Dis-Chem’s decision to ban employing and promoting white people was a huge mistake which cost the retailer millions in sales and destroyed billions in shareholder value.
The debacle started on 13 October after Solidarity CEO Dirk Herman published a letter from Dis-Chem CEO Ivan Saltzman placing a moratorium on employing or promoting white people.
In his letter, Saltzman explained that a review of their employment equity profile and BBBEE verification process revealed shortcomings in their transformation.
To rectify the situation, Saltzman placed a moratorium on appointing and promoting white individuals.
“It’s the ratio between white and black that counts. When a white is appointed, we need several blacks just to maintain the status quo, never mind moving forward,” he said.
There was widespread condemnation of the letter from business organisations, the public, and politicians. There were also many calls for a boycott of the pharmacy chain.
Dis-Chem initially said it regretted the letter’s wording but not its intent, signalling that the moratorium on employing or promoting white people at the retailer remained in place.
However, after the company’s sales were affected and threats of legal action were raised by Solidarity’s legal team, Dis-Chem retracted its statement.
Saltzman recently told investors that many regular Dis-Chem dispensary customers withdrew their scripts following the debacle.
He said an analysis of customer data revealed that it also gained black chronic medication customers but did not make up for the number of lost clients.
There was a huge slowdown in Deis-Chem’s growth following the moratorium on employing or promoting white people.
The impact was also seen in the company’s share price. It declined by around 25% since Saltzman’s no-whites letter destroying R6.9 billion in shareholder value.
Why people reacted so negatively to the letter
Dis-Chem and Saltzman may have been taken by surprise by the negative reaction to the decision to place a moratorium on employing and promoting white people.
Saltzman’s decision was aimed at adhering to South Africa’s employment equity and black empowerment laws.
Adhering to a country’s laws would be commended in normal circumstances, not resulting in a huge backlash and a boycott.
However, affirmative action and BEE laws are controversial because they are based on social justice rather than the traditional concept of justice.
Renowned economist Professor Thomas Sowell explained that social justice has a very high cost and is very dangerous.
“Traditional concepts of justice or fairness boil down to applying the same rules and standards to everyone,” Sowell said. “This is what is meant by a level playing field.”
However, social justice aims at equality of opportunity which cannot be achieved by applying the same rules to everyone. It requires interventions to equalise either prospects or results.
In South Africa, for example, affirmative action requires companies to reach the result of racial and gender targets.
The problem with social justice, Sowell explains, is that it is inherently incompatible with traditional justice and the rule of law on which a free society depends.
“You cannot redress the myriad inequalities which pervade human life by applying the same rules to all,” he said.
The problem is that many people have not abandoned traditional justice, which requires everyone to be treated equally.
They see actions like placing a moratorium on employing or promoting white people as discrimination.
Discrimination based on race, gender, and sexual orientation can cause a tremendous backlash, which is why Dis-Chem has suffered after its no-whites decision.