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Our Purpose and Function

The Competition Commission of South Africa was established in terms of the Competition Act (89 of 1998), as amended (the Act). Its purpose is to promote and maintain competition in South Africa in order to:

· promotetheefficiency,adaptabilityanddevelopmentof theeconomy · provideconsumerswithcompetitivepricesandproduct choices · promoteemploymentandadvancethesocialand economic welfare of South Africans · expandopportunitiesforSouthAfricanparticipation in world markets and recognise the role of foreign competition in the Republic · ensurethatsmallandmediumsizedenterpriseshave anequitableopportunitytoparticipateintheeconomy · promoteagreaterspreadofownership,inparticular toincreasetheownershipstakesofhistorically disadvantagedpersons. Toachievethesepurposes,theCommission'score functions are to: · implementmeasurestoincreasemarkettransparency · implementmeasurestodeveloppublicawarenessof theprovisionsoftheAct · investigateandevaluateallegedanti-competitive conduct · grantorrefuseapplicationsforexemptionfromthe application of the Act · authorise,withorwithoutconditions,prohibitorrefer mergersofwhichitreceivesnotice · negotiateandconcludeconsentorders · refermatterstotheCompetitionTribunalofSouthAfrica (the Tribunal), and appear before the Tribunal when required · negotiateagreementswithanyregulatoryauthorityto coordinateandharmonisetheexerciseofjurisdiction overcompetitionmatterswithintherelevantindustryor sector and to ensure the consistent application of the principles of the Act · participateintheproceedingsofanyregulatory authority · advise,andreceiveadvicefrom,anyregulatory authority · overtime,reviewlegislationandpublicregulations, andreporttotheMinisterconcerninganyprovisionthat permitsuncompetitivebehaviour · dealwithanyothermatterreferredtoitbytheTribunal.

Executive Committee

TheCommissioncurrentlyhassixdivisionsthatareresponsiblefortheday-to-dayimplementationofitsstrategicprioritiesandplans.TheCommissioner andtheDeputyCommissionerprovideoverallguidancetotheorganisation.

Shan Ramburuth Commissioner

Tembinkosi Bonakele DeputyCommissioner

Nandi Mokoena* Manager:Strategy and Stakeholder Relations

Simon Roberts Chief Economist and Manager: Policyand Research

Keith Weeks Manager: Enforcement and Exemptions

Wendy Mkwananzi Chief Legal Counsel and Manager: Legal Services

Maarten van Hoven Manager: Mergers and Acquisitions

Nellie Pillay Chief Financial Officerand Manager: CorporateServices

Johan Dreyer CompanySecretary

Notes:*ResignedinFebruary2010andwasreplacedbyOupaBodibe.

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Acronyms and Abbreviations

Aspen Pharmacare Holdings Limited (Aspen) BusinessUnitySouthAfrica(BUSA) Cape Town Iron and Steel Works (Cisco) ConfederationofSouthAfricaTradeUnions(COSATU) executivecommittee(Exco) FederationofUnionsofSouthAfrica(FEDUSA) Franchise Association of Southern Africa (FASA) GlaxoSmithKlineSouthAfrica(Pty)Limited(GSK) highdensitypolyethylene(HDPE) IndependentCommunicationAuthorityofSouthAfrica(ICASA) International Competition Network (ICN) InternationalDevelopmentResearchCentre(IDRC) NationalEconomicDevelopmentandLabourCouncil(NEDLAC) NationalUnionofMetalworkersofSouthAfrica(NUMSA) OrganisationforEconomicCooperationandDevelopment(OECD) Pay-as-you-earn(PAYE) polyvinylchloride(PVC) SouthAfricanDevelopmentCommunity(SADC) South African Iron and Steel Institute (SAISI) SouthAfricanLocalGovernmentAssociation(SALGA) SouthernAfricanBitumenAssociation(SABITA) SouthernAfricanCustomsUnion(SACU) Southern and Eastern African Competition Forum (SEACF) UnitedNationsConferenceonTradeandDevelopment's(UNCTAD)

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Table of Contents

Commissioner's Overview Part 1: Prioritisation and Impact Part 2: Reports from the Divisions Enforcement and Exemptions Mergers and Acquisitions Legal Services Policy and Research Strategy and Stakeholder Relations Our People and Resources Part 3: Governance Part 4: Financial Statements Part 5: Performance against Targets 2 4 12 13 17 20 24 27 33 36 40 78

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Commissioner'sOverview

Enforcement for impact

The annual report for the 2009/10 financial year records the activities that took the Competition Commission to its first decade of existence. Indeed,theCommission'stenthanniversaryisasignificantmilestoneinthe trajectoryofsteadygrowththatthecompetitionauthoritieshaveenjoyed. This milestone was celebrated at the third annual competition conference, heldinearlySeptember2009.Theconferencewasofwiderscopethanin previousyearsandhosteddelegatesfromabroadbaseofinterestgroups. These included: competition authorities from across the globe, including from Africa; scholars and academics; government departments; legal practitioners and other professionals; and former staff members of the Commission.Itwasanappropriatetimetopaytributetotheworkofthe foundersofthecompetitionauthorities,whoprovidedthesolidfoundation from which it has been able to grow. The Competition Commission is clearly continuing on its growth path. It is a highly respected institution locally and internationally, responding effectivelytothechallengesofthelocalandinternationalenvironment. The Commission's three-year strategies are carefully devised to give direction and vision to the organisation's activities, and to use its resources intelligently. The 2006-2009 strategic plan, which had guided the Commission through a significant growth phase, came to an end in the year under review. A key measure of a resilient organisation is its abilitytodealwithchangeand,inthedynamicandchallengingbusiness environment over the past few years, the Commission has shown that it is more than able to do this. The importance of the strategic plan was to ensureamoreproactiveapproachtoourworkandaconsciouseffortto introduce,manageandsteerchange.Webeginthenextyearwithanother TheCommissioncontinueditsfocusonproactiveenforcementworkwitha focusoncartelbehaviourintheidentifiedprioritysectors.Tomanagethis moreeffectively,weareintheprocessofsettingupadedicatedcartels unit.Wereceived79applicationsforleniencyintermsoftheCommission's corporateleniencypolicyintheyearunderreview,asubstantialincrease fromthe13applicationsinthepreviousyear.Significantly,mostofthese applications (53) are in the infrastructure and construction market, suggestingsignificantcartelbehaviourinthisbroadsector.Theincrease alsoshowsthatfirmsarebecomingmoreawareofcompetitionlawandof thefactthattheCompetitionCommissionhasteeth,andtheyareusingthe leniencyprocesstovoluntarilycomplywiththelaw. TheCommissionhasbeenveryactiveinitsprioritysectors.(infrastructure and construction, food and agro-processing, intermediate industrial products and financial services). This is evident in its completing its prosecutions with all members of the bread cartel. Pioneer Foods, the last member of the cartel, was fined a hefty R195 million, the equivalent of 10 percent of the bread division's turnover for 2006. The Commission alsoreachedasettlementwithSasolforitscollusiveconductinrelationto fertiliserproducts,inwhichSasolagreedtopayR250millionforitsrolein thefertilisercartel.Investigationsintoothermembersofthecartelarestill ongoing. In the intermediate industrial products sector, the Commission uncoveredcartelsinvariousmarketsforsteelproductsandreferredfour cartelcasestotheTribunal.Thereferralsinvolvesomeofthemajorplayers in the steel industry such as Arcelor Mittal and Aveng. In the financial servicessector,theCommission'sworkcontinuedtofocusonimplementing mediumtermstrategicframework.Keyprioritiesidentifiedinthestrategic plan include prioritisation for impact, increased stakeholder engagements andbuildingahighperformancecompetitionauthority.

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therecommendationsoftheBankingEnquiry.TheCommissionhasbeen working with National Treasury, the South African Reserve Bank and the Department of Trade and Industry to take the Banking Enquiry panel's recommendations forward, with the major banks agreeing to implement 19ofthe28recommendations.Thisisasignificantsteptowardsamore transparent and pro-competitive banking system that will operate to the benefitoftheconsumer. Measuring the impact of our activities on consumers and the economy requires the Commission to increase its engagements with government, stakeholdersandpolicymakerstoinfluenceeconomicpolicyanddecision making that will be consistent with the principles of pro-competitive practices. Increased engagement with government includes our bidriggingseminars,thepublicsectorconsultativeforumandourinvolvement withNationalTreasuryintheBankingEnquiryoverthepastthreeyears. An increase in the merger threshold for intermediate and large notified mergers,combinedwithaweakeconomicenvironmentresultedinadrop inthenumberofnotifiedmergers(190intheyearunderreviewcompared to415inthepreviousyear).TheCommissionalsowitnessedanincrease in the number of notifications affecting firms in financial distress. While job losses are an inevitable part of merger activity, where possible, the Commission has tried to mitigate the effects by approving mergers on conditionthatmechanismsareimplementedtominimisetheimpactofjob losses.Inparticular,theCommissioncalledonmergingpartiestoinvestin thetrainingandskillsdevelopmentofaffectedemployeestoenablethem toaccessotherjobs. In terms of our international focus, we have become more involved with competition authorities from the African continent. An example is our participationwiththeZambianandEgyptiancompetitionauthoritiesinthe Joint Food Project, which is examining anticompetitive practices in food products. Our work with other competition authorities in forming a joint competitionforumforAfricanauthoritieswillprovideaplatformforsharing experiencesandstrengtheningourcapacity. Becoming a high performance competition authority requires good governanceandstrongleadershipwithintheorganisation.TheCommission identifieditsmiddlemanagersasakeytierofmanagementinthecontextof severeresourceconstraints.Anumberofinitiativestodevelopthecapacity of middle management were undertaken. In order for the organisation to continue to be effective, particularly in the face of the growing scale

and complexity of enforcement, investigations and prosecution, our staff numbersaresettogrowoverthenextfewyears. Recognising that people are our greatest asset, we value all our staff membersandtheimportanceofgoodstaffmorale.Wehavebenchmarked our working conditions and salaries with our peers in the public sector and arepleasedtonotethatthestaffturnoverhasstabilisedcomparedtoother years.Onthisnote,Iwouldliketothankallstaffandourstakeholdersfor allthatyouhavedonethisyeartoensurethattheCommissioncontinuesto achieveitsgoaltowardsafairandefficienteconomyofallSouthAfricans.I wouldalsoliketothanktheDeputyCommissionerandmyExcocolleagues forhelpingtosteerthisshipinthelastyear.Yourcollectivewisdomiswhat keeps us sane in troubling times. TheCommissioncontinuestobenefitfromgovernment'sfinancialsupport toexecuteitsmandate.However,resourcesarelimitedandtheworkload has increased substantially. The mismatch between resources and the demand placed on the Commission resulted in a deficit in the financial year. This would have been bigger were it not for the financial support receivedfromtheMinistryofEconomicDevelopment. TheCommissionwillnowreporttotheMinisterofEconomicDevelopment. We look forward to working with the Minister and new colleagues. We thank the Minister of Trade and Industry and colleagues in the Department of TradeandIndustryfortheirsupportandcollaborationoverthepastyears.

The Commissioner's office

Front row: Sesule Mojapelo, Mittah Sibanyoni, Innocent Tau, Tembinkosi Bonakele Back row: Hardin Ratshisusu, Shan Ramburuth, Leonard Morapedi, Malefyane Mogale, Anisa Kessery

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Part 1

Prioritisation and Impact

How the Commission prioritises its work

ThewaytheCommissionprioritisesitsworkisbasedonthreemaincriteria:thepotentialandactualimpact of anticompetitive conduct on low income consumers, the alignment of the Commission's activities with government'seconomicpolicy,and,whetherthereisthelikelihoodofanticompetitiveconduct.Thismeans thatlikelycartels,whichareaper secontraventionoftheAct,arealmostalwaysaprioritywheninformation suggeststhattheymaybeinoperation. Intheyearunderreview,majorprogresshasbeenmadeasaresultoftheCommission'ssustainedfocus on its priorities. The Commission has referred more cases than ever before, with the majority relating to collusion,whilesomerelatetocontraventionsofarangeofsectionsoftheAct(seefigure1).Inaddition,the totalamountofpenaltiesconfirmedordeterminedbytheTribunalintheyearunderreviewishigherthanin anypreviousyear,atclosetoR500million. Fromtheprioritisationframework,theCommissionidentifiedfourbroadsectorsinwhichitwouldundertake proactiveanalysisofpossiblecompetitionrelatedproblems.Theseare:food,agro-processingandforestry;

Figure 1: Referral of complaints to the Tribunal for adjudication against the corresponding sections of the Act

30 9(1) 8(c) 25 8(a) 5(1) 4(1) (a) 8(d) 8(b) 5(2) 4(1)(b) Number of cases

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15

10

5

0

1999/00 2000/01 2001/02 2002/03 2003/04 2004/05 2005/06 2006/07 2007/08 2008/09 2009/10

Source: Competition Commission

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infrastructureandconstruction;intermediateindustrialproducts;andfinancial services (banking). The Commission has also done considerable work in areas such as telecommunications and healthcare in response to complaints brought to it. And, as a matter of course, the Commission investigates all complaintslodgedwithitandanalysesallmergersthatarenotified. In terms of sector, staple foods have proved to be a major focus for all the criteria, while the infrastructure and construction sector is important becauseofboththeimportanceingovernment'seconomicdevelopment strategy and the likelihood of cartels. The Commission's investigations intoanticompetitiveconductinthefoodsectorcontinue,withmajorcases comingbeforetheCompetitionTribunalin2009/10.Thesearementioned undertherelevantsectorsbelow.TheCommissionisalsolookingatother ways of ensuring competitive outcomes, one of which is assessing the implications of competitors exchanging information, which may result in coordinated outcomes which limit competition. Thehardworkovertheyearsisbearingfruit.Forexample,initialresearch carriedouttoidentifyareaswheretherearepossiblecompetitionproblems intheconstructionsectorhasledtoseveralverylargeinvestigationsbeing initiated and, in the year under review, to a rush of corporate leniency applications, most of which are linked to bid-rigging of construction tenders.Overtheperiod,therewere79applicationsforcorporateleniency, compared to 13 in the previous year. Applications oblige firms to admit to having contravened the law prohibiting collusion and to providing the Commission with information that enables it to prosecute the remaining cartel members. The importance of following through on cases is a key element in maximising the impact of competition enforcement. This also relates to the Commission's aim to engage more with other public institutions and governmentasawholetoimprovethealignmentbetweentheworkofthe Commissionandotherinstitutions,suchasregulatorybodies.

The Commission's investigations into cartel conduct in wheat flour and mealiemealwerereferredtotheTribunalduringtheyear.Theinvestigations focused on possible collusion among the main milling companies after thebreadcartelwasexposed,andwiththebenefitofthecooperationof PremierFoodsandTigerBrands.Bothhadcomeforwardinexchangefor conditional leniency, meaning that no penalty would be sought against them. The Commission is continuing to look at all kinds of problematic conduct in thesectorthatmayleadtoanticompetitiveoutcomes,whichmayinclude theunderminingofnewentrantsandcompetitorsexchanginginformation. This is based on the premise that competitive outcomes are about the abilityoffirmstoparticipateeffectively,includingaccessingcompetitively priced inputs.

The bread cartel

InFebruary2010,theTribunalhandeddownitsdecisioninwhichitfound the remaining member of the bread cartel, Pioneer Foods (Pty) Ltd, had contravened section 4(1) (b) of the Act, which refers to cartel related conduct. Pioneer Foods had denied contravening the Act. The Tribunal imposed a record breaking penalty of 10 percent (the maximum penalty thattheActallowsinpercentageterms)oftheturnoverofSasko,Pioneer's bread division, in relation to one of the complaints. Despite this, the Commission has appealed this decision as it concluded that the Tribunal misconstrued its powers when determining that the penalty should be based only on the firm's turnover from the bread division. The penalty it imposed was therefore not a sufficient deterrent and the Commission contendsthatitshouldratherbebasedonthefirm'swiderturnover.The appeal is pending before the Competition Appeal Court and will be heard inSeptember2010.

