Business Maverick, South Africa

Right of Response: When facts are also casualties – ABI and the Daily Maverick

By Daily Maverick Staff Reporter 11 December 2015

Earlier this week, Daily Maverick published its groundbreaking investigation, Casualties of Cola. Here, in the interest of fair representation and robust debate, we publish in full a response by Velaphi Ratshefola, ABI MD.

We recognise the effort that has gone into the Daily Maverick investigation into the ABI Owner Driver (OD) initiative. But it tells mainly one side of a complex story.

As a starting point, the ABI Owner Driver initiative was not set up as a BEE scheme and neither is it a typical outsourced scheme where a function is given to a single third party. It was a genuine effort made well before the ANC came to power – in fact in 1991 – to give individuals the opportunity to control their own destiny. We earn no B-BBEE scorecard points for the OD programme for enterprise development, only for procurement, as we would for any B-BBEE supplier. And this was a conscious decision we made.

When the OD programme was introduced nearly 25 years ago, the benefits were obvious: ABI could create a means to motivate better performance and leverage part of its distribution network with a reliable, flexible and customer-focused service, while at the same time enabling the creation of hundreds of small businesses – the owners of which are not all previous employees.

The dimension, scale and effectiveness of the OD initiative is clear: today, the programme accounts for more than 40% of ABI’s distribution spend. It constitutes a substantial group of businesses who are the primary interface with our customers. It has been, and remains, in ABI’s material interest to make sure the programme succeeds. It is premised on productivity and customer service – the more productive and service-oriented the ODs are, the more they gain – and obviously, the more ABI benefits. Both parties profit from a successful business, which is as it should be.

The average monthly profit – by which we mean what’s left in the OD’s pocket after all expenses – is R21,000 a month, well above the industry standard of about R13 000 for a driver who works three hours overtime a day. On average our drivers are far exceeding the industry standard. A top driver can earn over R50 000 per month, after all expenses including the truck which in the end is their own asset. This level of wealth creation has enabled many ODs to educate their children, buy their homes and live secure lives in their communities. Notwithstanding this, not everyone hits these goals or succeeds at being an entrepreneur, and as a society we will have to confront and debate this further.

Today, there are more than 300 ODs running their own businesses and the scheme has had an 84% retention rate for the past five years – a high success rate for small business. Their success is no accident: it takes great effort from both ABI and the ODs to make it so. As an example, ABI offers 14 training modules to improve ODs’ skills to assist in the sustainability of their business.

The fact that not all ODs are former employees suggests that people outside ABI joined the scheme because they saw an opportunity. And the scheme is not an attempt to remove unionised employees. 76% of ABI’s 2,600 employees in the bargaining unit are unionised, so there would be little point.

And while the story told by the Daily Maverick suggests that ODs were forced to use one particular business advisor, the truth is somewhat different. Twenty eight accredited business advisors, independent of ABI, were and still are available to ODs from which to choose, and they can change them at any time subject to the contractual obligations they have agreed to with their relevant advisor. The company remunerates the driver to cover the cost of the advisor and also for running expenses such as fuel, maintenance, lubrication and tyres as well as fixed expenses such as rental, insurance, licence, and cell phone costs.

In terms of the contracts being signed, it seems the disgruntled former ODs were happy to abide by their contracts while making money, but having fallen foul of certain contractual obligations, they are now making allegations of being forced to sign. By their very nature, contracts are complex and are created in accordance with SA’s statutory requirements, which cater for independent contractors. This is a complex business that requires contractual agreements to cover both ABI and the ODs, and of necessity they are professional legal documents which set out important principles and expectations – for both parties.

The real issue remains the termination of contracts. As it turns out, 30% of the terminations in the last 18 months have been terminated by ODs themselves for their own reasons. There are three primary reasons for contract termination from ABI’s side: failure to perform distribution services, theft, and non-payment of tax. None of these is a minor cause to terminate a contract; they are fundamental both to good governance and contractual obligation.

Given how long it takes to set up and train a new OD, and our need to ensure the success and effectiveness of the programme, terminating contracts is a last resort, and decided upon only when every other form of engagement has failed, or when evidence of wrong-doing is palpable.

On the R6.3-billion court case brought by former ODs, ABI has devoted a great deal of time trying to manage this issue constructively. We have had over two years of engagement with the former ODs, including the involvement of the Department of Trade and Industry in trying to mediate. Interestingly, the former ODs’ initial request was to be re-instated on the scheme, which we rejected as we believed the termination of the contracts was the right decision. They have had every recourse to appropriate dispute resolution options, and have only recently launched a court action with a wholly unsubstantiated figure as a proposed settlement.

Importantly, each termination needs to be looked at separately according to the specifics of each case and cannot simply be grouped together in one court action. There is no one reason for termination that is common to all. For example, some of the plaintiffs listed in the litigation are ODs who chose to terminate their own contracts – a right given to them in the contract. In addition, the 150 plaintiffs are a collective of ODs that have been terminated over a long period, some of which date back to the 1990’s.

The R6.3-billion claim is an alleged claim for damages that cannot, in our opinion, be substantiated factually or legally. We have engaged with the plaintiffs’ attorney and believe we would succeed in defending our position in a court case. ABI will continue to pursue all avenues to try and resolve the litigation.

While we believe that in each case the terminations were lawful, we are also deeply saddened by any loss or hardships suffered by former ODs or their families. We appreciate that following termination, some people have fallen on hard times and we certainly do not view this with indifference.

The bottling sector operates in a highly fractured and complex market. We review the programme consistently and make changes where we believe it could improve. We know we can always do better. While we may disagree with key aspects of the content in the Daily Maverick story, it is nonetheless a measure of a vibrant democracy that it was published. DM

Photo by Shaun Swingler.

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