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Announcement Regarding The Settlement Agreement Concluded with The South African Government
Basil Read Holdings Limited
(Incorporated in the Republic of South Africa)
Registration Number 1984/007758/06
Share Code: BSR ISIN: ZAE000029781
("Basil Read" or "the Company")
ANNOUNCEMENT REGARDING THE SETTLEMENT AGREEMENT CONCLUDED WITH THE SOUTH
AFRICAN GOVERNMENT
Shareholders are advised that Basil Read entered into a settlement
agreement (the “Settlement Agreement”) with the government of the Republic
of South Africa (the “Government”), together with five other construction
companies (collectively, the “Construction Companies”), 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 payment of R103 750 million into a fund
(the “Fund”). The Fund will be constituted as a trust (the “Trust”).
Basil Read's annual contribution amounts are (all years stated
inclusively) –
- R2,000,000 in each of the years 2016 to 2018;
- R8,000,000 in each of 2019 and 2020;
- R10,000,000 in 2021;
- R14,000,000 in each of the years 2022 to 2025
- R16,000,000 in each of 2026 and 2027.
(b) Application of payments to Fund:
The Trust will use the payments made to the Fund to (i) implement
initiatives to develop and enhance the construction industry, in
line 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:
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
primarily arising from the Fast Track Settlement Process, will be
fully and finally settled.
(d) Development initiatives or disposal of the construction business
to an emerging contractor:
The Construction Companies have each also undertaken to either:
(i) launch development initiatives with the aim of identifying,
developing and mentoring up to two emerging contractors
(“Emerging Contractors”), to ensure that the Emerging
Contractors will have the necessary skills and quantity of
work required to generate a cumulative combined annual
turnover equal to at least 25% of the South African civil
engineering and general building annual construction works
turnover of the relevant Construction Company within seven
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 their
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 (i) above.
(e) Limitation of liability:
(i) The aggregate liability of a Construction Company arising from
(i) its annual contribution payments 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
as at the signature date of the Settlement Agreement.
(ii) Basil Read’s liability in terms of the Settlement Agreement is
as set out in 1.1(a) above.
(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,
ensuring a positive future relationship with the Government and
State Owned Enterprises.
(b) Allowing Construction Companies to focus on its business 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) Provides 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) brought against the
Construction Companies following signature date, in relation to
those public entities specifically identified in the Settlement
Agreement will be deducted from the aforementioned annual payments
made by the Construction Companies to the Fund.
1.4 Outstanding civil claims
The Settlement Agreement settles all Claims and pending Claims by
identified public entities.
In conclusion, this settlement signifies the Government and
Construction Companies’ commitment in promoting sustainability,
transformation and development in the construction sector.
Johannesburg
11 October 2016
Company Secretary
Andiswa T Ndoni
JSE Sponsor
Grindrod Bank Limited
Date: 11/10/2016 12:46:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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