Themillingcartel:wheatflourandmealiemeal

Aninvestigationintoanticompetitivebehaviourinthemillingindustrystarted in2007,followingadisclosurebyPremierFoodsduringthebreadcartel investigationthatthecartel,whichinvolvedlargelythesamecompanies, wasalsoactiveinrelationtomillingoperations. During the investigations, the Commission found that several wheat and maizemillershadbeendiscussingpricing,hadagreedonpriceincreases and their timing, and had allocated markets to each other. Employees andrepresentativesofthefirmsdidthisthroughthetelephoneandsecret

Prioritysectors

Food, agro-processing and forestry

MuchoftheCommission'sworkinthissectorhasbeenwithstaplefoods, which include mealie meal, bread and flour, dairy, poultry, and fats and oils (cooking oil and margarine). The pricing of these products impacts particularlyonlowincomeconsumers.

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meetings held at different venues such as churches, stadia and hotels. Theinvestigationsledtotwocases relating to wheat flour and mealie meal (milled white maize) being referredtotheTribunal.forcollusive practices. The Commission has asked the Tribunal to impose an administrativepenaltyof10percent of annual turnover for 2009/10 on each of the firms involved. This would not apply to Premier Foods and Tiger Brands, which were granted conditional immunity from prosecution by the Commission providedthattheyfullycooperateintheCommission'sinvestigationsand prosecutionofthecase.KeystoneMillingwasoneofthefirstrespondents inthewhitemaizemillingcarteltosettlewiththeCommissionandwillpay afineofR6.7million. Other firms involved are currently negotiating settlements with the Commission. The Commission is continuing to investigate other kinds of anticompetitive conduct, including the exchange of information between competingfirms,andpossiblecollusiveconductbyfirmsdealinginanimal feedforwhichmilledmaizeisanimportantinput.

In relation to the alleged cartel in nitrogenous fertiliser products, two respondents, Omnia Fertilizer and Yara South Africa (Pty) Ltd, are still defending the case. There are also remaining abuse of dominance charges againstSasolforexcessivepricingandexclusionaryconduct,whichare duetobeheardlaterin2010.

Box 1: The Joint Food Project

In 2009, the Competition Commission joined forces with the Egyptian Competition Authority and the Zambian Competition Commission in a project that aims to evaluate competition issues in the production, supply and pricing of staple food products through collaboration and informationsharingworkshops.TheprojectisfundedbytheInternational DevelopmentResearchCentre(IDRC).Ithasbeenorganisedintothree phases: · phaseone:initiatingtheprojectandbuildingtheteamcapacityineach competitionagency · phasetwo:collatingtheavailableinformationandanalysisrelatedto foodpricesineachcountryleadingtothecompilationofanoverview report · phasethree:examiningcloselycompetitionissuesinaselectedsetof markets. South Africa and Zambia carried out studies to examine the factors affecting the fertiliser and maize milling sector, and South Africa and Egypt looked at the edible oil sector. Egypt also examined competition issues relating to food supply in the informal sector. These studies highlightedtheimportanceofpractitionershavingadeepunderstanding ofmarketdynamics,andthewaysinwhichproductsareproducedand sold. The project has also identified the need for greater collaboration between competition authorities in the southern African region to deal more effectively with anticompetitive conduct by companies operating across the region.

Fertiliser

ThefertiliserindustryhasbeenaconcernoftheCommissionforanumber of years, with two complaints relating to collusive behaviour by firms referredtotheTribunalinApril2005andMay2006. Fertiliseristhesinglelargestcostinagriculturalproductionandtherehave been indications of extensive anticompetitive conduct over many years. Long-runninginvestigationsbytheCommissionledtosomeofthecases coming close to being finalised in 2009/10. It concluded a settlement agreement with Sasol Chemical Industries Limited on behalf of its operating division in the nitrogenous fertiliser market, Sasol Nitro. In terms of the agreement,Sasoladmittedtoitscollusiveconductintwoseparatematters involvingnitrogenousfertiliserproductsandphosphoricacidandagreed topayapenaltyofR250.7million.Thiswasthehighestamounteveragreed between the Commission and a respondent.

Infrastructure and construction

TheCommission'sworkintocollusionintheinfrastructureandconstruction sectorisintwomainareas:first,theCommissionhasidentifiedthewide range of products used in infrastructure that it needs to monitor; and second,itislookingintocollusivebid-riggingbyconstructioncompanies on a contract-by-contract basis. Anticompetitive conduct in both areas increasesthecostsofinvestmentinnewandimprovedinfrastructure.Itis clear that collusion has been endemic in this broad sector for some time.

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Inrelationtoproducts,therehavebeenanumberofreferralsandsettlements in cast concrete products, plastic pipes, bitumen and reinforcing steel. In addition, investigations into the cement, bricks and pilings markets are ongoing. Intermsofbid-rigging,theincreasedawarenessoftheCommission'swork in the sector appears to have persuaded several companies to properly addresstheirownconductandtofileapplicationsforleniencywherethey have identified contraventions. The Commission is allocating substantial resources to investigating all forms of anticompetitive conduct that are beingidentified,aswellaspursuingwiderinvestigationsinareasalready recognised as problematic. In the year under review, the Commissioner initiated five complaints in this sector. Of the 79 corporate leniency applications received over the year, around two-thirds were in construction alone (see figure 2 in the EnforcementandExemptionssection).TheCommissionconcludedthree consent agreements with respondents in two cartels relating to plastic pipes and concrete pipes. In the case of collusion in the manufacture and supplyofplasticpipesmadeofpolyvinylchloride(PVC)andhighdensity polyethylene (HDPE), Marley Pipes Systems agreed to pay a penalty of R31.1million.OtherfirmsimplicatedinthecartelincludePetzatakis,Swan Plastics,DPIPlastics,GazellePlasticsandAmitechSouthAfrica. In precast concrete products, including pipes, two consent agreements were confirmed with Cobro Concrete (Pty) Ltd and Concrete Units (Pty) LtdforpenaltiesofR4millionandR5.8millionrespectively.InMarch2010, theCommissionreferreditsfindingsofpricefixinginthesupplyofbitumen againstChevronSA(Pty)Ltd,EngenLimited,ShellSA(Pty)Ltd,TotalSA (Pty) Ltd, Masana, Southern African Bitumen Association, Sasol Limited andTosas(Pty)LtdtotheTribunalforadjudication.Thisfollowedaleniency applicationbySasolanditssubsidiaryTosasinJanuary2009. The Commission found that the respondents engaged in collusive conductfromaround2000untilatleastDecember2009.Therespondents collectively determined and agreed on pricing principles, including a starting reference price and monthly price adjustment mechanism. Discussionsandagreementswerefacilitatedthroughmeetingsconvened by the Southern African Bitumen Association (SABITA), correspondence through SABITA and direct communication between the oil companies. TheCommission'sinvestigationintoreinforcingsteelwasalsooneofthe

results of the assessment of important construction products. There were fourreferralstotheTribunalinthissectorintheyearunderreview,which are discussed below under intermediate industrial products.

Box 2: Raids on firms in the cement industry and PPC's admission

InJune2009,theCompetitionCommissionraidedtheofficesofPretoria Portland Cement Company Ltd (PPC), Afrisam, La Farge Industries South Africa (La Farge) and the Natal Portland Cement Company (NPC), following a complaint initiated by the Commissioner based on the Commission's research into construction products. This was based on reasonable suspicion by the Commissioner that the four cement producerscolludedtocontrolquantitiesofcementextendersavailableto thedownstreamindustry,fixedpricesofcement,dividedcementmarkets andengagedincollusivetendering.Thecomplaintwasalsoinitiatedon thebasisoftherebeingpossibleabuseofdominancebyPPCaimedat foreclosing independent cement blenders. Shortlyaftertheraid,PPCappliedforcorporateleniencyforitscollusive conduct,andwasgrantedconditionalleniencyfromprosecutioninrelation to the division of markets. The information that PPC provided showed that the four cement producers agreed to divide the cement market among themselves to maintain the market shares that each producer heldupto1996,whenalawfulcementcartelexisted.Themarketdivision agreementwasimplementeduntil2009throughthehighlydisaggregated sales information each producer submitted to the Cement and Concrete InstituteofSouthAfrica.Inaddition,PPC'sinformationrevealedthatthere isaterritorialmarketdivisionagreementbetweenPPCandLaFargein terms of which the two parties agreed that PPC would not compete in the NorthernKwa-ZuluNatalmarketinexchangeforLafargenotcompeting withPPCintheBotswanamarket.

Intermediate industrial products

Intermediateindustrialproductswereidentifiedasakeyareaofinvestigation duetotheimpactthatanticompetitivepricingandotherconductcanhave onthosedownstream,generallymorelabour-absorbingindustriesthatuse theproductsasinputs.TheDepartmentofTradeandIndustry'sindustrial policyhasrepeatedlyidentifiedanticompetitiveconductasanobstacleto growthandemploymentcreationinadiversifiedindustry.TheCommission's workhasfocusedinparticularonsteelandpolymerchemicals,inresponse

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to formal requests from the department for the Commission to undertake investigations. Four referrals in relation to anticompetitive conduct in steel products were made to the Tribunal in the year under review, and investigationsintothepolymerchemicalsindustryarecontinuing.

· CompetitionCommissionvsAveng(Africa)andothers:reinforcingmesh This complaint was referred to the Tribunal in December 2009 and concerns the involvement of large reinforcing mesh suppliers in South Africa in the conduct of price fixing and market allocation. The Commission's investigation was triggered mainly by the leniency application filed by one of the participants in the cartel, BRC Mesh Reinforcing(Pty)Ltd,asubsidiaryofMurray&RobertsSteel. The Commission's investigation revealed that the leniency applicant, AvengAfrica(tradingasSteeledale),VulcaniaReinforcing(Pty)Ltdand CapitalAfricaSteel(Pty)Ltd(tradingasReinforcing&MeshSolutions), engagedintheconductofpricefixingandmarketallocationbetween 2001 and 2008. The Commission found that the cartel was facilitated through formal meetings held under the auspices of the industry association, the South African Fabric Reinforcing Association. The meetingswerelaterreplacedbyinformalgatheringsinplaceslikepubs andrestaurants,aftertherespondentswereadvisedthattheirconduct was unlawful. At these meetings, agreements were made to fix prices and discount structures for reinforcing mesh products, and not to sell to eachother'scustomers.

Investigationsintothesteelsector

Overthepasttwoyears,theCompetitionCommissionhasbeeninvestigating variouspartsofthesteelindustry.Anexampleisthedownstreamsupply ofreinforcingbar,steeltradersandtinplate.Inthelatterpartof2009,the Commission referred four separate cartel cases to the Tribunal in this sector. These relate to: the manufacturing and supply of long steel products; includingreinforcingsteelbars;thesupplyofwireandwireproducts,the supplyofminingroofbolts;andthesupplyofreinforcingwiremesh.Twoof the cases are highlighted below. · CompetitionCommissionvsArcelorMittalandothers:longsteel In April 2008, the Commission initiated a complaint against, inter alia, the producers of long steel products in South Africa: ArcelorMittal South AfricaLimited,CapeGate(Pty)Ltd,CapeTownIronSteelWorks(Pty)Ltd andScawSouthAfrica(Pty)Ltd.Thecomplaintrelatedtotheiralleged collusive conduct. The Commission decided to initiate the complaint followingconcernsraisedbytheDepartmentofTradeandIndustryand basedonresearchconductedbytheCommission,whichshowedthat formanyyearsthesteelmillshadbeenchargingcustomersatcloseto import parity levels, even though South Africa has always been a net exporterofsteel. After the search and seizure operation conducted at the premises of Cape Town Iron & Steel Works (Cisco), Highveld Steel and Vanadium (aproducerofflatsteel)andtheSouthAfricanIronandSteelInstitute (SAISI),theCommissionreceivedanapplicationforcorporateleniency from the Scaw Metals Group regarding the conduct of price fixing, market-allocationandcollusivetenderinginthesupplyofproductssuch asreinforcingbar,wirerodandsections.Basedonevidenceprovided by Scaw, as well as evidence obtained through its own investigation, in September 2009, the Commission referred the complaint to the Competition Tribunal for adjudication. The Commission's referral includedpricefixing,marketallocationandcollusivetendering.Itwas foundthatSAISIwasusedtofacilitatethesecollusivepracticesthrough facilitatingtheexchangeofcommerciallysensitiveinformation.

TherejectionofAllensMeshcoexemptionapplication

AllensMescho(Pty)Ltd,oneofthebiggestmanufacturersofwireandwire productsinSouthAfrica,soughtatwo-yearexemptionenablingittodiscuss pricesandexportsrelatingtowireproductsandprices,aswellasprices, profitmarginsandverticalagreementswithCapeGate,ConsolidatedWire Industries, ArcelorMittal SA and Scaw South Africa. Allens Meschco argued thatitshouldbeexemptedfromtheapplicationoftheCompetitionActon the grounds that the restriction on competition arising from its discussions withcompetitorswasnecessarytopromoteexports.Further,itsubmitted that it is a small business and that the restriction was needed in order for it tocompeteeffectively. The Commission rejected the application after taking into account the various submissions. The Commission found that the objective of export promotion can be achieved without the coordinated conduct, and that AllensMeshcodoesnotmeetthestatutorydefinitionofasmallbusinessas definedintermsoftheNationalSmallBusinessAct(1996),asamended. The Commission considered its findings in previous investigations whichrevealedahistoryofcollusioninthewireindustryinvolvingAllens Meshco. An approval of this exemption application could undermine the

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Commission'spreviousfindingsinsimilarmattersandgivetheimpression that the conduct previously found to have been a contravention may in factbejustifiable.Inaddition,AllensMeshcowasnowbeingexposedto greatercompetitiongiventhatitspreferentialsupplyagreementwithMittal had come to an end.

Theoverallgoalwastogenerateenoughconsensusamongtheinstitutions involved on the best way forward for each set of recommendations. It is commonlyunderstoodthatbankingisdifferentfrommostotherindustries as aiming for more competition cannot compromise on the need to maintain financial stability, a proven strength of South Africa's banking regulators. IthasbeentheCommission'sjobtoshowthatchangescanbemadeto improvethecompetitiveenvironmentwithoutsignificantlyincreasingrisk. Rates of progress in the different areas varied, but by early 2010, most of the technical work had been completed and communication with industryparticipantsandassociationshadimproved.TheCommissionis confidentthat,overall,theprocessismovingintherightdirection,butis stillmaintainingavigilantpositionandrespondingtocomplaints. TheCommission'soverarchingobjectiveistoincreasecompetitioninretail banking, which will benefit the consumer. Where prospects of greater competition are limited, more direct consumer-friendly interventions are beingintroduced.Forexample,SouthAfricanconsumerscanlookforward togreatercontrolovertheirdebitorders,anditwillbeeasiertocompare banking products and switch banks. It is crucial, however, that National Treasury takes the lead in ensuring better consumer protection in retail banking. The Commission is not a consumer protection authority and cannot respond to this kind of complaint. TheCommissioncontinuestoworkwithNationalTreasuryandconsultwith the South African Reserve Bank on the recommendations that banking industryparticipantscandolittleaboutontheirown.Itisclearthatthese issues will require the ongoing attention of policymakers and regulators; that this is now happening is one of the most important legacies of the BankingEnquiry.

Banking

TheCommission'sworkinretailbankinginthereportingperiodcontinued tofocusonimplementingthe28recommendationsoftheBankingEnquiry Panel.TheEnquiryidentifiedabroadrangeofconsumerandcompetition concerns,manyofwhichcalledforchangesthattheCommissioncannot introduceonitsown.Asteeringcommittee,chairedbyNationalTreasury, wasestablishedtorevieweachofthe28recommendations,andprovide an opportunity for the sector's regulators to consider each from their respectivepositions. The committee met for the first time in March 2009, and approximately everytwomonthsthereafterthroughouttheyear. Steeringcommitteemeetingsweresupportedbymorefrequenttechnical engagements between the Commission, National Treasury and the Department of Trade and Industry, in consultation with the South African Reserve Bank where necessary. To facilitate debates the Commission generatedsixdiscussionpapersthatcovered:ATMpricing;penaltyfees for dishonoured debit orders and problems with debit order management; competition in the national payment system; recommendations aimed at improvingtheconsumerexperience;andtwopapersontheissuesrelated topaymentcardsandelectronicpayments.

