Under the Competition Act, firms can be fined up to 10% of their turnover if their employees participate in cartel activity which is defined as price fixing, market division or collusive tendering.

However, in terms of a corporate leniency policy applied by the Competition Commission, it is possible for a firm involved in collusive activity to get immunity from receiving a fine.

“If the firm is the first participant in the cartel to disclose the conduct to the Commission and undertakes to assist the Commission to prosecute the other participants in the conduct it will avoid being fined,” said Desmond Rudman, competition law partner at Webber Wentzel. 

In order to apply for immunity in terms of this policy, firms rely on their employees to come forward. 

The difficulty is that employees are often reluctant to disclose their involvement in cartel activity to the firm for fear of the firm instituting disciplinary action against them, which could include dismissal.

“An effective way in which firms can incentivise employees to disclose that they have engaged in cartel activity is by offering them immunity from any disciplinary action by the firm if they make full disclosure of their involvement in the activity.

Rudman advises firms can achieve this by implementing an ‘immunity’ hotline, in terms of which employees are invited to phone an external party, such as the firm’s attorneys, and make disclosure of their involvement in cartel activity within a specified period.
However, he noted that the effectiveness of this mechanism will be undermined by the impending criminalisation of cartel activity in terms of amendments to the Competition Act that have been signed into law by the President and are expected to come into force shortly.
Criminalisation means that the individual employees involved in the conduct, or who knowingly acquiesced to it, could be criminally prosecuted and themselves fined and/or imprisoned for their involvement. 
“Although firms can grant immunity from disciplinary action within the firm, they cannot protect their employees from criminal prosecution, which will serve as a disincentive to employees to make disclosure in the future.

“Firms therefore have a limited window of opportunity to take advantage of the Commission’s corporate leniency programme in order to get immunity for past and on-going cartel activity by their employees,“ Rudman added.

Daniel O’Day, Chief Operating Officer Roche Diagnostics, said: “Diabetes has become a real epidemic that affects more than 285 million people worldwide. Roche Diabetes Care, a global leader in blood glucose monitoring and insulin delivery systems, is committed to improving the quality of life for people with diabetes. With this acquisition we will broaden our portfolio of innovative insulin delivery technologies and strengthen our position as a leading player in the diabetes care business”.

The new Medingo Ltd. micro pump insulin delivery system consists of two parts: a semi-disposable insulin dispensing patch and a remote control, which allows for discreet personalised insulin delivery. It provides the functions of a conventional insulin pump alongside with all advantages of the innovative tubeless patch pump technology. Features like the ability to administer an insulin bolus directly from the patch pump without a remote control, as well as the option to temporarily disconnect the pump from – and later reconnect it to – the patch securing it to the skin, offer enhanced convenience to insulin pump users.

The Medingo Ltd. patch pump is not yet marketed. In a next step, production capacities will be scaled-up to prepare for global launch which is expected by 2012.

The acquisition will strengthen Roche Diabetes Care’s position in the fast growing segment of insulin delivery systems. In 2009, the insulin delivery system global market was estimated at CHF 1.6 billion. While the whole market is growing rapidly, the expectations for the growth of the patch pump segment are even higher.

Zvika Slovin, Co-CEO of Elron Electronic Industries Ltd., said: “The fate of diabetes patients has been at the center of the Medingo Ltd. from the foundation of the company. Therefore, Medingo Ltd. as well as its shareholders are very pleased to have found a very strong and potent partner in Roche to ensure success of Medingo Ltd.’s products and research and development”.

Roche Diabetes Care develops and commercializes innovative solutions in the field of insulin pumps combining blood glucose monitoring, information management and personalized insulin delivery As an example of this new class of integrated product solutions the company recently has launched the Accu-Chek Combo system in Europe with great market success, allowing for enhanced efficiency and convenience in managing insulin pump therapy.

“The integration of Medingo Ltd. is a perfect fit to our existing diabetes management product portfolio”, stated Burkhard G. Piper, Head Roche Diabetes Care. “Offering an innovative micro patch pump will bring our competence in the area of integrated insulin delivery systems to a broader range of people with diabetes on insulin therapy, providing a greater choice to meet the different individual needs”.

As part of Roche Diabetes Care, Medingo Ltd. will continue to further develop and produce the insulin patch pump system which will be integrated into Roche Diabetes Care’s insulin delivery portfolio. “As we share the same vision of providing integrated diabetes management solutions for insulin pump users, Roche to us was the partner of choice to bring our technology to life. The integration into the Roche Diabetes Care business unit offers the opportunity to broadly market our innovative patch pump system with a leading global company, which brings its knowledge and strong market expertise into play”, said David Vidan, General Manager Medingo Ltd..

