Foodcorp fine should frighten construction chiefs

If I were a chief executive of one of the major construction companies under investigation by the Competition Commission, I would start getting very seriously worried indeed about the size of fines that are being imposed for collusive behaviour.

Yesterday, the commission imposed a heavy penalty on Foodcorp for its collusion in the white maize and wheat milling industries for offences that ran concurrently.

The company was fined R88.5 million, or 10 percent of its turnover from its milling division for the 2010 financial year.

In January 2009, Foodcorp was fined R45m, or 6.7 percent of its turnover, for a similar offence. The fine this time is heavier because the commission has added punitive measures for the reason that Foodcorp settled too late.

One is presumed innocent until proven guilty, so what appears below is subject to that caveat.

One can only hope that the road to the offices of the commission has been congested by the construction chief executives running to apply for leniency. This option offers a cartel member the possibility to disclose information on a cartel to the commission in return for immunity from prosecution or fines. Immunity is only available to the first cartel member to approach the commission.

If other cartel members wish to come clean on their involvement in the same cartel, the commission will also encourage such co-operation, which can eventually result in a reduction of the fine to be paid in a settlement agreement.

The investigation by the commission has found that major players in the industry had been meeting since 2006 and conspiring to profit dishonestly from the building of infrastructure such as the World Cup stadiums and the Gautrain.

It is understood the commission has received 65 leniency applications, involving the public and private sectors, from road construction to general building, to stadiums and industrial construction, so watch this space as the culprits are singled out.

Remuneration

When President Jacob Zuma asked chief executives in October to deny themselves bonuses, perks and salary increases to narrow the nation’s wage gap, there was uproar from some analysts who said executive pay cuts would hurt the economy.

Yesterday Sylvania Platinum unveiled austerity measures to offset production lost as a result of weeks of illegal strikes.

The low-cost platinum processor said its directors, including chief executive Terry McConnachie who was awarded $709 481 (R6.1 million) in the 2012 financial year, would “sacrifice” a third of their basic remuneration from January to June next year. It said its office in Perth, Australia, would be closed and because of the reduced workload, the executive director would take a cut of half his salary.

The vast number of strikes in the mining, transport, and farming sector have hit the economy considerably.

South Africa’s sovereign debt rating was downgraded by two international ratings agencies, partly because of the wildcat strikes in the mining sector.

Zuma reportedly said tough times called for tough measures and senior executives should “tighten their belts as part of building a shared commitment to prosperity and growth” in the country.

“(We) call on chief executives and executive directors in the private sector and senior executives in the public sector to agree to a freeze on increases in salaries and bonuses over the next 12 months, as a strong signal of a commitment to build an equitable economy,” he said.

Whether or not other mining companies will follow in Sylvania Platinum’s footsteps is yet to be seen.

But the question remains: will the executive salary cuts improve the company’s balance sheet? The answer is no.

Unless the company improves its labour relations, the austerity measures will become irrelevant in the long term.

Green hotel

A hotel now being constructed outside the Cape Town International Airport and due to open in May next year, aims at being the “greenest” in South Africa and almost certainly in Africa.

Appropriately named the Hotel Verde – Italian for green – the building is designed to make the maximum saving on energy, water and waste, without sacrificing comfort or amenities.

The photovoltaic solar panels that will provide electricity, for instance, are positioned on the north facade so that they will also provide shade for the windows that get the most sun. Instead of a standard air-conditioning system, the hotel will use ground source heat pumps made by 100 holes drilled about 76m into the ground where the temperature is a consistent 19ºC.

German supplier AGO Energy is installing a complex network of pipes and equipment specially designed for the hotel that will use the earth as a source of heat in winter and a “heat sink”, absorbing excess energy, in summer.

There will be a grey water recycling plant which, together with rainwater collected, is aimed at reducing the amount of drinkable water used in toilets, the car wash and irrigation. The lifts will run on a regenerative drive that will recapture about 30 percent of the energy used.

Even in the construction of the concrete floors, the amount of concrete used has been reduced by using Cobiax void formers – balls of recycled plastic placed strategically within the slabs.

Mario Delicio who, with his wife AnneMarie, are the owners of the hotel, explained: “We have a responsibility as a company, employer and visitor on this planet to live as sustainably as possible. This is the only way the human race can survive long term and hand over to our children in a responsible manner.”

Delicio said he did not want his hotel to be unique and hoped others would be developed to save finite resources.

Edited by Peter DeIonno. With contributions from Wiseman Khuzwayo, Dineo Faku and Audrey D’Angelo.