Healthcare

Aswiththetelecommunicationssector,(coveredintheEnforcementand Exemptionssection)complexcompetitionmattersarisinginthehealthcare sectorhavedemandedtheCommission'sattention.

Aspen/GlaxoSmithKlinemerger

In 2009, the Competition Commission had to consider the merger transaction between Aspen Pharmacare Holdings Limited (Aspen) and GlaxoSmithKline South Africa (Pty) Limited (GSK). Aspen is a generic

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pharmaceutical company and GSK is an originator pharmaceutical company. In terms of the transaction filed in South Africa (which formed part of a broader international transaction), Aspen acquired control over the pharmaceuticalbusinessofGSKinSouthAfrica.Inreturn,GSKbecame thesinglelargest shareholder in Aspen, holding 16percent oftheentire issued share capital of Aspen.

than 85 percent of medical schemes in South Africa. Its main functions includelobbyinggovernmentandotherorganisationstoinfluencepolicies onbehalfoftheindustry. Theboardfiledtheapplicationonbehalfofitsmembers,requestingtobe exemptedfromtheprovisions of Section 4 of the Act, to enable medical aidschemestoengagecollectivelyinawaythatmaycontravenetheAct. The Commission decided not to grant the exemption on a number of

TheCommissionfoundthatthesufficientnumberofcompetitorsremaining inthesemarketspost-mergerwillbeabletoconstrainthemergedentity's behaviourandconcludedthatthemergerisunlikelytosubstantiallyprevent or lessen competition in these markets. During the investigation, GSK publicly announced its commitment to voluntarily license an antiretroviral product, Abacavir, on a non-exclusive basistoAspen.AbacavirisaGSKpatentedproductusedmainlyforthe treatmentofchildrenwithHIV.GSKistheonlysupplierofthisproductin South Africa at present. The Commission voiced its concern about the mergingparties'agreementthatAbacavirwouldbelicensedonlytoAspen andnotothergenericfirms.GSKthenextendedthevoluntarylicencesto Adcock Ingram, Cipla Medpro, Ranbaxy, Biotech Laboratories and Feza PharmaceuticalsandprovidedtheCommissionwithcopiesofthelicensing agreementssignedbyGSKinAugust2009.TheCommissionexpectsthat the finalised licence agreements will ensure that Abacavir will be priced more competitively due to the increased competition among the generic manufacturers.

grounds. First, it acknowledged that the healthcare market is unique in that it covers a combination of services and products and has complex institutionalarrangements,likethoseinvolvingmedicalaid,andmanaged healthcare providers. But this does not exempt it from being subject to competition scrutiny like other industries. Further, the Commission took theviewthatthe"ruleofreason"provisionsintheAct,whichallowforthe Commissiontoconsidertechnological,efficiencyorotherpro-competitive benefits, are sufficient to cater for the peculiarities found within the healthcareindustry. Second, in the competitive analysis, the Commission found that the conduct that the Board of Healthcare Funders was proposing would amount to a contravention of sections 4(1)(b)(i) and/or section 4(1)(b)(ii) of the Act, and could also have the effect of substantially preventing or lessening competition in the medical schemes market. The other grounds fortheexemptionwerenotconvincing;theassertionthattheindustryisin a declining state could not be substantiated. The Commission also engaged the Ministry and Department of Health

RejectionoftheBoardofHealthcareFunders'exemption application

TheCommissionreceivedanapplicationforanexemptionfromtheBoard ofHealthcareFunders.Theboardisanindustrybodyrepresentingmore

on competition in the health care sector, particularly related to prices in the industry. The Commission will continue these discussions in the next financialyear.

11

Part 2

Reports from the Divisions

EnforcementandExemptions

Thedivision'smainfunctionisinvestigatingandprosecutingprohibitedpracticesassetoutinChapter2 oftheCompetitionAct.Chapter2prohibitsthreeclassesofanticompetitiveconduct:restrictivehorizontal practices,restrictiveverticalpractices,andtheabuseofadominantposition.Complaintsareeitherinitiated bytheCommissionerorfiledbymembersofthepublicorprivatefirms.Whereaprohibitedpracticehas beenestablished,thematterisreferredtotheCompetitionTribunalforadjudication. During the period under review, the Commission received 172 complaints from the general public. The Commissioner initiated 31 complaints and 86 cases were carried over from investigations in previous years.Ofthe289casesunderinvestigationduringthereportingperiod,27complaintswereincludedinthe 13referralstotheTribunalforadjudication,102caseswereclosedatscreening,15caseswereclosedafter furtherinvestigation,6caseswerewithdrawnandconsentagreementswereconcludedin5cases.

Figure 2: Enforcement cases under investigation, by year

300 250 210 200 150 100 58 50 10 0 Complaints carried overfromprevious year Complaints receivedfromthe public Investigations initiatedbythe Commission Total 56 23 31 86 193 172 125 131 289

2007/08

Source: Competition Commission

2008/09

2009/10

13

Most of the 31 investigations initiated in the reporting period were in the priority sectors identified in the Commission's strategic plan (see figure 3). The investigations initiated in other sectors were mainly into cartels, whichisconsistentwiththeCommission'spriorityfocusontacklingcartel conduct.

Investigationsintocartels

The Commission's corporate leniency policy has proven to be effective, with79leniencyapplicationsmadeduringtheperiodunderreview.Each leniencyapplicationrevealsanallegedcartelandmustbeevaluated,either asaseparateinvestigationor,insomecases,asmultiplecontraventions formingpartofalargeinvestigationintoaparticularsector.Intheperiod underreview,broadinvestigationswereinitiatedintoallegedcartelconduct insectorsasdiverseasconstructionandpoultry. Asfigure4shows,thedivisionhasexperiencedasubstantialincreasein the number of leniency applications, resulting in a very steep rise in the numberofcartelcasesunderinvestigation.Theinvestigationofcartelsisat the core of competition regulation because it deals with the most egregious formofanticompetitiveconduct,includingpricefixing,customerallocation, andbid-rigging.Asthiskindofconductundermineseconomicgrowthand development, the division continues to carry out its investigations and prosecutionswithvigour.However,thesubstantialincreaseinthenumber ofcaseshasplacedaconsiderableburdenonthedivision'sresources. Of the 13 cases referred to the Tribunal for adjudication, 12 included

Figure 3: Cases initiated in 2009/10, classified by sector

Foodandagro-processing Infrastructure and construction Intermediate industrial products Other (media, transport, packaging, glass, skin products,tyres,furniture, franchisingandadvertising)

Source: Competition Commission

findingsofcartelactivity.The31investigationsinitiatedthisyeararestill underinvestigation,with26outofthe31involvingcartelconduct.Included inthe26cartelcasesisonebroadinvestigationthathasattractedmore than50leniencyapplications,intheconstructionsector.Theseareamong the79leniencyapplicationsthatarestillbeingevaluated. Thesuccessoftheleniencypolicyhascreatedabacklogofapplicationsand investigationsthathavetobecompleted,whichhasplacedconsiderable strainontheresourcesofthedivisionandtheCommission.

Figure 4: Corporate leniency applications received, by year

80 70 60 50 40 30 20 10 0 2007/08

Source: Competition Commission

2008/09

2009/10

14

Figure 5: Corporate leniency policy applications by sector for 2009/10

by Internet Solutions, Verizon South Africa Ltd, MultiChoice Subscriber Management Services (MWeb) and Internet Solutions) as one referral as the complaints all dealt with conduct relating to the backbone required for theprovisionofinternetanddataservices. Thesecomplaintswerelodgedatdifferenttimesbetween2005and2007 butforpurposesofinvestigationtheCommissioncombinedthecomplaints, astheyraisedoverlappingissues. Addressingthisconductdecisivelyshouldcontributetothepromotionof

Construction Intermediate industrial products Foodandagro-processing Others

competitiveoutcomesintheICTindustrytothebenefitoftheeconomy.

Box 3: Supreme Court of Appeal confirms the Commission's jurisdiction in telecommunications

InrelationtoamatterreferredbytheCommissionagainstTelkomtothe

Source: Competition Commission

TribunalinFebruary2004,theCompetitionCommissionhasbeenfighting various legal challenges brought by Telkom. In the reporting period, the Commission won its appeal in the Supreme Court of Appeal in the decision of the High Court to review and set aside its decision to refer certaincomplaintsofanticompetitiveconductbyTelkom. In its application to the High Court, Telkom challenged the Tribunal's jurisdictiontohearthecomplaintandhadsoughtanordersettingaside the decision to refer it to the Tribunal on the basis that it was vitiated bybiasorprejudiceandbyotherproceduralirregularities.TheSupreme CourtofAppealheldthattheTribunalhadcompetencetoadjudicatethe complaint and that there were no grounds to review the Commission's decision to refer. The effect of this decision was that Telkom was obliged to answertothemeritsoftheCommission'scomplaintreferral,filedwiththe TribunalinFebruary2004.ThismatterisstillpendingbeforetheTribunal.

The Commission is committed to increasing its enforcement capacity, particularlyintheareaofcartelinvestigations.Tothisend,thedivisionhas establishedaspecialinvestigativeunitdedicatedtocartelinvestigations. Thisisprovidingthenecessaryfocusfordealingwiththeincreasednumber ofcartelrelatedcases.Butthedivisionhasbeenconstrainedinhiringthe requirednumberofstaff,whichisaffectingitsabilitytoexecuteitsmandate optimally.TheunitiscurrentlyhousedintheEnforcementandExemptions division,andtheaimisforittobecomeastandalonedivision.

Investigationsintoabuseofdominance

In the period under review, 7 of the investigations initiated by the Commissioner involved allegations of abuse of dominance, and these investigations are still ongoing. This was in addition to a further 36investigationsinvolvingallegationsofabuseofdominancecarriedover fromthepreviousfinancialyear.While9ofthesewerecompletedandwere notreferredtotheTribunalastheCommissiondidnotfindanycontravention oftheAct,22complaintsarestillunderinvestigation.Theinvestigationof 5complaintswascompletedandtheywerereferredtotheTribunal. In October 2009, the Commission referred 5 complaints involving allegations of abuse of dominance against Telkom (including those lodged

Abuseofdominancecasesarecomplex,involvingacombinationoflegal, economic, and investigative skills. Unlike cartel infringements, abuse of dominance is not per se illegal. Mere evidence of an agreement (to fix prices for example) is not sufficient to establish a contravention; the Commission is required to weigh up anticompetitive effects against the claimed efficiencies and other benefits that may arise as a result of the unilateral conduct of dominant firms. This, in turn, places considerable strainontheCommission'sresourcesasthesecasestendtotakelonger to investigate and often require larger teams with a wider set of skills.

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Nevertheless,effectiveenforcementoftheChapter2provisionsonabuse ofdominanceremainsanimportantcomponentofpromotingcompetitive outcomesintheSouthAfricaneconomy.

the Commission to show that the anticompetitive effects outweigh any efficiencyjustifications. The Enforcement and Exemptions division, and the Commission as a

Thewayforward

It is imperative that the Commission continue to build capacity. It plans to do this by developing the cartels unit into a standalone division specialisingincartelinvestigationandenforcement.Emphasiswillalsobe placedondeepeningcapacityandexpertiseintheinvestigationofabuse ofdominanceandrestrictiveverticalandhorizontalpracticesthatrequire

whole,willcontinuetobefrustratedinachievingtheseobjectivesifhuman resource capacity is not improved and increased. This will involve hiring more staff and devoting more resources to training and development. Althoughimportantstepshavebeentakentodothis,thecurrentresources and budgetary limitations are preventing the levels of success that the organisation would like.

Enforcement and Exemptions

Front row: NeoChabane;MapatoRakhudu;VanessaKruger;CassandraMongake;SallyMashiane;XolelaNokele;MosimaTambani; Keith Weeks Second row: WilliamKganare;NyadzaniMabasa;ThapiMatsaneng;SamanthaNiemann;NompucukoNontombana;LameezVania; MakgaleMohlala;ShadrackRambau;EdwinaRamohlola Third row: SiphoMtombeni;PerceiveMaswanganyi;PhilAlves;JohanLiebenberg;KwenaMahlakoana;NellySakata;KatlegoMonareng Back row: ElphusMudimeli;AnthonyNdzabandzaba;NeoMolefe;ThabeloMasithulela;LebogangMadiba;TotoFiduli;MarlonDasarath

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Mergers and Acquisitions

The Mergers and Acquisitions division is responsible for administering Chapter 3 of the Competition Act. The division's core function is to investigateandanalysemergers. Chapter 3 of the Competition Act requires merging parties to notify the Commission of a merger before it is implemented if the proposed merger meets or exceeds the threshold stipulated by the Minister of Trade and Industryforintermediateandlargemergers.Thethresholdrelatestothe turnoverandassetvaluesoftheacquiringandtargetfirms.Smallmergers maybenotifiedvoluntarilyorontheCommission'sdirective. The Commission investigates all notified mergers to determine whether the transaction is likely to lead to a substantial prevention or lessening ofcompetition,orhaveanegativeeffectonthepublicinterest.Similarly, it seeks to encourage a dynamic environment by evaluating mergers that may result in innovation or efficiency gains, and hence contribute to a more competitive landscape. The Commission has the authority to approve, approve with conditions, or prohibit intermediate mergers. For large mergers the Commission makes a recommendation to the Tribunal to approve,approvewithconditions,orprohibitthemerger.

Approved 190 455 424 11 9 8 3 8 1 11 17 9 480 458 208 0 100 2007/08

Source: Competition Commission

Table 1: Number of notified mergers over a three year period

Year Small Intermediate Large Total

Source: Competition Commission

2007/08 13 394 106 513

2008/09 9 303 103 415

2009/10 10 136 44 190

About 8 percent of the total number of transactions notified to the Commissionrelatedtofirmsinfinancialdistress. Table2showsthatsomeofthemergerandacquisitiontransactionsresulted inabout2,000joblosses,summarisingthenumberofskilledandunskilled jobs lost as a result of merger activity. The losses occurred in 19 of the 190transactionsnotifiedtotheCommissionduringtheperiodunderreview.

Figure 6: Outcome of merger reviews for 2007/08, 2008/09 and 2009/10

Activities

Intheyearunderreview,twofactorsresultedinfewermergernotifications totheCommission.First,thethresholdfornotifyingmergersincreased;and second, the economy was just beginning to recover from the economic slowdown. From 1 April 2009, the combined threshold for mandatory notification of intermediate mergers increased to R560 million from the previous R200 million, with the threshold for the target firm increasing from R30 million to R80 million. The combined threshold for mandatory notificationoflargemergersincreasedfromR3.5billiontoR6.6billion,with thethresholdforthetargetfirmincreasingfromR100milliontoR190million. Theaimofthesignificantincreaseinmergerthresholdsistodecreasethe numberofmergersthatrequirenotificationandtolightentheadministrative loadoftheCommission.Whilethischangedefinitelyaffectedthenumber ofmergernotificationsintheperiodunderreview,thedepressedeconomic environmentalsocontributedtothesharpdecline(seetable1).

Approvedwith conditions

Prohibited

Withdrawn/ nojurisdiction

Cases finalised 200

300 2009/10

400

500

2008/09

17

Mostjoblossesinboththeskilledandunskilledcategorieswerearesult of two transactions: Nedbank acquiring Imperial Bank, and Harmony acquiringPamodziFreeState(Pty)Ltd(seeboxes4and5).

Box 5: Harmony and Pamodzi Free State: 1,200 job losses for unskilled employees

ThismergerwasapprovedbytheCommissiondespitetheresultingjob

Table 2: Job losses arising from mergers

Skilled Totalnumberofanticipatedjoblosses Joblosses(excludingthetransactionscoveredinboxes 4 and 5)

Source: Competition Commission

lossesofapproximately1,200.Inapprovingthemerger,theCommission

Unskilled 1,542 342

was mindful of the fact that if the merger was not approved, a total of 3,606 employees of Pamodzi Free State would have permanently lost their jobs, as Pamodzi Free State was facing final liquidation. At the time the merger transaction was notified, employment contracts had already been suspended. The National Union of Mineworkers and Solidarity, the two unions representing the largest number of Pamodzi employees had signed agreements with Harmony Gold Mining Company Limited in terms of which Harmony undertook to re-engage 2,400employeeswithin24months.Theunionsprovidedlettersofcomfort in support of the merger. The Competition Tribunal made Harmony's undertakingsconditionsfortheapprovalofthemerger

715 251

Duringthereportingperiod,11transactionswereapprovedonthecondition that the likely effect of the transaction on employment be mitigated. In order to try and reduce the number of job losses occurring as a result ofmergers,ormitigatetheireffects,theCommissionrestrictedjoblosses byconditionallyapprovingmergersandforcingpartiestoup-skillaffected employeestoenablethemtogetworkelsewhereorbecomeself-employed.

