SAB Miller & Anheuser-Busch InBev merger conditions

Economic Development

13 June 2018
Chairperson: Mr A Cele (ANC) (Acting)
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Meeting Summary

This meeting was convened by the Portfolio Committee on Economic Development so that it could be kept abreast of the developments that had happened since the merger of SABMiller and AB InBev. There was an agreement between the government and AB InBev in which certain conditions were set and upon which the Competition Commission Tribunal based its approval of the merger. In the agreement, the company had agreed in its Public Interest Commitments to invest R1 billion over a five-year period by supporting entrepreneurship, empowering black owned businesses, expanding agricultural production to lessen reliance on imports of crops like barley which are used in production, to localise supply chain management, support emerging farmers, as well as empower women and the youth by providing skills development and capital. Agriculture is the main component of the five-year fund of which R610 million was earmarked for agricultural development and support to emerging farmers. Last year R117 million of that was spent and R130 million was going to be spent this year. South Africa has been a net importer of barley, but the target is to get South Africa producing 475 000 tonnes and already this year it is expected that South Africa will harvest 405 000 tonnes of barley. R200 million was dedicated to entrepreneurship development of which R150 million would be invested in black owned business with R25 million allocated for women entrepreneurs and another R25 million for youth entrepreneurs. The company reported that ninety-five percent of all the goods and services that go into its production were now locally sourced.

The Committee members were impressed with the projects that South African Breweries had undertaken but they asked why they were not spread out across the whole country. The company responded that most of what the company was doing was new and it was learning, but it also emphasised that it undertook its projects in areas where it could closely monitor the progress of its projects as compliance with the conditions in the Public Interest Commitments depended upon their success. However, the company pledged to further spread its programmes to the rest of the country

Meeting report

The Acting Chairperson apologised for starting the meeting late. The Committee was waiting for another member who was coming from another meeting.

The Acting Chairperson thanked the team from AB InBev for affording the Committee an audience. The Committee was interested in finding out how the Competition Commission Tribunal approved merger between SAB Miller and AB InBev was progressing. There were some conditions that were set for approving the merger and the Committee was interested in how they were being complied with and any challenges that were being faced, as well as successes scored.

Briefing by SAB Miller and AB InBev

Ms Doreen Kosi, Vice President:  Legal and Corporate Affairs, SAB Miller and AB InBev, said the merger of SAB Miller and AB InBev happened in June 2016 but the deal was sealed in October 2017. The work is managed directly by the global CEO of the company, who takes full accountability for the entire project but locally he is assisted by the President Mr Ricardo Tadeu who takes charge of the African zone.

There are two committees that were set up. There is an Implementation Board with government representatives and representatives from DTI, Department of Agriculture, Forestry and Fisheries (DAFF) and three members from AB InBev. This is the committee that is meant to ensure that the targets are met and guides the work of the Public Interest Commitment (PIC). There is a Task Force that processes the work of agriculture and it is made up of representatives from the company, members from the Department of Rural and Land Reform, DAFF, Department of Water and Sanitation and the Land Bank. In addition, there are internal processes and within that there is a steering committee. There is a task force of all the project managers internally. Then there are global representatives.

The programme is a five-year programme in which the funds are meant to be disbursed. In the first year there has already been an overlap. The idea is to spend R1 billion across the five-year period of the commitments. The bucket of projects that the company has undertaken is supposed to be funded through this money. Agriculture is the major component of the conditions and the others include the work of enterprise development and entrepreneurship, and South African social benefits which are meant to better the lives of the people. The conditions are meant to facilitate the work that was agreed upon when the merger happened, and the main aim is to ensure that the lives of South Africans are improved. The aim of the company is not to tick the boxes until the five-year periods and then relax. Some of the things that the company is embarking on will be done beyond the five-year period.