Talitha Bugwandeen and Craig Mckenzie

She decided to investigate franchising. “Juicy Lucy was a good fit. It is the perfect entry level franchise,” she said, pointing out that at least 90 percent of all new restaurants fail. Juicy Lucy, as one of the country’s oldest and most established fast food franchises, was a more comfortable option as it mitigated the risk of establishing a new restaurant and brand. “I looked at other franchises and decided on Juicy Lucy as it is an established brand that supplies an important niche market. There is a definite move towards healthy eating with growing demand for nutritious meals. I’ve seen that in my own life.”

As a direct result of her father’s illness, the Bugwandeen family decided to transform their lifestyle and altered their diet completely, opting for healthy foods in place of the high fat, spicy dishes they had eaten up until then. Bugwandeen said this was another reason Juicy Lucy was a good fit. She describes the food which focuses on healthy options and includes both delicious fruit and crunchy vegetables as “clean and uncomplicated.” She is certainly not alone and is already attracting a loyal clientele, including many vegetarians who, she says, find a range of appetizing choices there. “I like to call this restaurant an oasis where you can relax and feel well taken care of.”

Although she says her first two months have been wonderful with a particularly good Christmas trading period, she feels that it is still too early to predict turnovers or growth as it is just a few months since start up and the Galleria Mall is not yet close to establishing its full foot flow. Nevertheless, she said choosing to locate her outlet at Galleria was a strategic decision that had been supported by the fact that this was a new mall that “feeds an area that has previously been overlooked.”

Bugwandeen’s Juicy Lucy outlet is the first new look store in KwaZulu-Natal. Last year, Juicy Lucy was completely rebranded and its stores transformed into environmentally friendly, fashionable eateries, adding yet another dimension to the brands’ healthy image. “We should all be proud. This reflects the global trend towards preserving sustainable resources. It is good to see South African companies moving in line with this. It is good to embrace it.”

She describes the actual process of establishing the store of which her team is now extremely proud as ‘hectic’. She began negotiating with franchise management group Java Brands just before the end of October and, during an overseas holiday shortly afterwards, she received a letter informing her that her application had been approved. She returned home to hire and train staff. They began building during the second week of November and opened a month later.

“Normally the franchise experience is not so rushed. Mine was a unique set of circumstances,” she smiles, emphasising that what she achieved was only possible because of support from Java Brands whose team was available 24/7. Another important factor was that other franchises (Pietermaritzburg, La Lucia and Westwood) opened their shops to her and her staff, giving all the opportunity to get on the ground experience. “I would like to foster that spirit because we are all custodians of the brand. It is about shared success. We all need to look after each other’s investments.”

She says her vision for the future is to see Juicy Lucy Galleria continue as a customer oasis as well as an inspiration to staff. Already, she is sponsoring training for employees who want to go further in the hospitality sector. So far, she has created 24 jobs and would welcome providing more. Now that everything at Galleria is firmly on track operationally, she says she would even consider running a second franchise in the not too distant future.

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“The downgrades reflect our view of the implications for Foodcorp’s
leverage of the primarily debt-financed buyout, on March 9, 2010, of the
69.73% controlling shareholding formerly held by Pamodzi Investment
Holdings (Proprietary) Ltd. (Pamodzi),” said Standard & Poor’s credit
analyst, Philip Temme.

“Pamodzi’s stake has been purchased by a consortium comprising
management and a staff trust (who now own 51.0%), U.K. fund manager Blue
Bay Asset Management PLC (44.4%), and South African private equity
investor Capitau SA Partnership (4.6%). The downgrades also reflect our
view that Foodcorp’s liquidity has been weakened by cash outflows
associated with the buyout and by the significant cash costs associated
with the recent foreign exchange hedge re-strike.”

The buyout of Pamodzi was effected through an investment by Foodcorp in
South African rand (ZAR) 111.9 million of preference shares issued by a
new holding company, and the issue to BlueBay and Capitau by that same
company of ZAR495.5 million euro-denominated payment-in-kind (PIK) notes
and ZAR30 million PIK preference shares.

Lease- and hedge-adjusted net debt to EBITDA was 5.8x and adjusted
EBITDA interest coverage 1.9x in November 2009. Consolidation of the new
PIKs increases pro forma adjusted leverage well above 6.0x, even after
allowing for the positive leverage effects of the recent foreign
exchange hedge re-strike. Given that Foodcorp is currently projecting
higher capital expenditure (capex) of ZAR248 million in financial 2010,
future deleveraging ahead of the bond refinancing due in 2012 is likely
to be limited in our view.