Box 4: Nedbank and Imperial Bank: 464 job losses for skilled employees

TheCommissionapprovedthismergerdespitetheestimatedretrenchment of260permanentemployeesand204temporaryemployeesthatwould result from the merger. In approving the merger, the Commission took into consideration that the retrenchments affected less than 1 percent of the entire workforce of the merging parties. And out of the permanent employeesthatwouldbeaffected,mostareskilled,qualifiedindividuals with years of experience, and they would be able to find work at other institutions. The Commission was mindful of an agreement with the union to redeploy and re-skill staff to minimise the negative effects as far as possible. The Competition Tribunal made adherence to the agreement a conditiononwhichthemergerwasapproved.

Mergeractivitybysector

Figure7showstheindustriesinwhichtheCommissiondecidedonmergers andacquisitions.Therewasamarkedincreaseinactivityinthewholesale sector(increasingto12percentfrom5percentin2008/09).Aparticularly active firm was Massmart. The only transaction that the Commission prohibitedinthereportingperiodwasMassmart'sproposedacquisitionof FinroCash&Carry.TheCompetitionTribunalsubsequentlyapprovedthe transactionwithoutconditions(seebox6).

Figure 7: Merger decisions by sector

Manufacturing 21% Hotel and Restaurant 3% Other 11% Mining 11% Construction 2% Financial 7% InformationTechnology 5% Wholesale 12% Property 16%

Source: Competition Commission

Agricultural 1% Retail 9%

Transport 1% Telecommunications 1%

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Box 6: Massmart and Finro Cash & Carry

The Commission recommended to the Tribunal that it prohibit the proposed transaction between Massmart and Finro Cash & Carry. The Commission wasoftheviewthatthetransactionwouldresultinhigherwholesaleprices ofgroceryproductstothedetrimentoflowincomeconsumers.TheTribunal subsequently approved the transaction unconditionally after the hearing thatwasheldonthematterinAugust2009.ThemainfocusoftheTribunal's decisionwastheanalysisofthepotentialanticompetitivehorizontalunilateral effectsarisingintherelevantmarketasaresultofthemerger. The Tribunal found that Finro is undoubtedly an effective competitor to Massmart in the Port Elizabeth grocery wholesale market. However, the Tribunalstatedthatthisfactorandthefactthatthemarketwouldbehighly concentrated post-merger must be assessed in the context of other evidence. This was on the basis that there is substantial differentiation in thismarket,withsignificantdifferencesinindividualfirmsintermsofproduct range and product mix, customer profiles, margins, location, delivery arrangements and credit terms. It stated that post-merger, there would stillbesignificantcompetitorsintherelevantmarket,includingthreelarge wholesalers effectively competing with the merged entity as well as four smaller competitors. EvidenceprovidedinthehearingandwhichtheTribunalacceptedshowed that a number of constraints that the Commission had disputed in its recommendations were in fact relevant and could collectively inhibit the merged entity's ability to raise prices post-merger. These are: the ability of incumbent firms to expand and/or reposition their competitive offering inresponsetoapriceincentive(forexample,rivalfirmsmayrepositionor expandtheirproductranges);thesignificantdirectsupplyofcertainproduct linesbygrocerymanufacturerstogroceryretailers;andretailers'procurement of suppliers through buying groups, which is a distinct alternative for the larger retailers. TheTribunalconcludedthattheCommission'sscenarioofthemergedentity's abilitytounilaterallyincreasepricespost-mergerwasweak.Italsomaintained that there was no basis to conclude that consumers would be worse off as a resultofthisacquisition,eitherfromapricingorservicedeliveryperspective. Itacknowledgedthatthereareindeedhighbarrierstoentryintherelevant market,butconcludedthat,basedontheavailableevidence,theacquisition wasunlikelytoresultinasubstantialpreventionorlesseningofcompetition intherelevantmarket,eitherfromahorizontalorverticalperspective.Inits decision, the Tribunal also provided some guidance on the future use of economicmodellingandcustomersurveyandstatisticaldataanalysis.

Trackingmergeractivity

Thedivisionhasimproveditsprocessesfortrackingmergeractivitywith the aim of ensuring not only that there is compliance with the Act, but also to review and consider small mergers that are likely to substantially preventorlessencompetition.Tocreateawarenessofthis,theCommission publishedaguidetosmallmergeractivity,whichindicatesthatfirmsthat are subject to current enforcement investigation and/or prosecution are requested to inform the Commission of any small mergers that they are proposing, after which the Commission will inform the parties whether or nottheyneedtonotifytheCommission.Thereactiontotheguidewasslow at first, but with more firms coming forward, there is clearly a culture of compliancedeveloping.TheCommissionreceived16requestsintheyear underreview.

Mergers and Acquisitions

Front row:MaartenvanHoven;BrendaMaseko;LindiweKhumalo; ThembaMahlangu;NazeeraRamroop;GrashumMutizwa Back row:AlexConstantinou;ThabeloRavhugoni;FrancinaYedwa; Mfundo Ngobese

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LegalServices

The Legal Services division's primary responsibility is managing all the Commission'slitigationbeforetheTribunalandcourts.Itservesastheexit point for complex large mergers, intermediate merger decisions that are appealed, and complaints that are referred to the Tribunal. The division also manages litigation in the Competition Appeal Court, the High Court and the Supreme Court of Appeal. The division assists the Mergers and Acquisitions, and Enforcement and Exemptions divisions with their respective investigations of mergers and complaints by participating in investigationsasteammembersandprovidinglegalsupportandanalysis. Thedivisionalsoprovidesadvisoryopinionsandclarificationstoexternal stakeholdersandnon-caserelatedlegaladvicetotheCommission. Intheyearunderreview,thedivisionsawasteadyincreaseinitsinvolvement in enforcement cases and a decline in merger-related cases. This trend mirrorstheCommission'sstrategicdecisiontoshiftitsfocustoaddressing competitionconcernsintheidentifiedprioritysectors,particularlyinrelation to enforcement. productionoflongsteelproductssuchasrebarbyprimarysteelproducers. Five of the complaints referred to the Tribunal pertained to allegations of Telkom's abuse of dominance behaviour in the telecommunications industry, including exclusionary conduct and excessive pricing, and the remaining 2 involved allegations of resale price maintenance. In the reporting period, the division also attended to the prosecution of 5 matters before the Competition Appeal Court and 1 before the Supreme Court of Appeal. Two of these matters pertained to the interlocutory applications that have been mounted by the respondents against the Commission'sprosecutionofthemilkcartelwhich,despitebeingreferred totheTribunalin2007,hasyettobeheardonthemerits. TheTribunal'sfindingsintheCommission'sreferralagainstSenwesLimited were also the subject of appeals to the Competition Appeal Court and the Supreme Court of Appeal. All these matters are still pending before the Supreme Court of Appeal.In the course of its prosecution of pending complaints,thedivisionhasattendedtodefendingtheCommissionagainst anumberofinterlocutorychallengesthathavebeenfiledbyrespondents. These cases have mainly sought to challenge the Commission's internal proceduresandtoobtainaccesstotheCommission'sinvestigationrecord priortothecloseofpleadings.Interlocutoryapplicationsdelaythehearing ofcasesontheirmeritsandaddtotheCommission'shighlitigationcosts.

Activities

Prosecution

In the year under review, the division had a caseload of 148 cases, of which 41 were merger cases and 107 were enforcement cases. Of the enforcement cases, 32 were referrals, 6 investigations were finalised and 69 are still under investigation. Of the 32 referrals, 20 were carried over from the previous financial year and 12 were new referrals. A record 16 complaints were referred to the Competition Tribunal. Of these complaints, 9 related to cartel conduct, the investigations of which were prompted by applications for leniency in termsoftheCommission'scorporateleniencypolicyinvariousindustries, whichincluded:maizeandwheatmilling,theproductionanddistributionof tyres,theproductionandsupplyofbitumenproducts,theproductionand supplyofminingroofbolts,reinforcingmeshandfencingproducts,andthe

Settlement

Where possible, the Commission uses settlement as an appropriate way of curtailing proceedings in the Competition Tribunal. This is dependent ontheCommissionbeingabletonegotiatewithawillingpartyappropriate terms of settlement that address the anticompetitive conduct and that enable the Commission, through negotiation, to achieve an outcome it would probably have achieved if it had prosecuted the matter in the Tribunal. Invariably, when settling matters, the Commission requires that the agreement incorporates, among others, the following material terms: anadmissionofacontraventionoftheAct;paymentofanadministrative penaltyand/orwhereappropriate,theimplementationofanyotherremedy; cessationoftheanticompetitiveconduct;implementationofacompliance programmeasatooltoempoweremployees,managementanddirectors andenablethemonitoringanddetectionofanyfuturecontraventionsofthe

20

Act;andtheparty'sfullcooperationwiththeCommissioninitsprosecution ofanyotherrespondents. In the period under review, the division assisted the Commission in negotiating and concluding 5 consent and settlement agreements. The most significant was the agreement concluded with Sasol Chemical IndustriesLimitedonbehalfofSasolNitro,itsoperatingdivisionactiveinthe nitrogenous fertiliser market. This agreement was concluded in settlement of that part of the complaints referred to the Tribunal in April 2005 and May20061,relatingtoacontraventionofsection4(1)(b)oftheAct.Sasol paidarecordpenaltyofR250680000.00(twohundredandfiftymillion, sixhundredandeightythousandrands).Despitetheobviousbenefitsof earlycooperationandsettlement,theCommission'sexperiencehasbeen that the settlement negotiations it engages in with respondents tend to be protractedandtime-consuming,evenincircumstanceswhereapartydoes notdisputetheCommission'sfindings.ThroughtheLegalServicesdivision together with team members from other divisions, the Commission has adoptedastrategythatseekstoensurethattheprosecutionofcasesisnot delayedduetoprotractednegotiations.Thisincludestheprinciplethatthe levelofpenaltyimposedreflectsthevaluethattheCommissionplaceson cooperationandearlysettlement.Itishopedthatallthesemeasuresyield anincreaseinthenumberoffinalisedconsentandsettlementagreements increasing in the next financial year, which should be evident in more mattersbeingresolvedthroughnegotiatedsettlement. Table 3: Consent agreements (R million)

Respondent Market/ sector Description of conduct Pricefixingand fixingoftrading conditions, market allocation and collusivetendering Pricefixingand fixingoftrading conditions, market allocation and collusivetendering Abuse of dominance and customer foreclosure Pricefixingand fixingoftrading conditions Pricefixingand fixingoftrading conditions Conditions of the order Penalty,admission of guilt, compliance programme Penalty,admission of guilt, compliance programme Behavioural remedy Penalty,admission guilt, compliance programme Penalty,admission of guilt, compliance programme Penalty amounts (R million)

Figure 8: Total administrative penalties levied by the Commission through consent orders

R487,262,183

R331,423,704

R99,384,870

2007/08

Source: Competition Commission

2008/09

2009/10

Advisory opinions and clarifications

ThroughtheLegalServicesdivision,theCommissionprovidesnon-binding advisoryopinionsandclarificationsontheinterpretationoftheAct. Inthereportingperiod,theCommissionreceived32requestsforadvisory opinions and 150 requests for clarifications. The substantial increase in requests was unexpected and the result of the growing awareness of the Commission's work and role in regulating competition in the market. Advisory opinions are largely sought by firms of attorneys on behalf of their clients, while clarifications are submitted by individuals. The issues raised in advisory opinions range from the acquisition of control, exclusive agreements, exclusionary conduct and the vexed topic of information exchange. With regard to clarifications, however, it is noted thatapproximately90percentofthesepertaintonon-competitionrelated matters such as sms competitions, disputes with service providers and concerns about unfairness in the awarding of tenders.

Cobro Concrete (Pty)Ltd

Construction

R4,023

MarleyPipe Steel tubes and Systems(Pty) pipes Ltd BMWSouthAfrica(Pty)Ltdt/a BMWMotorrad and 13 others Sasol Chemical Industries Limited ConcreteUnits Retail motor cycles

R31,078

Nopenalty

Gas

R250,680

Construction

R5,764

Source: Competition Commission

1

NutrifloCCvs.SasolChemicalIndustries(Pty)Ltd,OmniaFertiliserLtdandYaraSouthAfrica(Pty)LtdCCcasenumber2003Dec770referredtotheTribunalon4May2005and Profert(Pty)LtdvsSasolChemicalIndustries(Pty)Ltd,OmniaFertiliserLtdandYaraSouthAfrica(Pty)LtdCCcasenumber2004Aug1148referredtotheTribunalon25May 2006

21

Figure 9: Number of advisory opinions and clarifications issued

150

High Court, Telkom had challenged the Tribunal's jurisdiction to hear the complaint and had sought an order setting aside the decision to refer on thebasisthatitwasvitiatedbybiasorprejudiceandbyotherprocedural irregularities. The Supreme Court of Appeal held that the Tribunal had competence to adjudicate the complaint and that there were no grounds to review the Commission'sdecisiontoreferthecomplainttotheTribunal.Intermsofthis decision,TelkomwasobligedtoanswertothemeritsoftheCommission's complaintreferral,whichithadfiledwiththeTribunalinFebruary2004.This

150 120 90 60 30 0 2007/08

Source: Competition Commission

45

53 32 22 13

matter is pending before the Tribunal.

2008/09

2009/10

CompetitionCommissionvsSenwesandanother

InDecember2006,theCommissionreferredacomplaintagainstSenwes,a dominant supplier of grain storage facilities, to the Tribunal. In its complaint, theCommissionallegedthatSenweswasengagedinexclusionaryconduct as it had induced farmers not to deal with its competitors in the market forthetradingofphysicalgrain.Inaddition,throughitsdifferentialpricing policy in which it charged farmers and traders a different price for the sameservice,theCommissionallegedthatthefirmwasengagedinprice discrimination. The Commission further claimed that Senwes was engaging inamarginsqueezeasitwascharginggraintradersahigherfeethanits trading arm, Senwes Trading, paid for the storage of grain. All this resulted in the undermining of competition in the grain trading market. InFebruary2009,theTribunalfoundthatSenwes'conductdidnotconstitute acontraventionofsections8(d)(i)and9(1)aspleadedbytheCommission, butinsteadconstitutedamarginsqueezeincontraventionofthegeneral prohibition against exclusionary conduct contained in section 8(c) as it pleadedinthealternative.Thisdecisionisimportantinthatitrecognises marginsqueeze,whichisnotexpresslymentionedintheAct,asaclassof exclusionaryconductthatcontravenestheActundersection8(c). Senwes appealed the Tribunal's decision of February 2009 to the CompetitionAppealCourtinNovember2009.TheCommissionopposed Senwes'appealandinturncross-appealedtheTribunal'sdismissalofthe inducement complaint. In its decision handed down in November 2009, theCompetitionAppealCourtdismissedtheappealandtheCommission's crossappeal.SenwesappealedtheCompetitionAppealCourt'sdecision onmeritanditsapplicationforspecialleavetoappealispendingbefore the Supreme Court of Appeal.

Highlighted cases

CompetitionCommissionvsPioneerFoodsPtyLtd

The Commission prosecuted the remaining member of the bread cartel, PioneerFoods(Pty)LtdoveraperiodofsixdaysinJune2009.InFebruary 2010,theTribunalhandeddownitsdecision,inwhichitfoundthatPioneer Foodshadcontravenedsection4(1)(b)oftheAct.Initsdecision,theTribunal awardedarecordbreaking10percentoftherelevantturnoverofSasko, Pioneer's bread division, in respect of one of the complaints. This is the highestpercentagepenaltythattheTribunalhasawardedtodate.Despite this, the Commission has appealed this decision as it concluded that the Tribunalmisconstrueditspowerswhendeterminingthatthepenaltyshould bebasedonlyonthefirm'sturnoverfromthebreaddivision.Thepenalty it imposed was therefore not a sufficient deterrent and the Commission contendsthatitshouldratherbebasedonthefirm'swiderturnover.The appeal is pending before the Competition Appeal Court and will be heard inSeptember2010.

