CORPORATE ACCOUNTABILITY

Massmart aspires to be trusted by all our stakeholders but we are clear that earning and keepingtrust is a journey rather than a destination.

It is about the way in which we conduct our business; the way that we source merchandise and deal withour suppliers; the way that we sell merchandise and engage with our customers; the way that we manageour operations and treat our associates; the way that we optimise returns and report to our shareholders;the way that we comply with the law and provide transparent disclosure; and the way that we demonstrategood corporate citizenship.

This section seeks to provide a balanced perspective that demonstrates that doing the right thing is core toour business philosophy. Specifically it summarises:

THE WAY THAT WE ENGAGE WITH STAKEHOLDERS;

OUR PROGRESS IN ENABLING SUSTAINABLE SUPPLY AND CONSUMERISM,MINIMIZING OUR ENVIRONMENTAL FOOTPRINT AND CHAMPIONINGSOCIAL EQUALITY INITIATIVES; AND

PERFORMANCE INDICATORS THAT ENABLE AN A COMPARATIVEASSESSMENT OF PERFORMANCE

Recognising that different readers may require

more issue specific detail we also provide an

additional reading list to provide greater clarity

wherever possible.

If after reading this update you require more

information or if you wish to engage us on a

particular issue then please contact

info@massmart.co.za.

QUICK RE-CAP AND ORIENTATION

As we have reported previously, Massmart’s Corporate Accountability initiatives are identified and prioritised on thebasis of feedback from stakeholders and with reference to the following six assessment criteria:

This has resulted in a Corporate Accountability agenda which is described in the matrix below:

(M) mandatory initiatives

These initiatives are described in greater detail here.

STAKEHOLDER ENGAGEMENT

Massmart practises an open-door-policy with our stakeholders to whom we provide various

platforms to share and help us understand their perspectives. Our approach to stakeholder

engagement is relatively fluid but typically involves the following steps:

1 RESEARCH

Conduct desktop, mostly web-based research, to identify public policyissues, specifically those that are relevant to the retail industry;

2 DISCOURSE ANALYSIS

Review leading media coverage to identify retail-related publicinterest issues that have a high share of voice in the public discourse;

3 ASSESS

Deploy employee, customer and supplier surveys to assessMassmart-specific organisational and supply chain expectations andperceptions;

4 CONSOLIDATE

Prioritise the identified input and formulate it into thematic focusareas;

5 VALIDATE

Facilitate face-to-face interaction with subject matter expertsincluding employees, suppliers, customers and representatives fromcivil society and government to expand our understanding of theidentified focus areas; and

6 REVIEW AND CONTEXTUALISE

Consolidate and contextualise the output of these meetings withreference to our Accountability Agenda which typically results in thevalidation, removal or addition of Group accountability objectiveswithin our sphere of influence.

Although we have presented our engagement approach

as a structured linear process it tends, in practise, to be

applied flexibly and to benefit from informal, often

unplanned, feedback.

The table below summarises some of the issues that we engaged with in 2013:

ACCOUNTABILITY THEMES, INITIATIVES AND OBJECTIVES

THEME 1:

ENABLE SUSTAINABLE SUPPLYAND CONSUMERISM

OBJECTIVES› Direct Farm Programme

To support and integrate emerging farmers intoMassmart’s fresh produce supply chain.

› Responsible Sourcing

To partner with private label, direct import andnon-branded merchandise suppliers to ensureadherence to Walmart Supplier Standards.

› Primary packaging rationalisation

To partner with willing suppliers to identify andimplement opportunities to rationalise privatelabel product packaging.

› Local Supplier Advocacy

To share knowledge with willing local suppliersto facilitate voluntary achievement of higherenvironmental and human rights standards in theretail supply chain.

› Consumer E-Waste Recycling

To implement post-consumer e-waste recyclingschemes in major metropolitan areas.

› Eco-Label Advocacy

To promote adoption by suppliers ofindependently verified eco-labels, such as MarineStewardship Council (MSC).

› Consumer Empowerment

To empower consumers to make responsibleconsumer choices more frequently throughbetter labelling standards.

