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Announcement regarding the settlement agreement concluded with the South African Government
Stefanutti Stocks Holdings Limited
(Registration number 1996/003767/06)
Share code: SSK ISIN: ZAE000123766
(Stefanutti Stocks)
ANNOUNCEMENT REGARDING THE SETTLEMENT AGREEMENT CONCLUDED WITH THE SOUTH AFRICAN GOVERNMENT
Shareholders are advised that Stefanutti Stocks (Pty) Ltd a subsidiary of Stefanutti Stocks entered
into a settlement agreement (the Settlement Agreement) with the government of the Republic of
South Africa (the Government), together with six other construction companies (collectively,
the Construction Companies) on 11 October 2016, in an effort to address the Construction
Companies’ exposure to potential claims for damages from certain identified public entities (the
Claims) arising primarily from the fast track settlement process launched by the South African
Competition Authorities in February 2011 (the Fast Track Settlement Process), as well as to
significantly advance the transformation of the South African construction sector.
SETTLEMENT AGREEMENT WITH THE SOUTH AFRICAN GOVERNMENT
Following an extensive period of negotiation, the Government and the Construction Companies have
concluded the Settlement Agreement which addresses outstanding legacy issues and commits to a
plan which will ensure the repositioning of the South African construction sector. All parties to the
Settlement Agreement acknowledge the need to foster a better relationship between the Government
and the construction industry going forward.
1. The Settlement Agreement
1.1 In summary, the Settlement Agreement stipulates that:
(a) Payments:
Over the next 12 years, the Construction Companies will be required to make a collective,
annual contribution of R125 million into a fund (the Fund). The Fund will be constituted as a
trust (the Trust). Stefanutti Stocks’ obligation amounts to R180 million payable in annual
contributions of R15 million. The first contribution will be structured so that 25% thereof is
payable within five (5) business days following the signature date of the Settlement Agreement
and the remainder shall be paid no later than 90 days following the signature date. Thereafter,
each subsequent contribution will be payable annually on 1 July.
(b) Application of payments to the Fund:
The Trust will use the payments made to the Fund to (i) implement initiatives that will develop
and enhance the construction industry, in conformity with the Government's transformation
objectives; and (ii) promote the development of emerging contractors and suppliers in South
Africa. The Trust shall be governed by a Board of Trustees appointed by the Government, the
Construction Companies and the South African Forum of Civil Engineering Contractors.
(c) Settlement of Claims:
Other than the civil claim received from the City of Cape Town, any Claims or potential Claims
for damages that certain, identified public entities have made, or may be entitled to make,
against the Construction Companies, in relation to projects arising from the Fast Track
Settlement Process, will be fully and finally settled.
(d) Development initiatives or disposal of a meaningful interest in the construction business
to an emerging contractor:
The Construction Companies have also individually undertaken to either:
(i) launch development initiatives with the aim of identifying, developing and mentoring up to three
emerging contractors (Emerging Contractors), to ensure that the Emerging Contractor will
have the necessary skills and quantity of work required to generate a cumulative combined
annual turnover equal to at least 25% of the relevant Construction Company’s annual South
African civil engineering and general building turnover within 7 years. Aligned to this obligation,
are fixed interim period transformation targets on each Construction Company as well as
penalties calculated in accordance with a formula, for a failure to meet such targets; or
(ii) to dispose of not less than a 40% economic interest in its South African civil engineering and
general building construction business, to an enterprise that is more than 51% black owned,
managed and controlled, in which case it is released from 1.d(i) above.
(e) Limitation of liability:
(i) The aggregate liability of a Construction Company arising from (i) its annual contribution in
1.1(a) above; and (ii) from any potential penalties in 1.1(d)(i) above, shall not exceed 29% of
the Construction Company’s market capitalisation based on the Construction Company’s
closing share price the day preceding the signature date of the Settlement Agreement.
(ii) Stefanutti Stocks’ aggregate liability in terms of the Settlement Agreement is as set out in the
financial effects in 1.1(a) and 1.1(d)(i) above. In the case of Stefanutti Stocks, this liability is
limited to R254 million.
(f) All Construction Companies commit to an integrity undertaking, in terms of which sound ethical
and legal principles are adopted.
1.2 Benefits of concluding the Settlement Agreement
(a) Enhancing transformation in the South African construction sector.
(b) Allowing Construction Companies to focus on their businesses as opposed to engaging in
lengthy, costly and protracted litigation.
(c) Creating and promoting black-owned and managed construction companies through Enterprise
Development.
(d) Enhancing innovation in the sector.
(e) Providing closure for Construction Companies on the legacy matters dealt with by the South
African Competition Authorities and giving certainty to stakeholders that any existing or
potential Claims from identified public entities, as well as the associated litigation costs and
disruptions to operations are avoided. Importantly, by committing to the critical transformation
initiatives of this Settlement Agreement the construction sector in South Africa will be a more
sustainable and competitive industry, ready to partner with the Government for the
advancement of infrastructure development in South Africa and for all South Africans.
(f) Any successful Claims (or settlement thereof) other than the civil claim from the City of Cape
Town, brought against the Construction Companies following the signature date, in relation to
those public entities specifically identified in the Settlement Agreement will be deducted from
the annual contributions made by the Construction Companies to the Fund as noted in 1.1(a).
(g) Settlement with the Construction Industry Development Board, avoiding possible black listing of
the Construction Company which would result in a suspension of public sector work.
1.3 Outstanding civil claims
The Settlement Agreement settles all Claims and pending Claims by identified public entities.
The Construction Companies will still be exposed to any claims brought by state-owned
enterprises and public departments that are not listed in the Settlement Agreement.
In conclusion, this settlement signifies the Government and Construction Companies’ commitment in
promoting sustainability, transformation and development in the construction sector.
Shareholders are further advised that the South African Competition Authorities have withdrawn the
matter against Stefanutti Stocks into the alleged “World Cup Stadia Meeting”.
Johannesburg
11 October 2016
Sponsor and Corporate Advisor: Bridge Capital Advisors Proprietary Limited
Legal Advisors: Webber Wentzel
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