CompetitionCommissionvsTelkomLtdand another

The Competition Commission appealed the decision of the High Court to reviewandsetasideitsdecisiontorefercertaincomplaintsofanticompetitive conduct by Telkom to the Competition Tribunal. In its application to the

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Legal Services Front row:SbusisoMadonsela;MosidiSibaya;WendyMkwananzi;ThandileCharlie Middle row:KhotsoModise;MoshThulare;NgoakoMoropene;LuckyTshigomana;ThaboKhumalo Back row:MervinDorasamy;JabulaniNgobeni;RomeoKariga;HyltonPetersen;RiziaBuckas;PaulinaMfomme;BukhosibakheMajenge

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PolicyandResearch

ThePolicyandResearchdivisionisresponsibleforundertakingeconomic analysisformergerandenforcementcases.Divisionmembersworkwith teamsfromthedifferentdivisions. The division continued to grow its capacity and expertise to undertake economic analysis of competition matters. This was matched by the demands for this expertise in complex cases under investigation such as on information exchange between competitors which might lead to collusion.Otherhighlightsincludedseveralpaperspresentedatlocaland internationalconferences,contributionstotheCommissionandTribunal's Ten Year Review, and work on the Joint Food Project together with the competitionauthoritiesofEgyptandZambia. The major analyses for cases of possible anticompetitive conduct were those in the Commission's priority sectors, discussed elsewhere in this report. In addition, the division undertook in-depth economic analysis for investigations into telecommunications. These included looking into conduct on the part of Telkom where the Commission concluded that Telkom hadchargedexcessivepricesforhighbandwidthfornationalleasedlines andhadexcludeditscompetitorsindownstreammarketssuchasinthe supplyofvirtualprivatenetworksandrelatedservices. The division has also been involved in substantial work on cartel-related investigations.Manycartelcasesrelatedtoagreementsonpricefixingor customer allocation, that are prohibited per se and do not require economic analysis.However,theCommissionisincreasinglyfocusingoninformation exchangearrangementsthatmayamounttoanagreementtocoordinate pricing and/or market shares. The division is also examining factors that facilitate ongoing coordination. Without addressing these factors, firms can continue to charge above competitive prices through dampening competitiverivalrybetweenthemselves.Overtheyear,thedivisionworked on29mergercases,severalofwhichinvolvedeconomicevidencebeing presented at the Competition Tribunal. Over time, the division has been building wider international networks to build its analytical capabilities through learning from international experience and drawing on international expertise. In 2009/10, the Commissiondrewonleadinginternationalcompetitionexpertstoassistin keycompetitionissues,includinginformationexchangeandexclusionary abuse of dominance cases. These included professors Massimo Motta, expert in competition and market regulation at the Barcelona Graduate School of Economics; Joseph Harrington, professor of economics at JohnsHopkinsUniversityandKaiUwe-Kühn,competitionandregulatory specialistattheUniversityofMichigan.Allprovidedhighleveltrainingand advicetocaseteams. In terms of economic research, the division has been part of the Commission's team working on the Joint Food Project with authorities in Egypt and Zambia. The project involved studies of the same products acrossthedifferentcountries.Maizemillingandfertiliserwerestudiedin both Zambia and South Africa, and edible oil was studied in Egypt and SouthAfrica,whileEgyptalsolookedattheimplicationsofalargeinformal sector for competition analysis of food markets. The project provided insightsintothenatureofcompetitionandpossibleanticompetitiveconduct in food markets.

Conferences, publications and economic briefs

Animportantpartofthedivision'sworkiscontributingtotheunderstanding of competition more widely. This includes commenting on all policies, legislationandregulationsthathaveabearingoncompetition.Thedivision submittedseveralcommentsonissuesoftelecommunicationsregulation, and also commented on the Department of Trade and Industry's new IndustrialPolicyActionPlanfor2010/11to2012/13.Analysesandreviews were done for the Department of Economic Development on the Eskom proposed electricity price increases, and on competition issues in food, infrastructure and telecommunications. Thedivision'sstaffpresentedpapersatlocalandinternationalconferences onavarietyoftopicsrangingfromcompetitioninbankingtoinformation exchange(seetable4).Threepaperswerepublishedasjournalarticles

International networks

The field of competition economics research is international both because marketsandfirmsoperateacrossbordersandbecausethebodyofliterature andanalysisisinternationalinnature.

24

or book chapters.In the year under review. The division also wrote eight briefing papers on key competition questions for internal use in the Commissionandhostedaseriesofseminarswithexternalpresenters. Table 4: Conference papers and publications

Author L. Mncube & H. Ratshisusu C.Lavoie S. Roberts & Z.Rustomjee* Publication `On merger simulation and its potential role in South African mergercontrols',South African Journal of Economic and Management Sciences `SouthAfrica'sCorporateLeniencyPolicy:AFive-YearReview', World Competition `Industrialpolicyunderdemocracy:apartheid'sgrownupinfant industries?IscorandSasol',Transformation `Competitionpolicy,competitiverivalryandadevelopmental stateinSouthAfrica',inO.Edighejied.Constructing a Democratic Development State in South Africa: Potentials and Challenges, HSRC Press, Pretoria `Food production in South Africa: corporate conduct and economicpolicy',InitiativeforPolicyDialogueTaskForceonAfrica, Pretoria,9-10July,2009 `Theroleofinformationexchangeinfacilitatingcollusion­insightsfromselectedcases',CompetitionCommissionandCompetitionTribunalTenYearReviewConference,3-4September 2009,Pretoria `Doverticalmergersfacilitateupstreamcollusion?',Competition CommissionandCompetitionTribunalTenYearReviewConference,3-4September2009,Pretoria `Localloopunbundlingversusencouragingthegrowthofwirelesslocalloops:lessonsforSouthAfricafromothercountries', CompetitionCommissionandCompetitionTribunalTenYear ReviewConference,3-4September2009,Pretoria `A framework for promoting competition in electronic communications:clarifyingtheroleofthecompetitionauthorityandthe sectorregulator',CompetitionCommissionandCompetition TribunalTenYearReviewConference,3-4September2009, Pretoria `CompetitionpolicyinSouthAfricaandsmallbusiness:Areview ofenforcementcases',CompetitionCommissionandCompetitionTribunalTenYearReviewConference,3-4September2009, Pretoria `TheuseofbehaviouralremediesinthereviewofverticalmergersinSouthAfrica',CompetitionCommissionandCompetition TribunalTenYearReviewConference,3-4September2009, Pretoria `TestingforcompetitionintheSouthAfricanbankingsector', EconomicSocietyofSouthAfricaconference,30September 2009,CapeTown

Information resource centre

Duetotheconvergenceofcompetitionlawworldwide,theCommissionhas been following the jurisprudence of a number of competition authorities. More recently, following a comparison of Westlaw International and LexisNexis International, the two major international legal databases, the Competition Commission took out a company-wide subscription to LexisNexisInternational.Duringtherolloutoftheserviceandthroughoutthe year,68staffmembersfromtheCommissionandtheTribunalweretrained onthedatabase.Inaddition,30newstaffmembersreceivedorientation training on the centre's resources. In total, the resource centre recorded 1,048loansofpublications,added18newtitlestothebookcollectionand dealt with 398 requests for information.

S. Roberts

Knowledgemanagement

In the year under review, the planned implementation of an upgraded case management system with an enhanced knowledge management functionality was slowed down by technical problems, which the Commissioncouldnotsolveonitsown.Inanticipationoftheimplementation andtrainingneedsforthenewsystem,asystem"superuser"groupwas established,whichbegantousethesystemandattempttoironoutsome oftheproblems.Thegroupismadeupofmembersfromeachdivision. While the primary focus of the knowledge management sphere was to resolve the problems of the implementation of the case management system, and to prepare for the eventual transition into the Commission's environment, the Commission's strategic goals in relation to knowledge management were also addressed. These included ongoing divisional capacity building sessions, internal and external knowledge sharing sessions, and the sharing and retention of materials and related knowledge gainedviatheavailablesystems. Thecurrentcaseandknowledge-basedsystemswereimprovedthroughout theyear,enablingimprovedcollaborationforcasesandprojects,improved accessibilityandimprovedreportingonmanagementinformationsystems. Moreover, the existing system that supports improved knowledge management was enabled and exploited more vigorously. This has led to more available information being completed in the shared knowledge space, and an increase in the use of the Commission's organisational knowledge.

S. Roberts

R. das Nair & L. Mncube L. Mncube, M. Ngobese & L. Khumalo

R. Hawthorne

K.Moodaliyar* &K.Weeks

P. Ncube & T. Paremoer

H. Ratshisusu

J. Greenberg

Source: Competition Commission Notes: These include papers by employees of the Competition Commission and not only of the Policy and Research division * Not an employee of the Competition Commission

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Policy and Research Front row: AzraaMohamed;PamelaNqojela;HerminahRasetlola;GennaRobb Middle row:YongamaNjisane;BongisaLekezwa;ReenaDasNair;KholiswaMnisi;AnnaleevanReenen;RakshaDarji; AndrewSylvester Back row:JuniorKhumalo;TrudiMakhaya;NtsakoMgwena;RakgoleMokolo;AviasNgwenya;LibertyNcube;SimonRoberts; GilbertMuzata

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StrategyandStakeholderRelations

Strategic planning

ThisdivisionishousedwithintheCommissioner'soffice.Acoreresponsibility during the reporting period was to plan for the Commission's strategic priorities for 2010 to 2013. A planning workshop was held with all the middlemanagersandtheexecutive.ItwasaddressedbyMinisterofTrade andIndustryRobDaviesandtheformerchairpersonoftheTribunal,David Lewis.Thefocuswasonimprovingefficienciesandensuringcompetitive outcomestomakeapositiveimpactontheeconomyinthecontextofthe global economic recession. The strategic planning workshop determined threekeystrategicprioritiesfortheCommissionoverthenextthreeyears. ThesearefortheCommissionto:achievedemonstrableoutcomesthrough the continuous prioritisation of sectors and cases and the assessment of its impactontheeconomy;increaseitsengagementswithkeystakeholders intheeconomytoinfluencepolicyformulationanddecision-making;and buildahighperformancecompetitionauthoritythroughefficientbusiness processes,staffdevelopmentandretention,andeffectivedecisionmaking. andtheDeputyCommissionerundertakeimportantadvocacywork,asdo otherdivisionalmanagersandcaseteams.Asitisnotpossibletorecordall advocacyactivities,thisreportprovidesthehighlightsofourengagements with stakeholders.

Government

The Commission's public sector consultative forum engages national government departments, state owned enterprises and municipalities. Themainprojectfortheyearunderreviewwasthefocusonbid-rigging. The Commission's investigation into a range of infrastructure projects revealedthatbid-rigginghasbeenwidelypractised,wherepartiescollude anddeliberatelymisleadgovernmentintheirtenderdocumentation.One practiceinvolvesthedirectriggingofcontractsinordertoachieveagreed market-sharepositions.Theotherrelatesto"coverpricing",wherebidders appear to be acting competitively, while in fact tender prices have been devisedtoensurethatonlyoneofthebiddingfirmsissuccessful.While ithasbeenparticularlyprevalentininfrastructuretenders,bid-rigginghas also been practised in other sectors. Clearly, this kind of anticompetitive behaviour practised on a wide scale is a great cost to government. The bid-rigging awareness project has three elements: training and capacity building; policy and legislative reforms; and encouraging government to claimbackdamagesfromtheconspiringfirms(seebox7).

Advocacyandeducation

TheCommission'sadvocacystrategyaimsto:raiseawarenessaboutthe Competition Act and the role of the Commission; mobilise civil society organisations' active participation in the Commission's processes and encourage voluntary compliance by business; and influence policy and legislation to ensure synergy between the Competition Act and other policiesandlegislation.(Tothatend,theCommissionengagesgovernment departments, sector regulators and legislatures on its positions in relation to existing or proposed legislative amendments). Also, in the course of enforcementandlegislationinallindustrialsectors,policyissuesariseand theaimoftheCommissionistobringthesetotheattentionoftherelevant governmentdepartmentorsectorregulator. AlthoughtheCommissionhasadedicatedadvocacydivision,thisfunction happensasamatterofcourseintheCommission'swork.TheCommissioner

Business

The Commission reached out to the business community to propagate the idea of voluntary compliance and to increase general awareness of the Competition Act. The Commission's work with business has yielded important outcomes, such as the increased number of applications for corporateleniency.Thedivisionmakescontactwithbusinessinavariety of ways, such as engaging with particular firms and meeting with trade associations.Whileovertheyears,theCommissionhadfocusedonsmall and medium enterprises, the highlight of the year under review was the Commission'smeetingwithbigbusiness(seebox8).

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Box 7: The Commission's war on bid-rigging intensifies

Enforcementandadvocacyareregardedasthetwinpillarsofcompetition compliance. Through its advocacy section, the Strategy and Stakeholder Relations division has tackled bid-rigging, a current component of the Commission's enforcement strategy, both from a policy and education perspective. The division has developed a bid-rigging brochure and held various workshops with business and government departments on bidriggingintheperiodunderreview.InJanuary2010,theCommissionmadea submissiontoNationalTreasuryontheuseoftheCertificateofIndependent Bid Determination in the procurement process. The certificate requires bidderstodiscloseallmaterialfactsaboutanycommunicationthattheyhave hadwithcompetitorspertainingtotheinvitationtotender.Theobjectiveof thesubmissionwastoinfluenceNationalTreasury'sprocurementpolicyto addressthatthegapsthathavebeenidentifiedbyadoptingthenecessary measurestopreventbid-riggingbeforebidsaresubmitted.Thecertificate willassistpurchasersbyinformingbiddersabouttheillegalityofbid-rigging andprovideforadditionalpenalties.Inresponsetothesubmission,National Treasurydevelopedapracticenoticeintermsofsection76(4)ofthePublic Finance Management Act (PFMA). The note is an instruction to accounting officersinallspheresofgovernmenttoensurecompliancewithsection4(1) (b)(iii)oftheCompetitionAct.ThenotewillbeofficiallyissuedbytheMinister of Finance in 2010/11. The general conditions of contract have alsobeen amended to include clause 34, which covers the prohibition of restrictive practices. Clause 34 now provides for the prohibition of collusive tendering and the referral of bidder(s) who have engaged in collusive tendering to the Commissionforinvestigationandthepossibleimpositionofadministrative penalties.ThesedevelopmentsaresignificantvictoriesfortheCommission andshouldhavefar-reachingconsequencesforpublicsectorprocurement. TheCommissionhascommentedonthefollowingprocurementpolicyand legislation: the Guidelines on Supply Chain Management, the Preferential ProcurementPolicyFrameworkAct(2000),thePublicFinanceManagement Act (1999) and the Prevention and Combating of Corrupt Activities Act (2004).Competitionconcernsinrelationtothelegislationandpolicieswere submitted to National Treasury. In the year under review, the Commission provided training to procurement officers from the private and public sectors on the prevention, detection and reporting of bid-rigging during the tendering process. The Commission started conducting bid-rigging trainingworkshopsfortheprovincialsphereofgovernment.Thiswasdone throughprovincialbid-riggingworkshopsinKwaZulu-Natal;WesternCape;

Gauteng and Eastern Cape, in partnership with the provincial treasuries. Atotalof243procurementofficialswerereached.Thedivisionalsomade presentations and held workshops with the business community through breakfastmeetingswithcompanydirectors.Theobjectiveoftheworkshops wastoeducatebusinessabouttheCompetitionAmendmentAct(2009)and its implications for directors of companies, as the Act introduces criminal liabilityforindividualsinvolvedinbid-rigging.Thisresultedinanincreasein applicationsforleniencyfromfirms.