We now consider Foodcorp’s liquidity to be less than adequate. Although
the company has secured an increase to ZAR200 million from ZAR50 million of its committed Nedbank working capital facility, availability and
headroom under the covenants for the other ZAR100 million facility are
tightening, and the company anticipates increasing capex year on year.
Consequently, we anticipate that cash held at the financial year-end in
August 2010 will be significantly lower than in the prior year, leaving
Foodcorp with less room for maneuver in the event of adverse
working-capital developments.

In our view, operating performance will remain satisfactory as South
African consumer demand continues to recover from the recession.
However, we anticipate that margin recovery will remain only gradual and
that Foodcorp’s net adjusted leverage will remain above 6.0x at
financial year-end 2010.

We would view adjusted leverage of about 6.0x and high single-digit
EBITDA growth as commensurate with the current ratings. Any evidence of
liquidity stress or slowing EBITDA growth could trigger a change of
outlook or a further downgrade.

Key numbers for investors include:

• Headline earnings per share decreased by 51% to R10,67
• Interim dividend increased by 12% to R2,80 per share
• Operating profit of R10,5 billion declined by 51%
• Cash flow generation by operating activities down 70% to R9,2 billion

Operating profit was negatively impacted by lower average crude oil prices (average dated Brent was US$71,42/barrel in 2009 compared with US$84,75/barrel in 2008) and chemical product prices, as well as a 14% stronger average rand/US dollar exchange rate (R7,64/US$ in 2009 compared with R8,88/US$ in 2008). The average oil price achieved during the prior year comparable period was positively impacted by the effect of the oil hedges which resulted in a net gain of R5,1 billion.

The company said it had not entered into similar oil hedges in the current trading year.

Key projects

Sasol management outlined some of its key projects for the year including:

Developments in the sustainable development area including:

• In November 2009, we signed a memorandum of understanding with Gassnova SF, a Norwegian state-owned enterprise responsible for managing carbon capture and storage (CCS), which will allow us to explore the possibilityof becoming a participant in the European CO2 Technology Centre Mongstad, currently under construction in Norway.

Developments on the project front include:

• In December 2009, the Project Application Report for the China coal-to-liquids (CTL) plant was submitted to the Chinese Government for approval. Applications will also be submitted for the mines and catalyst plantsrequired for the project during the 2010 calendar year.

In line with the strategy to acquire natural gas assets for potential GTL feedstock, progress has been made in three areas:

• In November 2009, SPI acquired exploration rights for two offshore licenses in Mozambique adjacent to the offshore Block 16/19, namely Sofala and M-10 in which SPI holds participating interests of 100% and 50%, respectively. Success in these areas will allow for the possible development of the entire area, including Block 16/19.
• In December 2009, SPI signed a Farm-in Agreement with Finder Exploration Pty Limited for a 45% participating interest in Block AC/P 52 situated in the gas-rich Browse Basin of the North Western Shelf of Australia. This transaction was approved by the Australian Governmentin January 2010.
• SPI submitted a joint application with Statoil ASA and Chesapeake Energy Corporation, in November 2009, for an onshore petroleum exploration right in the Karoo Basin in the central region of SouthAfrica. The application, for the proposed exploration of shale gas resources, is expected to take about 12 months to process.
• In South Africa, coal blasting and extraction of the 170 000 ton sampleof coal on Project Mafutha (a proposed greenfields CTL facility) commenced in November 2009. Coal gasification trials are planned for the middle of the 2010 calendar year. The cost thereof is included in the R1 billion already committed for the pre-feasibility study.
• Sasol Wax will invest R8,4 billion to double hard wax production at our Sasolburg facilities in South Africa. The first phase of this project, which will increase capacity by about 40%, will come into operation during the 2012 calendar year. Completion of the second phase is expectedin the 2014 calendar year.
• Sasol Solvents commenced basic engineering for the first commercialinstallation of its tetramerisation technology in the United States. The initial commercial unit will have a combined capacity of 100 000 tons perannum of 1-octene and 1-hexene which are co-monomers used in the plastics industry. Construction is expected to begin in the 2011 calendar year.

“Power hikes to cost 250000 jobs” and “foreign investors to be scared off by power price increases” scream news headlines on many of South Africa’s leading newspapers and financial news sites.

Without trivialising the impact of a power crisis or the additional strain on the average South African consumers wallet, these headlines and press statements are mis-leading and ill-informed.

The bizarre assumption is that humans will do nothing to change their behaviour and the country as a whole will choose not to innovate to address this challenge. To attach such lemming-like characteristics to one of the most innovative regions in the world is mind-boggling.

Humans as a species evolve and anybody who implies that they will continue behaviour which negatively hits them in the pocket needs to have their head read.

