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4. ETHICAL ISSUES AND RECOMMENDATIONS

Commitment to agreements and stakeholder dealings: To secure approval for the SABMiller deal, we
committed amongst others, that we will support local content rules by buying ingredients (barley and hops)
from South African suppliers, rather than importing. Further that we will not implement standards that are
less advantageous to local suppliers compared to our global standards. To renege on these commitments
because we estimate that authorities may lack the capacity to oversee the agreement displays lack of
integrity; our willingness to not respect laws or agreements if it will serve our narrow economic interest (self-

interest) is a breach of trust between us, the government and the people of South Africa. Furthermore, to
agree we will not retrench and then use indirect means to ‘force’ resignations or voluntarily retrenchments
is deviant, malicious or not dealing in good faith!

Recommendation: A thorough audit needs to be conducted to establish the extent of any deviations from
our commitments, and steps must be taken to ensure we honour all expectations, especially those
concerned with the pre-condition for the approval of the SABMiller deal!

5. CONCLUSION

Let’s re-iterate and summarise the key actions the Board must now take:
1. On organizational structure and change leadership, immediately confirm the leaked press release and
use a combination of education and communication; participation and involvement; facilitation and
support. If no progress, negotiate, co-opt and coerce. This is the best approach to secure the projected
synergies and co-operation, especially in Africa where consultation is highly valued!

2. On Deal Funding Strategy & Group Financial Performance, maintain 5 year financial targets, but take
steps to reduce gearing; consider speeding-up agreed asset disposals and changing dividend policy to
achieve this. Our gearing is much higher than that of our closest rival –Heineken, and industry norms.
3. On Human Capital Structure (in Nigeria), implement a performance-based pay system and actively
recruit skilled personnel who have left to Heineken, to return; this will help regain our lost market share!
4. On Competitor Activity (in China), design and implement an operational audit of our depots (distribution
channels). This will help identify why we are not as competitive in regions from which Heineken is likely

to challenge our market share in that country.
5. On Innovation Strategy, proceed with direct retail by launching our own e-commerce platform. It is more
suitable than the option of using 3 party platforms, as it will not only help address the previous issue
rd
of ‘B2B And Downstream Supply Chain Strategy’’, it will help us exploit big data opportunities –
Although its NPV is a lot lower, we expect the strategic benefits of this option to translate to better
financial results beyond 5 years (in the long-term)! But first incentivize supermarkets to come along!

6. Conduct an audit of all commitments we made to the government, stakeholder and the people of South
Africa as a pre-condition for the SABMiller deal; reneging on these is unethical!

We trust you will find this report helpful.
Team CharterCapital Advisory, The CharterQuest Institute
Developed by The CharterQuest Institute for 'The CFO Case Study Competition 2018'
www.charterquest.co.za | Email: thecfo@charterquest.co.za