Announcement regarding the settlement agreement concluded with the South African Government
RAUBEX GROUP LIMITED
(Incorporated in the Republic of South Africa)
(Registration number 2006/023666/06)
JSE Share code: RBX
(“Raubex” or “the Company”)
ANNOUNCEMENT REGARDING THE SETTLEMENT AGREEMENT CONCLUDED WITH THE
SOUTH AFRICAN GOVERNMENT
Shareholders are advised that Raubex entered into a settlement agreement (the Settlement
Agreement) with the government of the Republic of South Africa (the Government), together with
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:
Over the next 12 years, the Construction Companies will be required to make a
collective annual payment into a fund (Fund). In the case of Raubex, the annual
payment amounts to R15 million. The Fund will be constituted as a trust (Trust). The
first of such annual payments by Raubex of R15 million will be structured so that 25%
thereof is payable within five (5) business days following the effective date of the
Settlement Agreement and the remainder shall be paid no later than 90 days following
the effective date. Thereafter, each subsequent instalment will be payable annually on
(b) Application of payments to 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:
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 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 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 annual South African civil engineering and general
building construction works turnover of the relevant Construction Company
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 (i) above.
It is the intention of Raubex to launch development initiatives as set out in (i) above.
Raubex believes that the fixed transformation targets are achievable.
(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 the lower of R1,2 billion or 29% of the
Construction Company’s market capitalisation as at the time that the securities
exchange operated by the JSE Limited closes for trading on the business day
preceding the signature date of the agreement.
(f) Integrity undertaking:
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
(d) Enhancing innovation in the sector
(e) Providing closure for Construction Companies on the legacy matters dealt with by the
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) 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.
(g) Settlement with the Construction Industry Development Board (CIDB) and avoiding
possible black listing of the Construction Company which would result in a suspension of
public sector work.
(h) Ensuring a positive future relationship with Government and State Owned Enterprises.
1.3 Outstanding civil claims
The Settlement Agreement settles all Claims and pending Claims by identified public entities.
With respect to Raubex this includes the claim received on 19 April 2016 from the South African
National Roads Agency SOC Limited (“SANRAL”). 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.
11 October 2016
Investec Bank Limited
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