Coca-Cola Beverages Africa has told the Competition Tribunal that the retrenchment of staff two years ago was due to the effect of the sugar tax on its profits and not the merger with two bottling plants. BusinessLIVE reports that the Competition Commission has accused Coca-Cola of breaching the merger conditions surrounding its purchase of two bottling plants in 2016, Shanduka Beverages SA and the Coca-Cola Canners of Southern Africa.
Coca-Cola was given the go-ahead for buyout of the companies on condition it did not retrench certain staff as a result of the takeover. It was allowed to retrench staff if its reasons for doing so were not related to the merger and if it kept the same number of people employed.
Three years after the buyout, Coca-Cola cut 368 jobs at some of its bottling plants. The Food and Allied Workers Union (Fawu) complained to the commission about the job cuts, arguing that Coke had breached the merger conditions. The commission investigated the complaint and concluded that this was true.
Coca-Cola appeared has before the tribunal to dispute the contention that it breached merger conditions and have the commission’s finding overturned. Advocate Margaretha Engelbrecht SC, who represented Coca-Cola, told the tribunal that Coca-Cola’s decision to cut jobs was an “operational one” in response to rising input costs, a weak economy, reduced consumer demand, the increased price of sugar, the higher cost of fuel and the sugar tax.
The commission has said that because Coca-Cola retrenched staff while still making a profit the retrenchments were merger related. Advocate Romeo Kariga SC, for the commission, said the moratorium on merger-related retrenchments was “actually indefinite”.
Engelbrecht argued that the retrenchments were justified as directors of the company had a fiduciary duty to be prudent and make strategic decisions to ensure the company did not become insolvent. Engelbrecht said Coca-Cola “was surely not expected to become the SAA of the soft-drink industry, before it did something” and it was legally entitled to take steps to remain profitable.
BusinessLIVE reports that at about the same time as it was retrenching, Coke hired 1,000 employees through labour brokers at wages lower than those paid to the retrenched workers.
Advocate Nyoko Muvangua, for Fawu, said the “sugar tax was used as a veneer” by the company to defend its retrenchments. Muvangua said the job cuts were as a direct result of the mergers with the two bottling plants three years before.
[link url="https://www.businesslive.co.za/bd/companies/retail-and-consumer/2021-03-18-coke-assertion-that-layoffs-were-as-a-result-of-sugar-tax-disputed/#:~:text=Coca%2DCola%20Beverages%20Africa%20told,merger%20with%20two%20bottling%20plants."]Full BusinessLIVE report (Open access)[/link]
See also MedicalBrief archives:
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[link url="https://www.medicalbrief.co.za/archives/sugar-tax-cut-consumption-sugary-drinks-meta-analysis/"]Sugar tax has cut consumption of sugary drinks — meta-analysis[/link]
[link url="https://www.medicalbrief.co.za/archives/beverage-producers-evidence-against-sa-sugar-tax-was-out-of-context-and-unscrupulous-study/"]Beverage producers’ evidence against SA sugar tax was ‘out of context’ and ‘unscrupulous’ — study[/link]
[link url="https://www.medicalbrief.co.za/archives/sugar-industry-shouldnt-blame-woes-sugar-tax-treasury/"]Sugar industry shouldn’t blame woes on sugar tax — Treasury[/link]
[link url="https://www.medicalbrief.co.za/archives/sas-sugar-tax-pits-jobs-lifestyle-diseases/"]SA’s sugar tax pits jobs against lifestyle diseases[/link]