US president Barack Obama recently commented that the US had to focus on the development of nuclear technology at home to meet their power supply. He made a poignant comment saying that if the US didn’t focus on developing these technologies at home, then competitors in foreign countries would and the US would be forced to import these technologies. The end result would be no jobs for Americans in this sector of the economy and his mind that was unacceptable.

This is precisely the attitude we as South Africa need to adopt in the light of the challenges facing the country.

So where are the opportunities?

While independent power production is still not viable in South Africa, it is fast coming to a point where it does become attractive. If you can participate in a market which has guarantees of price increases of 25% per year for the next three years, it is going to start to look attractive.

Innovation around alternative energy sources is going to be given the go-ahead. Green energy, nuclear, solar etcetera is going to come into vogue.

The same could be said for the agriculture sector. We know that resource giants like Vale and BHP Billiton are piling into the fertilizer sector and ratings agency Moodys says it expects this trend to grow as alternative energy sources are sought.

Increasing demand and funding for skilled engineers, researchers and developers to come up with innovative solutions. Already companies such as Sasol and Anglo American have been investing in their own independent supply technology. Educators, lecturers and trainers will be needed to support the demand for these professionals both in educational institutions as well as within corporates.

In conclusion we know that there is a shortage of electricity on the supply side and we recognise that South African consumers and municipalities remain cash-strapped.

However the talk of economic collapse and fall-out is overstated and dangerous when in fact the opportunities far outweigh the threats posed to the country.

Marc Ashton
ManufacturingHub.co.za and Ferronews.com
Respond to this editorial contribution on newsdesk@rival.co.za

Follow Marc Ashton on Twitter – www.twitter.com/zamarcashton
Marc Ashton’s blog – http://badentrepreneur.bundublog.com/

As of February 1, 2010, the Corner Bakery business will continue be supported by Retsol, while the holding company supporting the Ola Milky Lane, Juicy Lucy and Chicken King brands and responsible for the newly introduced Java Heights Specialty Coffee brand will be known as Java Brands (Pty) Ltd.

“During 2009, the Retsol management team recognised the need for greater focus and improved efficiencies, hence the split of management responsibilities between the Corner Bakery business and the Ola Milky Lane, Juicy Lucy and Chicken King brands.  This decision proved effective, resulting in a seamless split and an improved support structure for the respective business units.  Going forward, the businesses will be run independently.  This makes it necessary to trade under separate identities,” explained Craig MacKenzie who will head up Java Brands.

Craig MacKenzie (left) and Claus Kuhl

MacKenzie, a pioneer in the fast food sector and a franchising guru, co-founded pizza giant Debonairs Pizza in 1991. He believes the key to growth in this sector is constant innovation and strong management support for the growing network of Ola Milky Lane and Juicy Lucy, particularly with the ice cream franchise being rolled out across southern Africa.

Juicy Lucy, a franchise which introduced South Africans to healthy eating in the early 1970’s, is now owned by Java Brands. The Ola brand falls under fast moving consumer goods giant Unilever. Unilever bought out the Milky Lane franchise in 2003 and brought Retsol on board to manage the business.  Java Brands will continue to manage this rapidly expanding brand that also holds the enviable accolade of being one of South Africa’s oldest franchises.

MacKenzie said that, with the growing diversity in the number of brands under the wider Retsol banner, it was imperative to revise the company’s structure and create a highly focused management team.

He confirmed that Estelle Botha would remain as financial director while Shanon MacKenzie had been appointed standards director. She will apply her considerable operational skills across all platforms of the business with a view to optimising efficiencies. The team, which has embraced the recent changes with enthusiasm, will be headed by managing director Claus Kuhl, who is recognised as a hands-on manager who leads by example.

Up until February, Kuhl was general manager of Ola Milky Lane.  He brings considerable experience within the food and hotel sector to this new position. This includes a stint as a highly successful Debonairs Pizza franchisee and, ultimately, as managing director of the Debonairs Pizza brand.  He joined Ola Milky Lane six years ago and was instrumental in not only relaunching the brand but also doubling turnover.

MacKenzie pointed out that this opportunity to create a more intimate company culture co-incided with the introduction of a sophisticated web-based enterprise management system that would see Java Brands migrating towards a completely paperless and seamless system within a very short space of time.

“It’s highly automated and will ensure better management.  This system allows for better reporting and evaluation and provides meaningful benchmarks, online training and examinations.  For example, franchisees can do waiter tests online and get the results immediately.  Franchise consultants can access reports immediately and present franchisees with online evaluations, as well as the ability to benchmark against other outlets.”

Although others in the industry are beginning to introduce similar systems, Java Brands is at the forefront of this technology in South Africa, according to MacKenzie

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