THEME 2:

MINIMISE THE GROUPENVIRONMENTAL FOOTPRINT

OBJECTIVES› Energy Efficiency

To improve energy efficiency in line with format-specific energy intensity benchmarks.

› Secondary Packaging Recycling

To recycle secondary packaging (specificallyboard and plastic waste) that is generated instores and distribution centres.

› Water Efficiency

To harvest rainwater to supplement nurseries (atBuilders Warehouse) and landscaping irrigationrequirements

THEME 3:

CHAMPION SOCIAL EQUALITYINITIATIVES

OBJECTIVES› Broad-Based Black Economic Empowerment

To achieve and maintain level 4 B-BBEEcontributor status.

› Socio-Economic Development

To invest a minimum of 1% profit after tax (PAT)in education-focused social developmentinitiatives that benefit the poorest of the poor.

› Women’s Economic Empowerment

To increase economic opportunities for womenby improving employment, education andbusiness opportunities.

› Employee Healthcare and HIV/AIDS Benefits

To increase permanent employees’ access toaffordable subsidised private medical benefits.To combat the rate of infection amongstemployees and to provide all employees andtheir spouses with free access to pre-highlyactive anti-retroviral therapy and programmes.

DIRECT FARM PROGRAMME

Since its August 2012 launch with 12 smallholder farmers in Limpopo province, ourWalmart-inspired Ezemvelo Direct Farm programme has been expanded to 164 smallholder farmers operating in five provinces in South Africa. Ezemvelo provides emergingfarmers with support such as input loans for farming vegetables, agriculturalextension services, mentorship and basic financial management training. Mostimportantly it offers participating farmers market access, which includes supplying ourstores. In the period January to December 2013, total smallholder farmer sales wereR4.3 million.

During the same period 800 tons of vegetables, accounting for 45% of total vegetable

sales, were supplied to Massmart stores, with the remaining 55% flowing to other

customers including public feeding programmes and other retailers. Our future plans

will include extending the programme to red meat and poultry farmers.

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RESPONSIBLE SOURCING

We continue to implement Walmart’s ethical sourcing programme to ensureresponsible procurement of the products that we sell. In line with this objective, in 2013we embarked on supplier assessment projects focusing primarily on private label andexclusive brands. The first stage involved asking suppliers to disclose the factoriesfrom which they source products, facilitating buyer and supplier awareness trainingand orientating suppliers to the factory assessment process.

Our objective in 2014 is

to initiate assessments

of the factories that have

been disclosed by

suppliers.

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PRIMARY PACKAGING RATIONALISATION

In 2012 we embarked, under Walmart’s guidance, on an initiative to identifyopportunities to rationalise and improve private label packaging. As a first step, in June2012 we committed to develop and conduct packaging rationalisation workshops withour private label buyers.To date 64 private label buyers have received training in

techniques to reduce packaging resources and optimise packaging recyclability andsafety. Early wins have included improving the recyclability of the Makro M brand rangeof detergents, and the introduction of child-safety lids on our range of 1l and 5l solventscontainers. We plan, in 2014, to conduct private label packaging audits in order toidentify packaging improvement opportunities.

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LOCAL SUPPLIER ADVOCACY

In 2009 we launched an advocacy process to motivate and benchmark responsibleenvironmental practices in our supply chain. As a result, we have collected and sharedcomparative information about supplier environmental practices that has enabledinterested suppliers to compare their performance with that of their peers. Altogether268 of our suppliers participated in the environmental advocacy survey that wedeployed during the year ending December 2013. We also conducted four specialistadvocacy surveys during 2013 which covered the energy labelling, seafood, timber andpalm oil practices of a further 32 suppliers. Since inception we have, as the result ofthis advocacy approach, been able to profile the practices of 983 of our suppliers.

In 2014 we intend

intensifying our

advocacy efforts through

site visits and

one-on-one meetings

with suppliers of high

priority products such as

seafood and timber.

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CONSUMER E-WASTE RECYCLING

To help divert e-waste from landfill and ensure its safe disposal, we have, since2008, provided Fujitsu-Siemens sponsored customer e-waste take back facilitiesat ten selected Makro stores.Since launching the project 464 tons of e-waste has been processed, 130 tons ofwhich was collected during the year ending December 2013.In 2012 we communicated our intention to engage with more Hi-tech suppliers toexplore opportunities to expand the project. The outcome of this engagement isthat Samsung Electronics has agreed to sponsor the project which will now beexpanded to all 19 Makro stores. We plan to increase consumer awareness ofthese facilities during 2014.