Mr Warren van-Rooyen, Legal Director for Africa, AB InBev, said he needed to give some context to the discussion. AB InBev was the company that bought SABMiller around the world but in South Africa they still operate as the South African Breweries (Pty) Ltd. That is the operating company that existed before the merger and the one that employs all the employees and holds all the assets and they still operate exactly as that company. There is some confusion as to whether it is still SAB or AB InBev. AB InBev is the holding company, the global parent, and SAB is a subsidiary. AB InBev allows the local companies to keep their names, their identity, even after acquisition. SAB is a proud name in South Africa and it has been maintained. Although the Chairperson of the committee referred to them as conditions, the company considers them as public interest commitments. They are actually conditions imposed on the merger of which some of them are public interest commitments, but generally in SAB they are referred to as public interest commitments because that is the most important part. There are some other conditions within there that have nothing to do with public interest as they have more to do with competition and making sure that the company does not stifle competition. That is where his role as Legal Director comes in regarding how the company is complying with the conditions.

There are three principal obligations that were placed upon SAB other than the conditions themselves. The first one was to create an Implementation Board which comprises government members and the company’s own employees and that is where the day to day activities are brought and the board gives recommendations and oversees how the recommendations are implemented. The board took time to get up and running but it started functioning on 17 October. The second one from a governance point of view is that every year in November, the company is obliged to submit a formal written report which goes both to the Competition Commission and to the Department of Enterprise. The first report was submitted last year and there is an obligation on the CEO in America to sign the report and that is the level of scrutiny to which it is subjected. An affidavit also has to be signed confirming that the report is true and correct. The third leg of the governance is that in April of every year, after the report is submitted in November, there is an obligation to have that report put through an independent audit process. The Competition Commission has given feedback that it was generally comfortable with the report for the year 2017 on every single aspect and not just on the investment. For instance, the company had to sell its shareholding in some other companies and that has been processed. That condition has been ticked and SAB does not have to report on it again. That is the governance aspect of the company.

Mr David Hauxwell, Vice President: Procurement and Sustainability in Africa, SAB, said that it was important for the Committee to understand that with this organisation, procurement’s role was to work with the business and help define and drive the strategies around what the company buys and who it buys from. What is telling about SAB and its commitment is that he was present at the meeting. The company made sure to embed fundamental principles throughout the entire procurement organisation. The company takes transformation seriously. It has targeting key performance indicators around what it needs to do and achieve as regards preferential procurement and that the best people are brought together in order to execute these things. The company is proud of what it has done so far in the past twelve months because it does not look at this as an obligation, but it looks at it as an honour to do and it is a conscious priority not just for SAB but for other companies in South Africa. Tthis was not a five-year endeavour but an on-going endeavour and as far as the company was concerned it was proud to be South African and it would continue to be.

Ms Zoleka Lisa, Procurement Director responsible for Transformation, Entrepreneurship and Sustainability, SAB, explained why sustainability was important for the organisation. In March this year, globally, AB InBev announced its sustainability ambition covering water, waste, agriculture, entrepreneurship and renewable energy. The company believes it is important to take matters that deal with the environment and socio-economic conditions seriously, so the company was prioritising identifying the challenges and coming up with concrete plans to address them. The company has the funding, power and might to make a difference in society. From the Public Interest Commitment (PIC) perspective, the fund is going to be an important lever for the company to bring sustainability initiatives to life. The team is passionate about bringing meaningful projects to life. In the last year, the company has focused on water, waste management and renewable energy. From a water perspective, 40 million had been demarcated to go towards infrastructure projects as there are municipalities that are struggling with water infrastructure. The company is working with the municipalities to ensure that the leaks in the metros. In Gauteng, the company has partnered with the City of Tshwane investing R3.5 million in a water station and the refurbishment that has been undertaken there has made a big impact in that municipality which has been able to bring on board additional capacity. The MMC that has been working with the company on the project was impressed that the project allowed the municipality to save a lot of money in the region of R2.4 million per month in what it was paying Rand Water in above-water purchases. In the second phase of the initiative the company wants to go into households to tackle ad-hoc leak repairs as well as install water pressure management systems. This is also seen as an opportunity to create much needed jobs by creating 10 jobs to drive this initiative.

