenever there are protests or civil unrest. This would mean trucks would be able to transport food and other goods more safely along this key corridor.

Why government hasn’t responded to such simple and easy suggestions to implement, is anybody’s guess. Is it a case of bureaucratic red tape getting in the way or simple ineptitude or something else? Who knows?

But one thing is for certain, other CEOs and chairpersons at companies, particularly the high-profile ones in the listed sector, should follow Ackerman’s example and speak more frankly about is going on in the country. Playing nice is fine and well, but they seem to be getting precious little from their charm offensives. Quite simply, if they do not speak out and loudly about the problems facing SA, we are going to continue getting more of the same. Which is a lot of talk about what government intends doing, but very little in the way of actual concrete action.

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