POST-CONSUMER WASTE RECYCLING

Beyond the good progress that we have made in the area of e-waste recycling, we havealso pilot-tested other post-consumer waste take-back schemes covering items suchas compact fluorescent light (CFL) light bulbs and batteries. Unfortunately theseinitiatives have generated indifferent customer interest and so we have decided todiscontinue them, although we will remain open to new opportunities that may beproposed by external parties.

WE CONTINUE TO INCLUDE, IN OUR INTERNAL OPERATIONAL RECYCLINGPROCESSES, BOARD AND PLASTIC WASTE THAT CUSTOMERS DROP-OFFAT OUR STORES.

ECO-LABEL ADVOCACY

We engage pro-actively with suppliers about their voluntary adoption of eco-labels

although, as communicated previously, we do not use eco-labels as a procurementscreen. During 2013, our activities in this area included investigating supplierreadiness to apply energy efficiency labelling to major appliances and working with theForest Stewardship Council (FSC) to assess local supplier awareness of the FSC label.Through these interactions we learnt that the European Union energy efficiencylabelling standard is the most commonly used energy label in South Africa whilsttimber suppliers perceive a lack of consumer demand for FSC labelling.

OUR PRIORITY IN 2014 IS TO INCREASE THE INCIDENCE OF ENERGYEFFICIENCY LABELLING ON THE MAJOR APPLIANCES THAT WE SELL IN OURSTORES.

CONSUMER EMPOWERMENT

Empowering customers to make better informed purchasing decisions while in our stores remains an area of interest. One area wherewe have made modest progress involves the incorporation of an eco-wise consumer information panel on all private label productsintroduced by Builders Warehouse since January 2013. The panel provides information about environmental product and packagingattributes, relating to factors such as water efficiency, energy efficiency and recyclability.We also continue to offer a range ofenvironmentally friendly products that include solar geysers, Light Emitting Diode (LED) and solar lighting, and, low Volatile OrganicCompound (VOC) paints. Consumer-demand driven highlights in 2013 include 222% growth in sales of Solar Flare garden lights andthe expansion of our solar geysers range to include 150l and 200l units.

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ENERGY EFFICIENCY

Energy efficiency is an on-going area of focus for Massmart. Walmart has extensiveexpertise in this area and we have, with their guidance, developed an energy efficiencyroadmap based on a Business As Usual (BAU) energy model. The model, which uses2010 as a baseline, defines energy efficiency targets to the year 2020.To achieve thisgoal we will continue to implement technologies such as LED sales floor lighting,daylight harvesting systems and high-performance refrigeration plants in our newstores and retrofit programmes. In recognition of the progress we have made in drivingenergy efficiency at our stores, Makro was selected as an

ESKOM ETA AWARD 2013 WINNER IN THE COMMERCIAL CATEGORY.Included in our energy goals is an initiative to pilot test a photovoltaic-basedrenewable energy pilot project at our standalone stores. Unfortunately, we have beenunable to develop a solution that meets our commercial guidelines, specifically ourfive year payback target.Notwithstanding this challenge, we will continue to assess potential renewable energysolutions in 2014.

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SECONDARY PACKAGING RECYCLING

Massmart is committed tominimising the volume ofwaste that our operationssend to landfill.

To achieve this we work with our stores to optimise board, plastic and paperrecycling opportunities.Calculating the volume of operational waste produced andrecycled by our stores is challenging and is achieved through the deployment of anonline waste self-assessment survey that is completed by store managers. Basedon this feedback we estimate that 15,400 tons of waste, representingapproximately 50% of the total waste produced by the Group, was diverted fromlandfill during the financial year ending December 2013.

IN 2014 WE INTEND INTRODUCING A DUE DILIGENCE REVIEW OF OURWASTE SERVICE PROVIDERS.

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WATER EFFICIENCY

Although we are not an intensive user of water, we are interested in moreaccurately calculating our water usage, particularly at our standalone stores.To do this we have installed independent water meters at selected BuildersWarehouse and Makro stores.