Box 8: The Commission reaches out to the business community

TheCommissionhelditsfirstbusinessconsultativeforuminJohannesburg, inNovember2009.Theforumwasattendedby90businessdelegates. The objective of the forum was to establish relations with the South Africanbusinesscommunity,todeveloparelationshipthatisnotbased solelyonenforcementaction,buttofosteramutualunderstandingofthe respectiveenvironmentsandchallenges,aswellastoidentifycompetition championswithinthebusinesscommunity.TheCommissionhostedthe foruminpartnershipwithBusinessUnitySouthAfrica.

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Trade unions

TheCommissionregardstradeunionsasakeystakeholdertobeengaged. The aim of interacting with the trade union movement is to increase awareness and mobilise trade union participation in merger processes as requiredbytheCompetitionAct.Tradeunionsalsohaveavestedinterest intheCommission'senforcementandinvestigationwork.TheCommission has established the trade union forum and the working committee to ensure regularinteractionandinformationsharing.TheCommissionalsoprovided training in mergers and acquisitions to shop stewards and other trade unionofficialsforthemtounderstandtheirroleandtheCommission'srole in these transactions.

Consumers

The Commission interacts with consumer organisations from time to time to highlight key consumer issues emanating from its investigations and enforcementwork.Anactiveconsumermovementisvitaltothecompetitive process, and can give impetus to firms to compete by offering better pricesandquality.Whilemuchworkremainstobedoneinthisarea,nongovernmental organisations and consumer forums that take an active interestintheCommission'sworkincludetheSouthAfricanHumanRights Commission,theBlackSashandtheConfederationofSouthAfricaTrade Unions(COSATU).

Table 5: The Commission's key engagements with stakeholders

Stakeholders Type of interaction Thirdpublicsectorconsultativeforum Presentationonbid-riggingatthepublicsectorsummit Provincialbid-riggingworkshops SubmissiontoNationalTreasuryontheuseofthecertificateofindependentbid determination in their general conditions of tender Outcome 59delegatesfromgovernmentdepartments,regulatorybodies,state owned enterprises and public entities 120procurementofficials 243procurementofficialsinKwaZulu-Natal,EasternCape,Gauteng and Western Cape N/A

Government

CapacitybuildingtoemployeesoftheNationalLiquorAuthority'slicensingdepartmentonthe general assessment of competition issues and the application of competition principles of N/A law and economics Breakfastmeetingswithbusiness.Theobjectivewastoeducatecompanydirectorsabout theimplicationsfornotcomplyingwiththeCompetitionAct.Meetingswereco-hostedwith theInstituteofDirectorsandtheprovincialChambersofCommerce Business PresentationtoconstructioncompanyonthevoluntarycompliancewiththeCompetitionAct Miningmanagersonbid-rigging South African Institute of Internal Auditors FederationofUnionsofSouthAfrica(FEDUSA) NationalUnionofMetalworkersofSouthAfrica(NUMSA) Trade unions Workshopswithprovincialandregionaltradeunionsonhowtoparticipateinmerger proceedings and to encourage whistle blowing 150delegatesinKwaZulu-Natal,Limpopo,EasternCapeand Mpumalanga 60stakeholdersreached 59 stakeholders reached 100stakeholdersreached 19 stakeholders reached 39 stakeholders reached 243tradeunionistsreachedinGauteng,KwaZulu-Natal,Limpopoand North West

Establishment of the trade union working committee. The committee will implement decisions takenattheannualtradeunionconsultativeforumandtotacklecompetitionrelated N/A challenges

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Table 5: The Commission's key engagements with stakeholders (continued)

Stakeholders Type of interaction Meetingstocommunicateconsumerissues,developmentsandhighlightsofwhatother institutionshavedoneforconsumerprotection The Commission attended and participated in the following consumer protection conferences:2009consumerrightsconference,hostedbythenationalconsumerforumFirst Africandialogueconsumerconference,hostedbytheDepartmentofTradeandIndustry Consumeradvocacyworkshops Twocompetitionlawpresentationsonconsumeradvocacy Small and medium enterprises SevenpresentationswithSMEsheldinKwaZulu-NatalandGauteng Participationintheinternationalfranchiseexpo Franchise industry Participation in the franchise breakfast seminar Outcome 49 delegates attended from Gauteng and Western Cape 100stakeholdersreached

Consumers

133consumersreachedinNorthWestprovince 49 stakeholders reached 229stakeholdersreached 100stakeholdersreached 80franchisesattended,32%werenotmembersoftheFranchise Association of South Africa

ParticipatedinthefranchiseworkshopshostedbytheDepartmentofTradeandIndustryon 20stakeholdersreached the new Consumer Protection Act

Source: Competition Commission

Communication

Media relations

TheperiodunderreviewhasseentheCommissioncontinuingtoreceive wide coverage from the media, evident in the number of news clippings for both the print and electronic media. According to Newsclip media monitoring, the Commission was covered in 7,303 news clippings comparedto5,861in2008/09.Theincreasecanbelargelyattributedto theCommission'smediaoutreachandinformationsharinginitiative,which aims to: · enrich the media's knowledge of the work of the Commission and its purpose · improve the Commission's understanding the media's needs in its interaction with the Commission · update the media on the Commission's programme in the identified prioritysectors. Intheyearunderreview,outreachworkshopswereheldinJohannesburg, Cape Town and Durban with a total of 34 journalists who report on competition related issues. In the year under review, 19 media releases wereissuedand181radioand73televisioninterviewswereconducted.

2007/08 2008/09 2009/10 2002 2492 3652 3878 3369 3425

Figure 10: Media coverage: number of news items

BroadcastMedia Print Media

Source:owncalculationsfromdatasuppliedbyNewsclipmediamonitoring

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Publications

TheCommissionusesvariouspublicationstocommunicatewithexternal stakeholders. The following publications were printed and distributed in the reporting period: Table 6: Publications

Publication Competition News SME Guide (reprint) Franchise Notice (reprint) Pocket Act (reprint) Bid-riggingGuide Ten-YearReview 2008/09AnnualReport

Source: Competition Commission Note: * 4 per year at around 2,000 per batch.

participation in the Cell C Take a Girl Child to Work and a team and brand building race. There were 12 issues of the Competition Commission's internalnewsletterNewsflash.

International relations

Number printed 8,000* 5,000 2,000 1,500 2,000 2,000 2,000

In the year under review, the division continued its role of coordinating andimplementingtheCommission'sinternationalagenda.Thereisavery strong international community in the area of competition law practice, because although enforcement takes place at the national level, many businessesarecompetingininternationalmarkets,wherecartelsmayform and cross-border mergers take place. So international cooperation and networksnotonlyinvolvememberslearningfromeachother,butarealso concernedwithjointenforcementprojectsandensuringthesmoothand consistentreviewofinternationalmergers. The consolidation of the African Agenda, as the principal focus of South Africa'sforeignpolicy,hasbecomeoneoftheCommission'spriorityareas. Significant effort has gone into hosting staff exchanges and fact finding missions involving staff members from competition agencies on the continent. In line with its commitment to the economic development and economic integration of the SADC, South Africa chaired the meeting of the SADC regional workshop on competition law and policy in Botswana in August2009.ItispartofSouthAfrica'sforeignpolicytoplayanactivein thedifferentforumsoftheUnitedNations,particularlyinrelationtoissuesof globalgovernance.TheCommissionthereforecontinuestoparticipatein UnitedNationsConferenceonTradeandDevelopment's(UNCTAD)annual intergovernmentalexpertmeetingoncompetitionlawandfindsthistobe avaluableforumwherememberstatescanshareexperiences,successes and challenges in the world of competition.

The Commission publishes Competition News on a quarterly basis. The aimofthejournalistohighlightkeycasesandotherkeydevelopments. Thisalsoservesasavehicleforfeedbackfromkeystakeholders.

Website

TheCommissionlauncheditsrevampedwebsite(www.compcom.co.za)in December2009.Thenewwebsiteismoreuser-friendlyandaimstocater fortheneedsofthefrequentvisitor.ThenumberofhitstotheCommission's websitehasgrownconsiderably:in2009/10visitstothewebsitetrebledto 106,738from27,400in2008/09,andthenumberofvisitorsincreasedfrom 11,930to45,619.Therewasalsoanincreaseinthenumberofreturning visitors, from 2,840 in 2008/09 to 11,630. Most visitors are from South Africa(79percent),andthenfromtheUnitedKingdom,UnitedStates,Italy, Germanyandothercountries.

Specific activities in the international arena

Joint Food Project:ThisiscoveredinthePrioritisationandImpactsection of this report. The Commission is engaging its peers in the SADC region to implementasimilarprojectonidentifiedfood items. International publications: The Commission submitted a contribution to the 2009 edition of the Global Competition Review's Rating Enforcement publication, which is an annual survey of the world's leading competition authorities.

Internal communication

The Commission's efforts to improve internal communication are bearing fruit.Inaneffortto improve internal communication and create a healthy andopenworkingenvironment,theCommissionhasundertakenanumber ofinitiatives.Intheyearunderreview,22discussionforumswereorganised and attended by staff members. Other team building initiatives included 13staffmeetingsandeventssuchasanawardceremony/yearendfunction,

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The prospect of an African competition forum: In March 2010, the Commissioner attended the African stakeholders' workshop' in Nairobi, Kenya.ThemeetingfocusedontheformationofanAfricancompetitionforum whichwillfocusonAfrica-specificprojects,activities,needsandchallenges incompetition.TheCommissionerhasbeenappointedasvice-chaironthe interim steering committee that has been tasked to set up the forum. The Namibian Competition Commission: The Commissioner gave the opening address at the launch of the Namibian Competition Commission in October2009.

Participation in international organisations

International Competition Network: The Competition Commission is an active member of the International Competition Network (ICN) and the Commissioner is a member of its steering group. A delegation from the Commission attended the network's eighth annual conference in Zurich, SwitzerlandinJune2009.Staffmembersfromrelevantdivisionsparticipated intheICN'scartelsworkinggroupinOctober2009inEgypt. Organisation for Economic Cooperation and Development (OECD): TheCommissionandtheTribunalhaveparticipatedintheOECD'sGlobal Competition Forum since 1999, when the South African competition authorities were established and participated at its meetings held in June andOctober2009andFebruary2010. Southern and Eastern Africa Competition Forum: South Africa is a member of the Southern and Eastern Africa Competition Forum and the CommissionerandDeputyCommissionerattendeditsinauguralmeetingin May2009. SADC: The Commission chaired the second meeting of the SADC regional workshoponcompetitionlawandpolicyinBotswanainAugust2009.

Capacitybuilding

Facilitated by the SADC, the Commission's principal investigator at the Competition Commission was attached to the Competition Commission of Mauritius in July 2009 to provide technical assistance to the newly establishedinstitution.InSeptember2009,theCommissionhostedastudy tour for delegates from the Fair Competition Commission and Tribunal of TanzaniainSeptember2009.ThisvisitwasfacilitatedbyProfessorEleanor Fox, professor of trade regulation at New York University School of Law. TheCommissionalsohostedastudytourfordelegatesfromtheGambian Competition Commission in December 2009. The Commission hosted three officers from Botswana for capacity building for the new Botswana competitionauthority.TheywerebasedinthePolicyandResearchdivision fromFebruarytoMarch2010.

Strategy and Stakeholder Relations Front row: ItebogengPalare; MolebogengTaunyane; OupaBodibe; NericeBarnabas; ZibuyileJafta; Keitumetse Letebele Back row: MziwodumoRubushe; TebelloSello; BusisiweMolefe; FredaMathaba; Andile Mangisa

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Our People and Resources

TheCommission'shumancapitalassetisthelifebloodoftheorganisation. TheHumanResourcesdivisionisresponsibleforawidescopeofactivities withspecificemphasisontheperformancemanagementandlearningand development of the organisation's primary asset, its staff. Performance contracts are drawn up annually and are aligned with the Commission's strategicobjectives.OneoftheCommission'scorestrategicobjectivesis toachieveandmaintainahighperforminginstitution.Thisisbeingrealised throughachievingindividualandorganisationalperformancegoalsthrough performancecontractsanddivisionalbusinessplans.

4%

commitment to retain and nurture high quality people, the Commission emphasises its growth and development interventions to current and prospectiveemployees.

Figure 11: Staff profile as a percentage of total staff, as at 31 March 2010

Human capital

Attheendoftheperiodunderreview,theCommission'sstaffcomplement was 138. This includes the 11 graduate trainees which had been recruited as part of the successful graduate trainee programme. Overall, the total numberofstaffincreasedby19percentfrom2008/09.Thetotalnumbers for 2007/08, 2008/09 and 2009/10 are 116, 132 and 138. The graduate traineesprovideapoolofskilledandqualifiedpeoplethattheCommission can draw from for permanent junior positions. During the period under review, four graduates were absorbed into the Commission's structure. Astheorganisation'scaseloadisputtingincreasingpressureonthestaff complement, more staff will have to be hired over the next three years fortheCommissiontocontinuetodelivereffectivelyonitsmandate.The number of staff is thus expected to grow to about 190 over this threeyearperiod.Mostofthenewstaffwillbringlegalandeconomicexpertise as the Commission's enforcement activities become more complex and demanding, although there will also be a need for more support staff.

Source: Competition Commission

Graduates

51%

36%

Man Support Law & Econ

Box 9: The Commission's management development programme

Duringtheperiodunderreview,asuccessfulmanagementdevelopment programmewaslaunchedandattendedby20seniorstaffmembers.The programme kicked off in September 2009 and was hosted off site with leading subject matter experts making presentations. This customised programme was aimed at equipping senior staff members with the necessaryskillsformanagingsubordinates,thusstrengtheningalllevels of the organisation's management. Participants submitted portfolios of evidenceaspartoftheprogrammeandtheirhighstandardpointstothe programme'ssuccess.Theprogrammewillbeextendedtoothersenior employeesinthenextfinancialyear.

Learning and development

The Commission encourages the personal development and growth of itsemployees.ThelearninganddevelopmentfunctionwithintheHuman Resources division supports this objective and has helped to establish theCommissionasalearningorganisation.Interventionsincludeinternal capacitybuildingprogrammes,trainingabroad,studyloanassistanceand localcustomisedtraininginterventionsinidentifiedpriorityareas. Learning and development initiatives support the retention of the organisation's skilled and professional staff complement. As part of its

33

The Deloitte employer survey showed that the Commission's efforts in developing its staff had yielded high levels of job satisfaction. In 2009, theCommissionwontheDeloitteBestCompanyToWorkForawardinits industrysectorforthesecondconsecutiveyear.TheDeloittesurveyresults aresharedwithallstaffandareusedasavaluabletoolforguidingfuture initiativeswithintheCommission.Monthlystaffmeetingsanddifferentforms ofongoingcommunicationwithstaffarepartofensuringthatemployees enjoy good levels of job satisfaction. The declining staff turnover rate suggeststhatlevelsofjobsatisfactionareincreasing(seetable7).

Table 8: Employment equity comparison for 2008/09 and 2009/10

Year 2008/09 2009/10

Source: Competition Commission

% Females 45% 47.2%

% Males 55% 52.2%

Figure 12: Employment equity (race and gender) over a three year period

100 100 84 80 60 40 19 18 5 2007/08 11 5 2008/09 20 0 16 20 5 2009/10 15 93 African White Coloured Asian

ThefollowingstaffmembershavebeenattheCommissionfor10yearsand receivedcertificatesforlongservice:fromleftMogalaneMatsimela,Brian Moeng, Binu Idiculla, Bellah Kekana, Nomsa Zilindile, Wilfred Steenkamp, LeonRossouwandAnnaleevanReenen*.

* Missing from the photo are Johan Dreyer, Brenda Maseko, Charlie Ndlovu, Mittah Sibanyoni and Johnny Wilke.

Source: Competition Commission

EmploymentequityreportsaresubmittedtotheDepartmentofLabouras Table 7: Staff turnover over the past three years

Year 2007/08 2008/09 2009/10

Source: Competition Commission

pertherequirementsoftheEmploymentEquityAct(1998).

26% 16% 15%

% Turnover

Remuneration

TheDepartmentofTradeandIndustryapprovedtheimplementationofthe resultsofasalarybenchmarkingexerciseacrossalltiersoftheCommission inAugust2009.