Likewise, in the City of Cape Town, the company partnered with the municipality by sponsoring R6 million to address the impact of the drought. This funding was meant to support water infrastructure. In another initiative in the Western Cape, there was an abundance of alien vegetation and, partnering with the WWF, that alien vegetation will be removed to release much needed water in the ecosystem. The job creation has been considerable at 120 jobs. The second phase has taken off and the company is looking to invest R 3.5 million in three years to create more jobs and to ensure that the area has a sustainable water supply. Regarding the five-year horizon, the company was now looking to other municipalities such as Polokwane and Nelson Mandela Bay to implement similar projects and tracking the projects to ensure that there is a return on the investment. The key thing is that water supplies are being safeguarded in water stressed communities. In addition to water, waste is another priority and the company is committing 25 million rand of the PIC funding to assist waste coops to formalise the job opportunity.

The company has embarked on a pilot project in Thembisa. Thembisa has a healthy group of coops and a number of schools are partnering with the coops. It will also get business development to understand their craft a lot better. Through this initiative, it is hoped that job opportunities will improve with 61 job opportunities being projected. The coops are fundamentally female managed with roughly 60 women involved. The company is also working on improving recycling in the community. The programme will be extended to other provinces. The idea is that waste should not end up in the landfills and waste is creating a new currency in South Africa. Regarding renewable energy, in the last year programmes were piloted at Thembisa looking to power some tavern owners by equipping them with solar panels on their roofs thereby helping them reduce their cost of electricity. The savings could be used to re-invest in their businesses.  The second phase of the programme aims to establish a black-owned solar energy company that will install these panels and maintain them. It is hoped the programme will scale from ten to a thousand in the country. Schools and clinics will also be powered by these solar panels.

On enterprise and supply development, R200 million had been allocated ensuring that impactful entrepreneur programmes are driven. The supply chain is being localised and diversified. SAB has a big supply chain and it is important to ensure that the company works with both the big firms and the small enterprises. The company’s interventions are creating the much needed jobs in the country. The procurement mandate is to lead from the front when it comes to transformation of the supply chain. Ninety-five percent of all the goods and services that go into the company’s products are all locally sourced. Where importation happens, it is because there are shortages as was the case with the drought when malt had to be imported from other countries. Regarding the allocation of the R200 million, R25 million will go to entrepreneurship programmes that are supporting youth and women owned businesses to help them with the necessary skills to access supply chains; another R25 million will go to the business incubator where there are dedicated coaches  and engineers working with black owned SMEs to ensure that transformation becomes a reality; and R150 million will go towards the SAB Thrive Fund which is used to make strategic investments into black owned entities, either transforming them or scaling black companies. There are five signature programmes at SAB. The first two are enterprise programmes.

The SAB Foundation, which is an independent trust, has been around since 2010 and it is the biggest programme that helps entrepreneurs in rural areas targeting youth and women owned businesses. The programme also works with people who have disabilities. There is also the SAB Kickstart Programme which is the youth enterprise development programme and it is one of the longest running programmes in South Africa as it was established in 1994. It helps youth aged between 18 and 35 years to start up a business. The programme tries to ensure that the interventions are closely aligned to market access. It is important to ensure that the youth businesses that the company is investing in do get business not just with the company’s supply chain, but the network as well. With the PIC investment, the company has been able to improve the existing programmes and add three new ones. There is also a programme that targets women owned and managed businesses to give them the necessary skills on how to approach a procurement organisation, how to read a contract and how to navigate a large supply chain.  The impact that is expected is a 10% representation of women owned businesses. The SAB Accelerator Programme has coaches and technical engineers trying to assist with supply chain management and take out all operational inefficiencies.