THIS HAS GIVEN US BETTER VISIBILITY OF OUR WATERCONSUMPTION AND HAS ALSO IMPROVED OUR UNDERSTANDING OFTHE WATER SAVINGS ACHIEVED THROUGH RAINWATER ANDREFRIGERATION CONDENSATE HARVESTING.In 2013, we expanded our water harvesting initiative to an additional 22Builders Warehouse, Builders Express and Makro sites. We estimate thatthese initiatives helped us save approximately 7,450kl of rainwater across theGroup for the period ended December 2013. We will continue to pro-activelyidentify and implement programmes to conserve water in our operations.

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BROAD-BASED BLACK EMPOWERMENT

In June 2009 Massmart committed to achieving level 4 Broad-based Black EconomicEmpowerment (B-BBEE) Contributor status by June 2011. We achieved this objectivein February 2010 and maintained level 4 status through to February 2014. However, weanticipate that our B-BBEE score will fall significantly as a consequence of theintroduction of the amended B-BBEE Codes of Good Practice. Notwithstanding this, wecontinue to make good qualitative B-BBEE progress.

ONE RECENT HIGHLIGHT IS THE WORK OF THE MASSMARTSUPPLIER DEVELOPMENT FUND WHICH HAS, SINCE ITS INCEPTION,DEPLOYED R21.7M IN FUNDING TO 183 BLACK- OWNED SUPPLIERSTO THE GROUP.Black owned participants in fund initiatives include emerging smallholder farmers andmanufacturers such as Korema Farm, X-Chem Chemicals, Biolotion Cosmetics andKurhula Paints.

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WOMENS ECONOMIC EMPOWERMENT

In line with Walmart’s focus on the empowerment of women in our workplace, localcommunities and supply chain, we have established the Massmart Chief ExecutiveOfficer’s Council of Women Leaders which fosters and promotes the progression ofwomen. Initial achievements have included identifying existing women suppliers inthe Massmart supply chain, prioritising women farmers in our direct farm programmeand increasing representation of women on the Massmart graduate traineeprogramme. A key focus in 2014 will be to explore ways to optimize supplyopportunities for existing women suppliers in our supply chain.

EMPLOYEE HEALTH CARE AND HIV/AIDS BENEFITS

Providing permanent employees with affordable access to private health cover is anon-going priority for Massmart. In June 2009 we set a target to increase privatemedical cover from 38% to 60% of permanent staff within a 24-month period. Although

we missed the 24-month time line, we have made steady progress and our currentestimate is that private medical benefits have, as at December 2013, been extended to53.6% of permanent employees. Our flagship employee wellness programme, Impilo, afully-funded wellness programme for employees with no medical cover, continues tooffer a 24-hour medical advisory and support service to permanent employees andtheir spouses, including: a fully funded HIV programme inclusive of medication; andtesting for and early diagnosis of chronic diseases such as high blood pressure, raisedcholesterol, diabetes and asthma.

SOCIO-ECONOMIC DEVELOPMENT

Primary school nutrition, Early Childhood Development (ECD), schoolmaintenance and infrastructure projects remain at the centre of our Socio-Economic Development focus. We have maintained our commitment to investa minimum of 1% Profit After Tax (PAT) in social projects.In the financial yearending December 2013, we invested R41.7 million which is equivalent to 3.1%PAT. Initiatives to support under-resourced schools included Game stores’ andMasscash’s deployment of 49 mobile kitchens under the on-goingAmalunchbox and EconoKitchen projects respectively.R41.7 MILLION / 49 AMALUNCHBOX AND ECONO KITCHENS / 28 SIYASIZATOOLKITS / 72 SCHOOL MAINTENANCE PROJECTS / R20M FOOD DONATIONS /R3.2M FUNDING FOR IMPROVED PRE-SCHOOL TEACHING

Builders Warehouse installed 28 Siyasiza gardening and maintenance toolkits and provided building maintenance and repairs to 72 primary schools across thecountry. In line with our focus on nutrition, over R20m in food donations were made to Food Bank and Feed-a-Child. Makro continued its involvement in ECD, inpartnership with HOPE Worldwide, through its provision of R3.2m in funding for the improvement of teaching and learning in preschools and crèches. To aidmeaningful and interactive learning in schools for children living with disabilities, DionWired donated projection display ‘Smart Boards’ to 16 schools. Inaddition, Massmart together with our suppliers donated 5,500 food hampers to the families of South African National Defence Force members deployed on ourborders and serving under a United Nations mandate on peace keeping missions in other countries.