Employmentequityandtransformation

Asarelativelynewinstitution,theCommissionhashadtheadvantageofnothaving todealwithissuesoftransformationandequity.Thestaffprofilelargelyreflects South African demographics. Black female professionals are well represented atthemanagementlevelandblackemployeesoverallcomprise78percentof theseniortierintheorganisation.Thestaffcomplementof138employeesis madeupof66females(47.8percent)and72males(52.2percent).This showsthattheCommissionisnotfarfromachievingitstargetof50percent femalesand50percentmales,inlinewithgovernmentguidelines.

The benchmarking exercise aligned the Commission's salary bands with the public sector. This will also serve the Commission in retaining and attracting staff, as staff are assured that they are being remunerated at marketrelatedlevels.

Employeewellbeing

The Commission takes a keen interest in the wellbeing of its staff members andsupportsacomprehensiveserviceatnocosttoitsemployees.

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Through the Independent Counselling and Advisory Services, staff membershave24/7accesstoatollfreehelplinethatoffersservicesand counsellingonarangeofmatters.Employeesarefrequentlyremindedof the benefits of the programme. The annual Health Days, where staff are able to have health screenings, are another successful intervention that contributetothewellbeingoftheCommission'sstaff. Employeesreceiveregularfeedbackontheirhealthstatusthroughemail desk drops. The Commission supports annual HIV/AIDS awareness initiatives and speakers on various health-related topics have been invited to help increase awareness of health related issues.

Securities and facilities

As the Commission is a growing organisation with an increasing workload, soitsneedsinrelationtoofficespaceandfacilitiesarechanging.Itisthe functionofthesecurityandfacilitiesbusinessunittoaddresstheseneeds. The unit has focused on improving the facilities management system, exploring ways of acquiring more facilities and resources that include officespace,furniture,accommodation,construction,designandparking. Theanticipatedgrowthinstaffnumbersoverthenextfewyearsisthemain challengefortheCommission'sfacilities. Thecurrentofficespaceof4,700m2makesitdifficultfortheorganisation tomeetallitsobjectivesoptimally.Forthistohappenitwillneed6,000m2 andspecificspacestandardsfordifferentlevelsofstaff.TheCommission is currently occupying two buildings, which is not ideal as this can slow downprocessesandinterrupttheworkflow.Theunitislookingintowaysof addressing the space constraints, which will get more pressured as more staffarehiredoverthenextfewyears.

Employeerelations

TheCommission'sdisciplinaryandgrievancepolicieshavebeenreviewed to ensure that best practice is followed at all times. Labour related matters thatmayariseintheCommissionaresettledasamicablyandaspromptly as possible. Apartfromminorgrievanceslodgedandresolvedduringtheperiodunder review, no formal disciplinary enquiries were instituted. The Commission hasnothadanymajorityunionoperatinginitsenvironmentsince2008.

Informationtechnology

The IT department provides a secure, user friendly and efficient IT environment for all employees. It has introduced variousinformationand communicationtechnologiestoensurebetterefficiencyandproductivityin theorganisation.Thecasemanagementsystemandthesharepointportal serverwererevampedduringtheyearunderreview,enablinginteractive information management. The department has also acquired a knowledge managementsystemwithvariousworkflowandcollaborationtechnologies. Any upgrade of computer equipment is scheduled for the forthcoming year,with80computersduetobereplaced.

Corporate Governance Front row: TsholofeloSebiloane;TshepisoDiremelo;WilfredSteenkamp; CharlieNdlovu;LaylaSadick Middle row: JoePhele;SuzanNyamane;CarolineLegwai;BellahKekana; PinkyNxumalo;BonoloSuping;NicoleGounder;KarenHudson; Kelebogile Mekoa Back row:LeonRossouw;ElmarieWiehahn;NomsaZilindile;AletAucamp; RhimeLetsoalo;BinuIdiculla;AbramTiro

35

Part 1 3

Corporate Prioritisation Governance and Impact

CorporateGovernance

Structuresanddecision-making

ThepowersoftheCommissionarevestedintheCommissioner,who,aschiefexecutiveofficer,isresponsible to the Minister of Trade and Industry (In the next reporting period, this will be the Ministry of Economic Development).TheCommissionerisresponsibleforthegeneraladministrationoftheCommissionandfor performinganyfunctionsassignedtoitintermsoftheCompetitionAct.AccordingtotheAct,decisions oncasesmustbetakenbyboththeCommissionerandtheDeputyCommissioner,whotogether,formthe Commission.Tothisend,thereareweeklyCommissionmeetingsduringwhichdecisionsoncasesaretaken. The Commission's meetings are attended by divisional managers and if necessary, case teams, which advisetheCommissionerandDeputyCommissioner.Inaddition,executivecommittee(Exco)meetingsare heldonamonthlybasistodecideonadministrative,humanresourcesandfinancialissues.

Oversightresponsibilities

The audit committee

TheauditcommitteesupportstheCommission'sexecutivecommitteeinfulfillingitsoversightresponsibilities relating to internal controls, risk management, financial management and compliance with laws and regulations. Anindependentnon-executivememberchairsthecommitteeandbothinternalandexternalauditorshave unrestricted access to the committee. The audit committee held four meetings in the reporting period. It reviewedquarterlyinternalauditreports,internalandexternalauditplans,theriskassessmentplanand financialstatementsfortheperiodending31March2010.

Audit committee members

Mr Jeff Rapoo (chairperson) MrVictorNondabula(externalmember) MsKarenTeixera(externalmember) MsMaleshiniNaidoo(externalmember) MrHermandeJager(externalmember,resignedMarch2010) MrJohanDreyer(managementrepresentative)

37

Internal auditors

The internal auditing function for the Commission is outsourced, and in the periodunderreviewwascarriedoutbyNgubane&Co.Duringtheinternal audit process the company provided reports on the Enforcement and ExemptionandLegalServicesdivisions,andtheCommissioner'soffice.

Compliance with legislation

TheCommissionisboundbythefollowinglegislation:

PublicFinanceManagementAct(1999) and Treasury regulations

In accordance with the Public Finance Management Act and Treasury regulations, the Commission submitted the following documents to the DepartmentofTradeandIndustryforapprovalintheperiodunderreview: · MemorandumofagreementwiththeDepartmentofTradeandIndustry · Requesttoretainsurplusesgeneratedasat31March2009 · QuarterlyreportsontheCommission'sexpenditure,budgetvariance, activitiesandperformanceagainstsettargets · Monthlyexpenditurereports · Strategicplanandbudgetforthethree-yearperiod2009to2012.

Internalfinancialcontrols

The Commission has policies, procedures and systems designed to providereasonableassuranceoftheintegrityandreliabilityofitsfinancial statements,andtoadequatelyprotect,verifyandmaintainaccountability for its assets. These internal financial controls are implemented by qualifiedandtrainedpersonnelwithinasystemcharacterisedbychecks andbalances.Theeffectivenessofinternalfinancialcontrolsismonitored bytheCommission'smanagement,aswellasbytheinternalauditors.All significantfindingsarereportedtotheauditcommitteeandCommissioner. TheCommissionerandtheexternalandinternalauditorsarenotawareof any material breakdown in the functioning of these internal controls and systemsintheperiodunderreview.

SkillsDevelopmentAct(1998)

The annual training report and annual workplace skills plan was submitted on30June2009.

Risk management

With the assistance of the internal auditors, management is responsible for proactively identifying, evaluating, and managing and monitoring all significant risks faced by the Commission. Some of the significant risks towhichtheCommissionwasexposedintheperiodunderreviewinclude operational,technologicalandregulatoryrisks.Arevisedriskmanagement strategywasdrawnupin2009withaviewtosafeguardingtheCommission's staff,assets,corporatecredibilityandreputation.Intheyearunderreview, the Commission started to implement the risk management strategy and integrateitintotheCommission'sactivities.

SkillsDevelopmentLeviesAct(1999)

A skills development levy equal to 1 percent of the total payroll is paid monthly to the South African Revenue Service. The Commission's contributiontotheskillslevyfundwasR562,959.Therewerenorefunds.

EmploymentEquityAct(1998)

With under 150 employees, the Commission is obliged to submit an employment equity report every alternate year. An employment equity reportwassubmittedinOctober2008,andthenextoneisdueinOctober 2010.

CompensationforOccupationalInjuriesand DiseasesAct(1993)

AreturnofearningswassubmittedinMarch2010.Thisprovidesanestimated cost of possible claims that can be lodged against the Compensation Fund in terms of this Act.

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UnemploymentInsuranceAct(2001)

FortheperiodunderreviewallcontributionstotheUnemploymentInsurance Fund were paid over on a monthly basis. These contributions consist of anemployeecontributionof1percentandanemployercontributionof1 percent,cappedatamaximumofR124.78.

OccupationalHealthandSafetyAct(1993)

Intheyearunderreview,theCommissiontookallreasonableprecautions toensureasafeworkingenvironmentandconducteditsbusinesswithdue regard for environmental issues. The Commission's occupational health and safety policy was reviewed and included in the Commission policy manual.

IncomeTaxAct(1962)

TheSouthAfricanRevenueServiceexemptedtheCommissionintermsof section10(1)(A)(i)oftheIncomeTaxAct(1962).

Levies and taxes

The Commission has registered for, and met its obligations in relation to the followingleviesandtaxes: · Skillsdevelopmentlevy · Workmen'scompensation · UnemploymentInsuranceFund · Pay-as-you-earn(PAYE).

39

Part 4

Annual Financial Statements

Competition Commission Annual FinancialStatementsfortheyear endedMarch31,2010

Contents

AccountingAuthority'sResponsibilitiesandApproval Audit Committee Report AccountingAuthority'sReport ReportoftheAuditor-General Statement of Financial Position Statement of Financial Performance Statement of Changes in Net Assets Cash Flow Statement Accounting Policies Notes to the Annual Financial Statements

42 43 45 49 51 52 53 54 55 62

41

AccountingAuthority'sResponsibilitiesandApproval

TheAccountingAuthorityisrequiredbythePublicFinanceManagement Act (1999), to maintain adequate accounting records and are responsible forthecontentandintegrityoftheannualfinancialstatementsandrelated financial information included in this report. It is the responsibility of the Accounting Authority to ensure that the annual financial statements fairly presentthestateofaffairsoftheentityasattheendofthefinancialyear andtheresultsofitsoperationsandcashflowsfortheperiodthenended. Theexternalauditorsareresponsibleforreportingonthefairpresentation oftheannualfinancialstatements. Theannualfinancialstatementshavebeenpreparedinaccordancewith the effectiveStandards of Generally Recognised Accounting Practice (GRAP), issued by the Accounting Standards Board in accordance with Section 55 of the Public Finance management Act (Act No. 29 of 1999). Accounting policies for material transactions, events or conditions not covered by the GRAP reporting framework have been developed in accordance with paragraphs 7, 11 and 12 of GRAP3 and the hierarchy approvedinDirective5issuedbytheAccountingStandardsBoard. The annual financial statements are based upon appropriate accounting policies consistently applied and supported by reasonable and prudent judgementsandestimates.

The going concern basis has been adopted in preparing the financial statements.TheAccountingAuthorityhasnoreasontobelievethatthe Commission will not be a going concern in the foreseeable future based on forecasts and available cash resources. These financial statements supporttheviabilityoftheCommission. The external auditors are responsible for independently reviewing and reportingontheentity'sannualfinancialstatements.Theannualfinancial statementshavebeenexaminedbytheentity'sexternalauditorsandtheir reportispresentedonpage49-50. Theannualfinancialstatementssetoutonpage51-77,whichhavebeen preparedonthegoingconcernbasis,wereapprovedbytheaccounting authority:

Mr. M Ramburuth

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ReportoftheAuditCommitteefortheyearended31March2010

ReportoftheAuditCommitteeoftheCompetition Commission

TheAuditCommitteeispleasedtoreportthat,fortheyearunderreview,it has complied with its responsibilities arising from section 55 (1)(b) of the PFMAandTreasuryRegulations27.1.7and27.1.10(b)and(c).

The Audit Committee also reports that it has adopted appropriate formal terms of reference as its audit committee charter, has regulated its affairs in compliance with this charter and has discharged all its responsibilities as contained therein. Accordingly,theCommitteeoperatesinaccordancewiththetermsofthe said charter and is satisfied that it has discharged its responsibilities in compliance therewith.

AuditCommitteemembersandattendance:

The Audit Committee of the Competition Commission (the "Committee") consists of the members listed hereunder and is required to meet four timesperannumasperitsapprovedtermsofreference.Duringtheyear underreviewfourmeetingswereheld.

Number of meetings attended Non-executive Non-executive Non-executive Non-executive Non-executive Executive 4 1 2 3 1 4 Number of meetings held 4 4 4 4 4 4

The quality of in year management and monthly/ quarterly reports submitted in terms of the PFMA andtheDivisionofRevenueAct

The Audit Committee is satisfied with the content and quality of monthly andquarterlyreportspreparedandissuedbytheAccountingAuthorityof theCommissionduringtheyearunderreview.

Name of member J. Rapoo (Chairperson) M. Naidoo Prof. H. de Jager V.Nondobula K.Teixeira* J.Dreyer(CompanySecretary)

The effectiveness of internal control

Thesystemofcontrolsisdesignedtoprovidecosteffectiveassurancethat assetsaresafeguardedandthatliabilitiesandworkingcapitalareeffectively managed. In line with the PFMA and the King III Report on Corporate Governancerequirements,InternalAuditprovidestheAuditCommitteeand management with the assurance that the internal controls are appropriate and effective.Thisisachievedbymeansoftheriskmanagementprocess,aswell as the identification of corrective actions and suggested enhancements to thecontrolsandprocesses.FromthevariousreportsoftheInternalAuditors, the Audit Report on the annual financial statements, and the management reportoftheAuditor-General,itwasnotedthatnosignificantormaterialnoncompliance with prescribed policies and procedures have been reported. Accordingly,wecanreportthatsystemofinternalcontrolfortheperiodunder reviewwasefficientandeffective.

The Committee's meetings have regularly included the internal auditors andrepresentativesfromtheAuditorGeneral'sOffice.

ResponsibilitiesoftheAuditCommittee

The Audit Committee reports that it has complied with its responsibilities arisingfromsection55(1)(b)ofthePFMAandTreasuryRegulations27.1.7. and27.1.10(b)and(c).

* Appointed 3 September 2009

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Evaluation of the annual financial statements

The Audit Committee has: · reviewed and discussed the audited annual financial statements to be included in the annual report, with the Auditor-General and the AccountingAuthority; · reviewedtheAuditor-General'smanagementreportandmanagement's response thereto; · reviewedchangesinaccountingpoliciesandpractices;and. · reviewedsignificantadjustmentsresultingfromtheaudit. The Audit Committee would like to highlight that the Competition Commission ishighlydependentontheapprovaloftheretentionofaccumulatedsurplus fromNationalTreasury,aswellastheapprovaloftheannualgrantsfrom the Department of Economic Development in order to maintain its going concern status. The Audit Committee concurs and accepts the Auditor-General's conclusionsontheannualfinancialstatements,andisoftheopinionthat the audited annual financial statements be accepted and read together withthereportoftheAuditor-General.

Mr. J.R Rapoo Chairperson of the Audit Committee Date:29July2010

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AccountingAuthority'sReport

ReportbytheAccountingAuthoritytotheExecutiveAuthorityandParliamentoftheRepublicofSouthAfrica.

1. Natureofbusiness

TheCommissionderivesitsmandatefromtheCompetitionActNo.89of1998,asamended.Themainobjectives,asdeterminedbytheCompetitionAct, are the following: · Promoteefficiency,adaptabilityanddevelopmentoftheeconomy; · Provideconsumerswithcompetitivepricesandproductchoices; · Topromoteemployment,andadvancesocialandeconomicwelfareofSouthAfricans; · ToexpandopportunitiesforSouthAfricanparticipationinworldmarketsandrecognisetheroleofforeigncompetitionintheRepublic; · Toensurethatsmallandmediumsizedenterpriseshaveanequitableopportunitytoparticipateintheeconomy;and · Topromotethegreaterspreadofownership,inparticulartoincreasetheownershipstakesofhistoricallydisadvantagedpersons.