Then there is the SAB Thrive Fund where in the last year, 200 permanent jobs and 170 contract jobs were created investing millions of rand. Not all funding that goes into entrepreneurship ecosystems goes via the PIC investment. As a business, the SAB has been doing entrepreneurship for many years and programmes like Kickstart has helped many young people start a business in South Africa. The SAB Lerumo Empowerment Programme for Women in its second year this year is expanding outside of Gauteng and the intention is to reach all the nine provinces. It has been expanded to the North-West where there is a vibrant group of women in mining, PPE manufacturing, metals, chemicals and the entrepreneurship opportunity in South Africa is right. SAB is currently assisting the ladies to understand their business model. Last year, of the 23 participants in the programme, ten of them received business from SAB and the spending was just under R20 million on these businesses. The company uses its marketing power as it has a strong marketing footprint and their names are put out, taking them to interviews and profiling them on their website. When SAB says it can do business with a black woman run business South Africa tends to respond positively. These are the interventions that the company is trying to drive through SAB Lerumo.

New territories are also being explored and the township economy is a new space for the youth programme SABC Kickstart. The township is a vibrant place with plenty of young people who can start up businesses. There is a harm reduction pilot where the company is looking to reduce the impact of alcohol, but it is important to give young people alternatives to explore. The company has invested in a vibrant facility in Mohlakeng where there is a partnership with the Gauteng Enterprise as well as the Rand West Municipality. SAB has identified 12 youth owned businesses in the area that will receive training with space and rent being paid for the next two years and they will be given the skills need for them to be compliant and viable. The idea is not to take these young people away from the area where they live but the township economy is being explored. The next initiative is looking at getting young people into agriculture and the company is taking over ten urban farms in downtown Johannesburg introducing young people to hydroponics technology. They are going to be owners of urban land and the young people are being partnered with a number of markets where people will be buying agricultural produce.

The Mergers and Acquisitions Director for Africa said the Thrive Fund is a black equity fund that has been created in terms of statement 1003.10 of the equity code. It is a SAB Supplier Development Fund set up in line with the codes. The SAB Fund is there to help transform the SAB supply chain. Big companies like SAB spend in excess of R10 billion a year on procurement and, unfortunately, only 20 percent of that is with black owned companies and that is not nearly enough so it was an initiative to help transform the supply chain. The other reason is to help create black industrialists within the economy and the equity that SAB provides helps to grow existing black businesses or to transfer equity from untransformed businesses to black industrialists and to create jobs. Funding for growth is provided and access to SAB procurement is provided. Strong black talent is also introduced into the businesses that SAB invests in. 94 jobs have been created to date within the supply chain. The company is also trying to reduce on Chinese imports by empowering black businesses. About R215 million will be invested, with R150 million being allocated towards PRC spend on enterprise development, training and knowledge transfer, investment support, procurement, process engineering and general business advantage. About R80 million has been invested to date in seven different businesses.

Mr John Rogers, Director: Agricultural Development and Raw Material Procurement, SAB, said agricultural development is core to the business not just in South Africa but around the world. The quality and availability of the ingredients of the products depend on agriculture. There is a team of scientists and agronomists working closely with farmers to drive productivity and efficiency for those farmers, as well as the stability and localisation of the supply chain. The investment in the area is R610 million over a period of five years with R117 million already having been spent last year and in the current year the plan is to spend R130 million. The agricultural development activities are broken down into three key areas: emerging farmers investments behind the capacity building upliftment of emerging farmers, one of the primary conditions and commitments; research and development which is the backbone of any agricultural development programme ensuring that improved varieties, new technologies and best practices are being deployed and adopted by emerging farmers to improve their productivity. Then agricultural technology is varied across diesel technology and mechanical technology the real key enabler behind agricultural development to the farmer and to the sector within South Africa. Over the five years, SAB is projecting to invest over R615 million. Some of the conditions are:

  • The number of emerging farmers incorporated into the supply chain. Not just buying from the farmers but developing their capacity. In 2017 the number of emerging farmers within the supply chain was increased to 352 with the majority being maize farmers. The number of barley farmers is also increasing. In 2018 the target for emerging farmers is 600. The barley season is already in the process of planting so dry land area is planted and irrigation will conclude the planting by the end of July of which it is anticipated that 152 small holder farmers who are within SAB’s supply chain. There has been a large increase within maize and the farmers that are participating in crop 19 which will be planted in September and October of this year and harvested in next year in June. The condition will be met one year ahead of the target.
  • The second condition is in line with the production expansion of the company and moving South Africa from a net importer to a net exporter of barley and malt with the production of 475 000 tonnes of barley. This will require the incorporation of more virgin farmers, as well as more commercial farmers. The target is to incorporate 540 commercial farmers in the supply chain. The barley grain has been planted and it is anticipated that this year there will be 405 000 tonnes of barley harvested in the country which is a big increase. Farmers are being encouraged to diversify the crops that they are growing as crop rotation is good for the land.

Discussion

The Acting Chairperson thanked the team from SAB for the presentation saying it was informative and asked the Members to respond to it.

Ms A Mfulo (ANC) said she was so impressed that the private sector could do so well in developing the communities. However, she had a concern that big investors tend to concentrate on areas that are already developed like Gauteng and she suggested that they go to economically weaker areas too. The Northern Cape was an area that was weak and where there were a large number of people there who abused alcohol. She wondered why investors were shunning places like the Northern Cape. Investors were approaching employment agencies and paying them money but when NGO’s approached the investors to do the same work they were told there was no money. NGOs had lists of people with disabilities who were in need of work. She could see the support provided by SAB to the youth and women, but she could not see the disabled. She said the work that SAB was doing was very good and she was aware of their programmes but was not so sure how they worked until she listened to the presentation. She also encouraged SAB to communicate in languages that the poor people with little education could understand. She was only complaining because her province was not catered for.

Mr I Pikinini (ANC) said the information was a lot for one day. He agreed with Ms Mfulo that the SAB programmes which were very good needed to spread further to other parts of the country. He asked what criteria was used to identify the people that were given support by the company. He expressed the desire for the Committee to visit some of the programmes so that they could speak with authority about them. He asked which institutions SAB was partnering with on agricultural development.

Mr Cele asked who the external auditors for SAB were and what was happening with the Zenzele scheme because there was a problem with the Competition Commission that there was dilution. He further asked how much of the R1 billion that had been earmarked for agricultural development had been used and which provinces had benefitted.

Mr Cele was corrected that it was R610 million and not R1 billion for agricultural development.

Mr Cele asked a question concerning the Thrive Fund where it was reported that it wanted to transform white ownership. He asked how much progress had been made in that regard. He also asked how much progress had been made on powering taverns with renewable energy and where this has been done.

Ms Mfulo asked why SAB did not have researchers in other provinces as they only had them in Free State and Gauteng.

Mr Hauxwell thanked the Committee members for their questions. He said the one thing the team tried to predict was what sort of questions they were going to get. We thought the biggest questions we would be asked would be how we choose where to go with our various programmes. The company recognised that the public interest commitments were for all of South Africa and not just Gauteng. The principle that was driving SAB was that this was not just a five-year commitment but a long-term commitment. A lot of what the company was doing was brand new and had never been done before and in order to do the projects, it needed to have the people close to the projects to make sure that those projects succeeded. Before it could spread them out, it chose areas to it could go to in case of problems. It was not that it would not commit to spreading the projects but it was choosing areas where it believed it would have the most success, where it would learn and teach people on the programmes and find partners to work with on future projects. Thereafter it could be transferred across the country. The company also had to factor in whether the projects were agricultural, for society or ED. The society ones were quite clear and the company could do a better job of balancing those projects as soon as possible. There are things around climatology, infrastructure that the company would have to worry about when it came to the agricultural programmes. The company had taken note and accepted the criticism and it will continue to expand the programmes in the future. On the Thrive Fund, there was no deliberate exclusion of the disabled, but the company had not come across a disabled business thus far, but it would love to include entrepreneurs. The focus of the Thrive Programme was the transformation of white-owned businesses so if it could find disabled black entrepreneurs that would want to take over those businesses it would be open to it. The company would remind its teams to have a special focus on the disabled and to see where these individuals are and how they could be included. He added that the road shows concerning the programmes were done in the vernacular. The company had good people throughout the whole of South Africa who were familiar with the customs and language and geography and they ensured that SAB communicated in a relevant way.