PERFORMANCE INDICATORS

CONSUMER PROTECTION ACT PERFORMANCE INDICATORS

Notes

Customer complaints refer to those logged through the central complaints system and exclude those at stores which are resolved immediately at thestore.

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PERFORMANCE INDICATORS

CLIMATE CHANGE AND ENVIRONMENTAL PERFORMANCE INDICATORS

MEASUREMENTS AND ASSUMPTIONS

Scope 1 and 2 emissions figures are calculated externally by GCX Africa consultants. Scope 1 emissions relate to direct emissions resulting fromCompany-owned vehicles, generator use and refrigerant gas emissions. Scope 2 figures are based on Divisional electricity consumption figures. Energyconsumption data is annualised and normalised (outlying data is excluded). Consequently the margin of error on reported data is considered to between 10% –15%. Electricity consumption and Scope 2 emissions figures include Masscash African operations but exclude divisional Distribution Centres and HeadOffices. This year emissions data for Cambridge stores and Fruitspot were included in the calculation. Scope 2 emissions factor has been updated from 0.99 to1.00. The total Group sales are used to calculate Scope 1 and 2 emissions’ intensity per Rand million (Rm). Water usage has been derived with reference to thecost of water consumed. Water consumption is based on Rand Water Tariff for retail customers.

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PERFORMANCE INDICATORS

CSI PERFORMANCE INDICATORS

MEASUREMENTS AND ASSUMPTIONS

CSI data is based on actual Group expenditure figures which have been internally audited.

Notes

Government beneficiaries include the Department of Basic Education, the South African National Defence Force and the South African Police Service.Support is provided through the provision of school container kitchens, school building and infrastructure maintenance, library containers, foodhampers and assistance with service delivery.Investment in feeding schemes includes spend on container kitchens, vegetable gardens, NGO and government feeding schemes and Foodbankcontributions.Investment in Early Childhood Development (ECD) includes Game’s Tools 2 Play ECD kits and Tools 2 Teach stationary hampers, as well as Makro’scontributions to ECD partners such as HOPE Worldwide.Investment in infrastructure and school maintenance is primarily based on a Builders Warehouse project that provides schools with equipment andsupplies for basic repair and maintenance.Investment in discretionary projects includes donations to Community Chest, Vodacom Wheelchair Fund and ad hoc requests.

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PERFORMANCE INDICATORS

B-BBEE PERFORMANCE INDICATORS

Notes

Comparative data represents the best performance in the Retail Sector as published in the Empowerdex EEC Survey 2013.(%) Indicates percentage score achieved on the B-BBEE scorecard.

MEASUREMENTS AND ASSUMPTIONS

Massmart’s B-BBEE figures are calculated externally by Empowerdex Economic Empowerment Rating Agency. These figures are based on actual staff numbers(not estimates). B-BBEE scores are calculated retrospectively, therefore the data reported is based on the scorecard complied in February 2013 for the periodJanuary – December 2012.

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PERFORMANCE INDICATORS

HUMAN CAPITAL PERFORMANCE INDICATORS

Notes

Comparative data represents the best available performance disclosed by South African retailers, except for:

Black management as a % of all management and professionals sourced from 2012 – 2013 Commission for Employment Equity Annual Report;

Average minimum wage sourced from Sectoral Determination for Wholesale and Retail Sectors; and

HIV prevalence which represents published national prevalence rate according to Statistics South Africa Mid-year population estimates 2013.

MEASUREMENTS AND ASSUMPTIONS

Human capital data is based on Group and Divisional payroll data. HIV prevalence is based on Healthy Choices VCT testing figures. Due to the large number

and geographical positioning of stores, testing is not conducted at all stores every year. HIV prevalence is based on staff tested in a particular year. Data is

internally audited prior to publication.

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