SPAR faces multi-million rand legal threat

Thirteen retail companies are launching legal action against the SPAR Group for damages relating to the botched implementation of SAP enterprise resource planning software at its KwaZulu-Natal distribution centre. 

The claim from these companies, which operate SPAR franchises, comes more than two years after the South African retailer implemented the software. 

On 30 January 2023, SPAR began rolling out a new SAP software system at its KwaZulu-Natal (KZN) distribution centre, which it said at the time resulted in “various go-live and integration challenges”.

This negatively impacted the retailer’s distribution operations in the region, resulting in stock delivery interruptions to stores and lost sales. 

The thirteen retail companies said in legal documents seen by Daily Investor that this system change was implemented unilaterally at the KZN distribution centre. 

“As a result of the introduction of the SAP software at the KZN distribution centre, there was an immediate breakdown in order picking, dispatch scheduling, inventory visibility, and pricing accuracy,” they said. 

These companies said that this resulted in SPAR breaching its membership agreements with the franchises affected. This is because SPAR failed to –

• Provide affected franchises with an efficient and functional ordering service;
• Enable its affiliated retail members to place orders for the purchase of merchandise;
• Enable its affiliated retail members to have orders for the purchase of merchandise executed; and
• Provide retailer members with appropriate merchandise at competitive prices

As a result, these members were not able to adequately stock their stores, make sales to generate a profit, and had to secure alternative merchandise at a premium from other wholesalers to mitigate their damages.

This translated into a decrease in their operating profit, a loss of customers, and a delay in returning to normal trading. The members affected said this suppressed their growth trajectory. 

The members said this resulted in significant financial losses in the form of loss of gross profit and loss of gross profit margin. 

These losses for the most significant plaintiffs over the past three financial years are outlined below. 

SPAR has not been formally served with legal papers

SPAR told Daily Investor that, at this stage, it has not been formally served with legal papers in respect of this matter.

“As a matter of principle, and particularly where issues may be subject to legal process, the Group does not comment on unserved or prospective litigation, nor does it engage on such matters in the media.”

“Should any formal legal proceedings be instituted, SPAR will respond in the appropriate manner.”

However, the legal battle should not come as a surprise to SPAR, as it has been an issue which has been damaging to the retailer and its franchisees.

In SPAR’s results presentation for the 2023 financial year, the company informed shareholders that the botched implementation had cost it R1.6 billion in lost turnover. 

The impact on the company was not only financial, as SPAR’s chief information technology executive, Mark Huxtable, resigned a few months after the implementation of SAP software. 

The company said at the time that Huxtable’s departure was for personal reasons, and he would leave the Durban-based company at the end of the month.

In September 2023, SPAR reported that it had found a solution to the problem, and the KwaZulu-Natal distribution centre had returned to full operation. 

“After months of collaboration to resolve the issues and drive success, management is satisfied to report that the KZN distribution centre is once again servicing all stores in the region,” SPAR said.  

“The SAP solution is stable and performing consistently. Overall, service levels are approaching the levels at which they were prior to the SAP implementation.”

Two years later, SPAR is still dealing with the fallout of the botched SAP implementation, with it now focusing on ensuring a repeat failure does not occur. 

In its 2025 annual report, SPAR said it has completely reset its approach to systems transformation and integration, with a shifting focus from speed to stability and accuracy. 

The retailer has begun a process to standardise its logistics processes and data collection. 

A big test for SPAR will come in the second half of 2026, as it plans to commence with the transition to the CSnX warehouse system.

This will be rolled out in phases, starting with a pilot at the company’s Eastern Cape distribution centre before extending to all of its operations. 

It said that this would improve inventory accuracy, inbound and outbound operations, network visibility, and cost efficiency.