Ms Kosi said in as much as the company was starting with a commitment, it also had things that it had been doing all along. The PIC was just an add-on investment. The company had been doing things before which it could not just drop because of the PIC commitment. It had a two-pronged approach where some of the projects that it had been doing all along were not featured in the report because they were specifically dealing with the PIC funding. The company only brought one or two as a matter of setting the context of SAB’s commitment to uplift the people’s quality of life. The company has already spread to all provinces with the rest of the programmes that it has. Part of what the SAB Foundation has been doing is working with people with disabilities and she committed to sending information regarding programmes involving the disabled to members of the Committee. It has good entrepreneurship programmes going on in the SAB Foundation. It found a niche in relation to people with disabilities in the social entrepreneurship space. It has a programme called social innovation where local people find solutions to the challenges facing their own communities. SAB was the first beverage company to contribute to the Proudly South African campaign and that shows that the company was there to stay. There are programmes that deal with foetal alcohol syndrome which is in the Northern Cape and a programme with the social ministry in Mpumalanga and a lot of money has been spent in those budgets, but they were not included in the presentation. She welcomed the idea of the Committee members visiting the projects and the offices of SAB so that more staff could make presentations to them about the programmes. However, the company was open to criticism so that it could improve their programmes.

Mr Clarence Sibiya, Corporate Sales Director, SAB,  said outside of the PIC the company invested over R80 million which was split into practical provincial programmes that could address the needs of those provinces. In the Cape it looked at programmes that addressed safety of the community members. It also looked at issues of under-age drinking and how to increase the visibility of the police in the community. The company went to KZN where it invested in road safety and tavern upgrades where the safety of consumers in taverns was the main concern, particularly the safety of females who frequent taverns. It looked at basic issues like lighting and security cameras, as well as alarm systems that assist with the response of the local police. The police response time has actually improved from 15 minutes to 10 minutes because of the gadgets. The company invested in other provinces as well but R80 million was focused on harm reduction. Over R50 million was spent on the SAB Foundation and other programmes such as gender-based programmes which was well represented across all provinces. The company is undertaking social responsibility with the hope that the community will also change.

On the learnership programme in the SAB Foundation, R40 million is specifically for the disabled. The idea is to create skills for them because disabled people can compete. The Northern Cape has a programme that has been running for the past five years which is the foetal alcohol syndrome programme and the company believes it can make a difference there. From the R210 million that was spent from the PIC Fund last year, at least eight provinces were touched. The company has been working closely with government to ensure that what it does is aligned to the government priorities and it is being led by the National Development Plan. This year the company is investing over R40 million in taverns and learnings from other provinces like KZN are being applied.

Mr Rogers stated that he loved the Northern Cape and that it was an important province for SAB from the barley production perspective. As the company moves towards 475 000 tonnes it was important to position much more production capacity under irrigation than in the past. The area under irrigation has been doubled from 2017 to 2018 and the majority of that expansion is in the Northern Cape. There is around 70 000 tonnes of barley that is under irrigation the majority of which will be from the Northern Cape. It is an important province for SAB from an agricultural perspective. One of the questions asked what the process to follow is if there is land and water available. There is a structured process for identifying potential entrants into the programme. The company works closely with the municipalities and the Departments of Agriculture and Rural Development. The company relies on their recommendations and the previously disadvantaged persons that they bring forward and some of the recommendations that the farmers bring in. A number of emerging growers are being supported. The criteria is that the emerging farmer has to be a previously disadvantaged individual or an entity that is 51 percent black owned, so the company works through direct referrals and departmental referrals to understand who is interested in the programme. There is a set of criteria regarding documentation, affidavits and tax registration, registration of the cooperative or entity and documentation that shows whether there is a title or a lease. The ability of the individual or entity to farm their land is assessed and some of those issues are governance compliance but they are important. There is also an agricultural assessment where one of the agronomists goes meets with the farmer or cooperative, understands the soil and understands the productive capacity for the crops that they are interested in growing. If all those conditions are met, then they are brought into the programme. The reason that they are robust is to ensure that when a farmer is in they would like to keep them in the programme for many years.

