Bread fixers face costs if class action goes through - 02 Dec 2011 Busrep.co.za - Business Report

The cost of operating a cartel could be set to become considerably more expensive with yesterday’s news that the Supreme Court of Appeal has granted theBlack Sash, Children’s Resources Centre, Cosatu and the National Consumer Forum leave to appeal an earlier ruling denying them a “class certification order” in their lawsuit against three bread companies.

The three companies – Tiger Brands, Pioneer Foods and Premier Foods – went through a fairly torrid time with the competition authorities, or at least Tiger Brands and Pioneer Foods did.

Premier Foods was smart enough to apply for a leniency agreement so it escaped the cost and humiliation of the Competition Tribunal process.

When Tiger Brands was having its consent order processed by the tribunal, it felt like things couldn’t really get much worse for corporate executives whose companies are involved in anti-competitive conduct; former group chief executive Nick Dennis had a particularly tough time.

But then it was Pioneer’s turn and things got a lot tougher.

The company’s decision to fight all the charges added to the hefty fine that it eventually faced.

Pioneer’s recently released results reflect just how hefty the fine was and reinforces the view that its management team was extremely lucky to survive. Although it escaped the full wrath of the competition authorities, Premier will not escape the impact of any class action suit.

Of course, such action is a long way down the track and the four parties behind it have still to overcome some major challenges. Many of these challenges stem from the fact that this will be the first action of its kind ever taken in South Africa. But they are determined.

Nkosikhulule Nyembezi of theBlack Sashrefers to the millions of consumers who suffered as a result of “corrupt and corrosive business practices”.

Ministers’ travel

Finance Minister Pravin Gordhan and his deputy Nhlanhla Nene notched up a bill of R631 000 for accommodation during trips abroad and within the country over the past two and a half years, although this figure will still increase as trips to London, Paris, Nanjing (in China) and New York were booked through the South African missions, so invoices are awaited.

In reply to David Maynier, a DA MP, Gordhan reported that he could not provide details of the hotels for security reasons, but he had stayed in foreign hotels on 20 different occasions for a total of 61 nights. In addition, he had also stayed at local hotels on 16 occasions for 61 nights.

DA finance spokesman Dion George took particular exception to a two-night stay by Gordhan in Paris in March this year – for the state visit of President Jacob Zuma – which cost R60 235.29.

He asked how Gordhan reconciled this bill – which makes up part of the R336 000 spent on his hotel stays abroad – with his numerous public comments urging the government to spend state funds wisely.

George quoted Gordhan in his medium-term budget policy statement: “We have to address inefficiency, extravagance and waste in public administration, for trusteeship is at the heart of the contract between government and its citizens.”

A four-night stay at a five-star hotel in Washington for the Group of 20 summit in September 2009 cost a sizeable R35 000 while a six-night stay in October 2009 in Istanbul for International Monetary Fund and World Bank meetings cost R53 000.

A six-night stay in London for the Investec chief executive’s conference, investor road show and speaking engagements at Oxford and Cambridge cost R43 000 in November last year. Nene’s bill for three nights at a London hotel came to R36 000 in March this year for the Commonwealth conference.

It is probably a case of don’t do what I do, just as I say.

Comair

JSE-listed Comair, which in addition to its British Airways franchise also has South Africa’s oldest low-cost airline, kulula.com, and is estimated to have a 37 percent share of the domestic aviation market, was unusual until yesterday in having two joint chief executives.

Its financial director, Erik Venter, and Gidon Novick, who was responsible for starting kulula, took over on the retirement of Pieter van Hoven about four years ago. Since then, it has branched out into other activities, including a holiday booking operation, and the two divided these responsibilities between them.

As airline costs rose and competition increased, the company has gone through an extensive restructuring and, according to Venter, its activities have become more integrated, making it difficult to separate them. So Novick has left to concentrate on new entrepreneurial activities, which yesterday he was not ready to discuss, although he will continue to act as a consultant to the airline.

Venter joined Comair 15 years ago as financial manager. Novick’s father, Dave Novick, joined Comair as an accountant in the 1960s. Chief executive Gidon Novick did not join the company immediately after qualifying as a chartered accountant, but took an MBA degree in the US and remained there for a time as a consultant, bringing back innovative ideas that were put into practice in Comair.

One of the latest innovations was to start an international operation, flying between Durban’s new King Shaka Airport and London, extending its British Airlines franchise.

But this has been put on hold indefinitely after a British Airways feasibility study. Venter pointed out yesterday that the present economic situation made it too risky.