Dark secret behind South Africa’s R14 billion industry

South Africa’s grocery delivery industry is estimated to be worth R14 billion and has created thousands of jobs in the country. 

However, it is increasingly coming under fire for underhanded business practices and for employing mostly foreign drivers, with industry leader Checkers Sixty60 receiving particular focus. 

Trade Intelligence recently released data on how big the overall grocery delivery industry is and who some of its biggest players are. 

However, retailers are very selective and often inconsistent about the data they share on their eCommerce efforts. This makes it difficult to compare the financial performance of the respective delivery services and how fast they are growing. 

Some report volume growth percentage, others value growth percentage, and, though rare, others report share of total revenue. 

Woolworths declares its online food sales as a percentage of its total Food turnover, but otherwise, getting to an accurate market estimate is challenging, Trade Intelligence said. 

Through its market size model, Trade Intelligence calculated the value of the FMCG e-commerce segment to be R13.9bn in 2023, or just 1.8% of total FMCG retail, despite its strong growth of 44.1% year-on-year.  

Trade Intelligence explained that while major grocery chains have moved quickly into delivery services, South Africa’s largest grocery chain – Shoprite – has only begun to dip its toes into the market. 

Aside from Checkers Sixty60, Shoprite only offers delivery through its Cash & Carry eCommerce offering. 

Some of the fastest-growing retailers, Boxer and Usave, do not generate any significant turnover via eCommerce.

For grocery eCommerce to hit 30% of total grocery revenue, it would mean that every third till in every grocery store in South Africa would be processing only eCommerce purchases bound for delivery. 

This would also require tens of thousands of delivery drivers and bikes, which have recently become a sore point for South African retailers. 

Grocery chains, in particular, Checkers, have come under fire for underhanded business practices and for hiring foreign delivery drivers over South Africans. 

Checkers Sixty60 was launched five years ago and is South Africa’s biggest delivery service, with millions of downloads on Android and Apple’s iOS platforms.

The backbone of Checkers Sixty60’s logistics success is a company called Pingo Delivery. Checkers-owner Shoprite owns 50% of Pingo.

In 2023, Pingo generated R994 million in revenue and R85 million in profit, with the majority of its income coming from the R35 fee per Sixty60 delivery. This charge allows Pingo to cover costs and remain profitable, supporting thousands of drivers. 

Recently, South Africa’s Competition Commission approved Shoprite’s acquisition of Pingo without conditions, as it found no threat to competition. 

Shoprite CEO Pieter Engelbrecht noted that full ownership was essential to avoid potential issues with third-party providers as Shoprite continues to grow rapidly.

With the acquisition, Shoprite inherited several challenges related to Sixty60 and its drivers. 

These drivers are classified as ‘independent contractors’ rather than employees, a designation that has sparked criticism for lacking employee benefits, insufficient driver vetting, and reliance on foreign workers, some of whom may lack legal work authorisation. 

Democratic Alliance MP Michael Bagraim argues that, due to the drivers’ low pay, exclusive work for Pingo, and set hours, South African courts might deem them employees rather than contractors, putting Shoprite’s classification under scrutiny.

MyBroadband asked Shoprite, RTT Logistics, and Pingo Delivery for comment on the allegations. They preferred not to provide feedback.