In the post-investment period, the support is meant to keep the farmers successful so that they do not leave. There is a minimum of three years support regarding the management of the soil. Extension officers are, therefore, an important part of the support provided post-investment. The support is well beyond finance. The idea is to support the farmer until they can become self-sustaining and eventually move from being an emerging farmer to becoming a commercial farmer. Out of the 350 emerging farmers that were supported 2017, 138 of the farmers were in the North-West, 29 were in the Western Cape, 67 in Mpumalanga, 59 in KZN, 32 in the Eastern Cape and 25 in Gauteng. The company already has a broad footprint regarding expansion in year one and there are efforts to look for opportunities in Limpopo for lime production.  One of the farms will be run by a disabled women’s cooperative.

Mr Cele asked how much money had been invested in emerging farmers.

Mr Rogers replied that in 2017, R35 million had been invested and R68 million was the plan for 2018. Regarding the institutional partners in research, there is no partner in the Northern Cape; however the company does active research in the Northern Cape because of its importance. There are three research agreements with universities in South Africa, namely, University of Stellenbosch, University of Johannesburg and the University of the Free State. The company is looking to broadening those collaborations and currently there are engagements with other agricultural colleges.

Ms Kosi said the auditors of SAB are Ngubane and Company a black owned auditing firm. She admitted that the company uses agencies, but it was trying to reverse that because the private sector is agency reliant with existing contracts - some of which are long-term. The company is now looking to having direct interactions with the communities. The company works with a lot of agencies and some of them are within associations, but it would be open to dealing with NGOs.

On the taverns and coolers, Mr Hauxwell said one of the things the company had done in the PIC commitment was that it was installing the on-site solar because it had discovered that one of the biggest expenses that tavern owners faced was either electricity or ice to keep the beer cold. It was a modern investment that allows the tavern owners to have additional disposal income that they can re-invest in the business or in their personal lives. The company had started with a pilot ten and they intended to roll out to one thousand taverns within the next twelve months.

On the challenges faced, one of the issues that was communicated to the Competition Commission was that it had to start delivering immediately and that it had logistical problems because it lost nearly 350 people. Compliance was expected even in the first year, but it was difficult. That was why they could not start with the weakest because they had to show the competition commission that they had addressed some of their concerns. The company raised this concern and advised that in future mergers there should be a grace period of around six months to engage with their implementation boards to identify their projects better and then to start to measure them. In total the SAB team delivered R202 million in 2017 and the target was R200 milion.

Mr Cele referred to the 350 employees that the company lost and he asked whether they had been retrenched.

Mr Hauxwell said the company was not allowed to retrench anybody as that was stipulated in the conditions but this was a process where people were given an opportunity to either leave the business or to stay. The people that left did so voluntarily and there was a contractual undertaking from SABMiller to protect the employees and the majority of the people who left were senior people. The condition was to maintain the number of 5697 employees and that is where they currently are. They are, however, allowed to retrench for operational reasons if there is a negative economic climate.

Mr Cele asked how many tavern owners had been issued with fridges.

Mr Cele was corrected that the condition stipulated that the company has to allow the tavern owner to allow the competitors to use the SAB coolers, but it is at his discretion.

Mr S Tleane (ANC) gave a vote of thanks on behalf of the chairperson for the presentation that was made by the SAB team.

The meeting was adjourned.

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