Good news for the more than 400 workers at the Tulbagh canning factory. They look set to get their jobs back — for an unspecified period — and most should hold onto the voluntary severance payments they’ve already received from the Premier Group. Pretty much all thanks to the doggedness of the Southern African Clothing & Textile Workers’ Union and other unions.
Other than that, it’s difficult to know what will flow from the unprecedented clash between Premier and the regulators. The Competition Commission wants the Competition Tribunal to revoke its conditional approval for Premier’s merger with Rhodes Food Group (RFG).
While the tribunal considers the revocation — likely to take at least a year — the commission is asking it to order Premier to maintain the Tulbagh factory in its entirety “to allow the facility to retain its productive capacity”. It also wants Premier barred from implementing voluntary severance agreements and ordered to reinstate employees who want to return.
All because of a 50-page document that described in detail how tough the canned fruit business was — and listed closing the Tulbagh factory among RFG’s cost-cutting options. It only appeared on February 18, weeks after the commission had recommended conditional approval for the merger. Premier CEO Kobus Gertenbach is adamant he barely saw it.
It’s almost impossible to believe Premier would not have contemplated, however cursorily, the closure of the Tulbagh factory before it agreed to buy RFG. The factory’s earnings record is extremely volatile.
Just how cursory is central to the clash.
In its late January recommendation, the commission stated: “To address employment concerns the merger parties undertake not to retrench any employees as a result of the merger for a period of three years.” Premier assured the competition authorities that no closures or disposals of manufacturing facilities were being considered.
Then, in late July, Premier announced the closure, claiming it was entirely due to a marked deterioration in global trading conditions.
Premier’s seemingly cavalier attitude incensed the unions and the farmers who supplied the factory. The unions referred to clause 2.3 of the merger conditions, which automatically presumes any retrenchments within three years were caused by the merger unless Premier can prove otherwise. Premier, on the other hand, is testing an earlier clause that excludes voluntary retrenchments and separation arrangements from the prohibition.
Unexpected?
Premier may have hoped to rely on the Constitutional Court’s 2024 ruling in the Coca-Cola Beverages Africa (CCBA) case against the commission. In 2019, three years after several bottlers merged to form it, CCBA retrenched 368 workers. It argued the cuts were driven by economic pressures and the sugar tax, not the merger.
The commission cried foul. The tribunal sided with CCBA, the Competition Appeal Court with the commission, and the Constitutional Court, finally, with CCBA.
Once again, the commission is crying foul. It says the RFG document is proof the merging parties contemplated closing Tulbagh and failed to disclose it.
Gertenbach is equally adamant the closure had nothing to do with the merger. And, he says, Premier has not contravened the “no-retrenchments” restriction. “There were no retrenchments, the workers accepted voluntary severance packages,” Gertenbach tells the FM.
It’s an argument that’s unlikely to sway the commission. “No-one would have taken voluntary severance unless they had to,” says one competition lawyer.
Gertenbach also argues that RFG would have had to close the factory anyway.
That may be, but the problem for Premier is the conditions it cites as causing the unexpected closure were not actually unexpected. The steep US tariffs had been introduced a year earlier; the structural decline in global demand for tinned fruit and China’s increasing supply were long-term factors. The rand had been reasonably stable between early March and the end-July announcement.
No doubt the impact of all those conditions was building into a horror show.
In Premier’s defence, its primary interest in the merger was not canned fruit, and little attention may have been paid to the document so close to completion. Once the deal was done, Premier may have looked closer and realised this was a business it didn’t want to be in.
The roughly R1bn asset write-off from the closure now looks like just part of the bill.
The competition lawyer tells the FM it’s highly unlikely the merger will be undone. But if the tribunal finds disclosure was incomplete, the commission may push for stiff penalties or tougher, and presumably costlier, conditions.