2. Financialoverview/performance

2.1.FinancialHighlights 2010 `000 Revenue Interestreceived Total Revenue Expenditure Net deficit Total assets Total liabilities No. of Merger cases filed 2.2.TotalRevenue TotalrevenueincreasedfromR95millionin2009toR111millionin2010.Incomefromthegrantincreasedby83%fromR44millionin2009toR80,7 millionin2010whilstincomefromfilingfeesreducedby40%fromR50,5millionin2009toR30,3millionin2010. Mergercasesfiledduringtheyeardecreasedby56%to181(2009:415). Interestearnedontemporarilyavailablefundsdecreasedby56%andotherincomereceivedduetorepaymentofstudyloansaswellasarefund from SASSETA remained constant. 111305 1987 113 292 128 673 (15 381) 26 509 20 675 181 2009 `000

94719 4526

99 254 110 638 (11 393) 37 826 16 609 415

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2.3Expenditure ExpenditureincreasedfromR111millionin2009toR128millionin2010reflectinganoverallincreaseof15%.ThisamountedtotheCommission spending86%ofitsbudgetedexpenditure.TheincreaseinexpenditurewasasaresultofthegrowingstaffnumberswithintheCommissiontoassist withtheincreasedenforcementactivity,andthecommensurateincreaseinlitigationandconsultingfeesduetothecomplexityofcases. 2.4FinancialPerformance TheCommissiongeneratedadeficitofR15,3million(2009:R11,4mdeficit)forthecurrentyear.ThecostsofrunningtheCommissionareincreasing annuallyduetoincreasedactivityresultinginanincreaseinthedemandforhumanresourcecapacity. TheCommissionreceivedadditionalfundingofR13milliontoassistwiththeincreaseinlitigationcostsincurredonhighprofilecasesbeforethe Tribunal.TheCommissioncarriesforwardanaccumulatedsurplusofR5,8m(CashsurplusofR2,5millionafterexpenditureonfixedassets)forthe currentfinancialyear. Theapprovedgrantfundingfromgovernmentfortheyear2010-11amountingtoR80,7m,incomefromfilingfeesplusanyaccumulatedsurplusthat the Commission is allowed to retain will ensure that the Commission is able to continue as a going concern.

3. Executivecommittee

Thecompositionofthecurrentexecutivecommitteeduringtheperiodunderreviewisasfollows

Member Mr. M. Ramburuth Mr.T.Bonakele Mr.J.Dreyer Mr. S. Roberts Ms.N.Pillay Ms.W.Mkwananzi Ms. N. Mokoena Mr.M.vanHoven Mr.K.Weeks Title Commissioner DeputyCommissioner CommissionSecretary Manager:Policy&Research Manager:CorporateServicesandCFO Manager:LegalService Manager:StrategicandStakeholderRelations(Resigned28February2010) Manager: Mergers & Acquisitions Manager:EnforcementandExemptions(Appointed1August2009)

4. Changesinnatureofproperty,plantandequipment

Nomajorchangesinthenatureofproperty,plantandequipmentorchangesinthepolicyrelatingtotheuseofproperty,plantandequipmenttook placeduringtheyearunderreview.Changesregardingtheestimatedusefullifeoftheassethavebeentakenintoaccountinthecalculationofthe depreciationvaluesoftheasset. Computerequipmentnotinuseandwithazeronetvaluehasbeendonatedandallassetsbrokenandindisrepairhasbeendisposedoff.

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5. Materialityframework

The Commission determined a planning materiality figure of R 340 292 for the year under review. The Commission's business is such that it is notcapitalintensiveandrevenuewasregardedasthebestindicatorofbusinessactivityandtherefore1%ofbudgetedfeeincomewasusedin determiningthematerialityfigure. Materialfactsandlossesofaquantitativenaturearedisclosedwhenthematerialityfigureisexceeded,oriftheyarosethroughcriminalconduct, irregular/fruitlessandwastefulexpenditure. DisposalofsignificantassetswhenoveralloperationalfunctionsoftheCommissionchanges,aredisclosed.

6. Eventssubsequenttofinancialpositiondate

Noeventstookplacebetweentheyear-enddate(31stMarch2010)andthedateonwhichthefinancialstatementsweresignedthatweresufficiently material to warrant disclosure to interested parties. HoweveritistobenotedthattheManagerCorporateServiceandCFO-N.Pillay,andtheCommission'sSecretary-JDreyer,resignedinMay2010.

7. Expenditurerelatedto2010SoccerWorldCup

TheCommissiondidnotincuranyexpenditureinthe2009/10financialyearrelatedtotheSoccerWorldCup.Thefollowingexpenditurewasincurred inthe2010/11financialyear,whichrelatedtothepurchaseofSoccerWorldCupmerchandise:

2010/11 Purchase of World Cup apparel Items purchased: BoogieBlaster/Vuvuzelas Drawstring bags Beanies T-shirts Scarves Total World Cup expenditure 150 150 150 150 150 750 4 5 8 15 11 43 Quantity R'000

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8. Commissionsecretary(acting)

ThedetailsoftheCommission'ssecretaryareasfollows: Ms.AnisaKessery Businessaddress: Thedticampus BuildingC:Mulayo 77MeintjiesStreet Sunnyside TSHWANE Postaladdress: PrivateBagX23 LynnwoodRidge 0040 TSHWANE Telephone Fax Emailaddress: +27-12-3943336 +27-12-3944336 [email protected]

ThepreviousincumbentMr.JohanDreyerservedduringtheperiodunderreviewbutsubsequentlyresignedon14May2010.

9. Address

TheCommission'sregisteredofficesaresituatedat:The dti campus BuildingC:Mulayo 77MeintjiesStreet Sunnyside TSHWANE with the postal address PrivateBagX23 LynwoodRidge 0040 TSHWANE Webaddress:www.compcom.co.za

Mr. M Ramburuth

Accounting Authority

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ReportoftheAuditor-GeneraltoParliament

onthefinancialstatementsoftheCompetitionCommissionfortheyearended31March2010

Report on the financial statements

Introduction

IhaveauditedtheaccompanyingfinancialstatementsoftheCompetition Commission,whichcomprisethestatementoffinancialpositionasat31 March2010,andthestatementoffinancialperformance,thestatementof changesinnetassetsandthecashflowstatementfortheyearthenended, and a summary of significant accounting policies and other explanatory information,assetoutonpages55to61.

assurance about whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about theamountsanddisclosuresinthefinancialstatements.Theprocedures selecteddependontheauditor'sjudgement,includingtheassessmentof therisksofmaterialmisstatementofthefinancialstatements,whetherdue to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity's preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing anopinionontheeffectivenessoftheentity'sinternalcontrol.Anauditalso includesevaluatingtheappropriatenessofaccountingpoliciesusedand the reasonableness of accounting estimates made by management, as wellasevaluatingtheoverallpresentationofthefinancialstatements. IbelievethattheauditevidenceIhaveobtainedissufficientandappropriate toprovideabasisformyauditopinion.

TheAccountingAuthority'sresponsibilityforthefinancial statements

The Accounting Authority is responsible for the preparation and fair presentation of the financial statements in accordance with the South African Standards of Generally Recognised Accounting Practice (SA Standards of GRAP) and in the manner required by the Public Finance Management Act of South Africa.This responsibility includes: designing, implementingandmaintaininginternalcontrolrelevanttothepreparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error; selecting and applying appropriate accounting policies; and making accounting estimates that are reasonable in the circumstances.

Opinion

Inmyopinion,thefinancialstatementspresentfairly,inallmaterialrespects, thefinancialpositionoftheCompetitionCommissionasat31March2010, anditsfinancialperformanceanditscashflowsfortheyearthenended in accordance with South African Standards of Generally Recognised Accounting Practice (SA Standards of GRAP) and in the manner required bythePublicFinanceManagementActofSouthAfrica.

Auditor-General'sresponsibility

Asrequiredbysection188oftheConstitutionofSouthAfricaandsection4 ofthePublicAuditActofSouthAfricaandsection40(10)oftheCompetition Act,myresponsibilityistoexpressanopiniononthefinancialstatements basedonmyaudit. I conducted my audit in accordance with International Standards on AuditingandGeneralNotice1570of2009issuedinGovernmentGazette 32758of27November2009.ThosestandardsrequirethatIcomplywith ethical requirements and plan and perform the audit to obtain reasonable

Report on other legal and regulatory requirements

IntermsofthePAAofSouthAfricaandGeneralnotice1570of2009,issued inGovernmentGazetteNo.32758of27November2009,Iincludebelow my findings on the report on predetermined objectives, compliance with thePFMA,theCompetitionActandfinancialmanagement(internalcontrol).

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Findings

Pre-determinedobjectives

Usefulness of reported performance information The following criteria were used to assess the usefulness of the planned and reported performance: · Consistency:Hastheentityreportedonitsperformancewithregardto itsobjectives,indicatorsandtargetsinitsapprovedstrategicplan,i.e. aretheobjectives,indicatorsandtargetsconsistentbetweenplanning and reporting documents? · Relevance: Is there a clear and logical link between the objectives, outcomes, outputs, indicators and performance targets? · Measurability:Areobjectivesmademeasurablebymeansofindicators andtargets?Areindicatorswelldefinedandverifiable,andaretargets specific,measurable,andtimebound?

Internal control

Iconsideredinternalcontrolrelevanttomyauditofthefinancialstatements andthereportonpredeterminedobjectivesandcompliancewiththePFMA andCompetitionAct,butnotforthepurposesofexpressinganopinionon theeffectivenessofinternalcontrol.Themattersreportedbelowarelimited tothedeficienciesidentifiedduringtheaudit.

Leadership

The Competition Commission did not have sufficient monitoring controls toensuretheproperimplementationoftheoverallprocessofreportingon pre-determinedobjectives.

Pretoria Thefollowingfindingsrelatetotheabovecriteria: 30July2010 Planned and reported performance targets not specific/measurable/ time bound For the selected objectives: mergers and acquisitions, enforcement and exemptionsandlegalservices,23%oftheplannedandreportedtargets were not: · specific in clearly identifying the nature and the required level of performance; · measurableinidentifyingtherequiredperformance; · timeboundinspecifyingthetimeperiodordeadlinefordelivery.

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Statement of Financial Position

Note(s) ASSETS Current Assets Inventory Tradeandotherreceivablesfromexchangetransactions Cashandcashequivalents 2010 `000 2009 `000

11 12

165 652 18,855 19,672

55 119 32,658 32,832

Non-CurrentAssets Property,plantandequipment Intangible assets Total Assets LIABILITIES Current Liabilities Finance lease obligation Tradeandotherpayablesfromexchangetransactions Provisions UnspentDonorFunds

13 14

4,987 1,850 6,837 26,509

3,461 1,533 4,994 37,826

15 17 16 28

880 18,480 154 5 19,519

23 14,474 2,112 16,609

Non-CurrentLiabilities Finance lease obligation Total Liabilities Net Assets NET ASSETS Accumulated surplus

15

1,156 20,675 5,834

16,609 21,217

5,834

21,217

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Statement of Financial Performance

Note(s) Revenue Governmentgrants&subsidies Fee income Other Income Surplus on disposal of assets Total Revenue Expenditure Employeerelatedcosts Administrativeexpenses Depreciation and amortisation Impairment Finance costs Operatingexpenses Total Expenditure Interestreceived Deficit for the year 2010 `000 2009 `000

2 3 5

80,739 30,380 186 111,305

44,000 50,506 183 30 94,719

6 7

8 9 4

71,557 3,263 2,431 228 51,194 (128,673) 1,987 (15,381)

54,938 2,458 808 75 25 52,334 (110,638) 4,526 (11,393)

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Statement of Changes in Net Assets

Accumulated surplus `000 Balance at 01 April 2008 Changes in net assets Deficitfortheyear Total changes Balance at April 01, 2009 Changes in net assets Deficitfortheyear Total changes Balance at March 31, 2010 32,610 (11,393) (11,393) 21,215 (15,381) (15,381) 5,834 Total net assets `000 32,610 (11,393) (11,393) 21,215 (15,381) (15,381) 5,834

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Cash Flow Statement

2010 2009 `000

Note(s) CASH FLOWS FROM OPERATING ACTIVITIES Receipts Saleofgoodsandservices Grants Interest income Other receipts

`000

30,380 80,739 1,987 295 113,401

50,506 44,000 4,526 580 99,612

Payments Employeecosts Suppliers Finance costs Net cash flows from operating activities CASH FLOWS FROM INVESTING ACTIVITIES Additionofproperty,plantandequipment Proceedsfromsaleofproperty,plantandequipment Addition of other intangible assets Net cash flows from investing activities CASH FLOWS FROM FINANCING ACTIVITIES Movementinunspentdonorfunds Financeleaserepayments Net cash flows from financing activities Net increase/(decrease) in cash and cash equivalents Cashandcashequivalentsatthebeginningoftheyear Cash and cash equivalents at the end of the year 12 13 13 14 18

(71,578) (53,143) (228) (124,949) (11,548)

(54,938) (54,015) (25) (108,978) (9,366)

(3,315) (960) (4,275)

(1,691) 228 (1,475) (2,938)

5 2,015 2,020 (13,803) 32,658 18,855

(260) (260) (12,564) 45,222 32,658

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Accounting Policies

1.Basisofpreparation

Theannualfinancialstatementshavebeenpreparedinaccordancewith the effective Standards of Generally Recognised Accounting Practice (GRAP), issued by the Accounting Standards Board in accordance with Section55ofthePublicFinancemanagementAct(ActNo.29of1999). Interest income Accounting policies for material transactions, events or conditions not covered by the GRAP reporting framework have been developed in accordance with paragraphs 7, 11 and 12 of GRAP3 and the hierarchy approvedinDirective5issuedbytheAccountingStandardsBoard. Theannualfinancialstatementshavebeenpreparedonanaccrualbasis ofaccountingandareinaccordancewithhistoricalcostconvention,unless specificallystatedotherwise.Theprincipalaccountingpoliciesadoptedin thepreparationofthesefinancialstatementsaresetoutbelow. Asset, liabilities, revenues and expenses have not been offset except whereoffsettingisrequiredorpermittedbyaStandardofGRAP. Theaccountingpoliciesareappliedconsistentlywiththoseusedtopresent thepreviousyear'sfinancialstatements,unlessexplicitlystated.Thedetails ofanychangesinaccountingpoliciesareexplainedintherelevantpolicy. Theseaccountingpoliciesareconsistentwiththepreviousperiod. 1.1Presentationcurrency ThesefinancialstatementsarepresentedinSouthAfricanRands. 1.2Revenue Revenue is recognised to the extent that it is probable that the economicbenefitswillflowandcanbereliablymeasured.Revenueis measuredatfairvalueoftheconsiderationreceivableonanaccrual basis. The following specific recognition criteria must also be met beforerevenueisrecognised: Filing fees Revenue comprises of case notification fees and facility charges received.Revenuefromcasenotificationfeesisrecognisedwhenthe case is accepted by the Commission. Facility fees are recognised on a monthly basis for services rendered by the Commission for infrastructure usage by the Competition Tribunal. Other income is recognisedasandwhenreceived Irregularexpenditureisrecognisedasexpenditureinthestatement of financial performance.If the expenditure is not condoned by the relevantauthorityitistreatedasanassetuntilitisrecoveredorwritten offasirrecoverable. On discovery of alleged irregular expenditure, such expenditure will be left in the expense account and the Accounting Officer will record the details of the expenditure in the irregular expenditure register. The Accounting Officer will must investigate the alleged irregularexpendituretodeterminewhethertheexpendituremeetsthe definitionofirregularexpenditure.Duringtheperiodofinvestigation the expenditure will remain in the expense account. The results of the investigation will determine the appropriate action to be taken regardingtheexpenditure. Should the investigation reveal that the expenditure is in fact valid expenditure and therefore does not constitute irregular expenditure the details of the expenditure will be retained in the register for the purposes of completion (and to provide an appropriate audit trail). The register will then be updated to reflect the outcome of the investigation.Iftheinvestigationindicatesthattheexpenditureisin fact irregular expenditure the Accounting Officer will immediately report, in writing, the particulars of the expenditure to the relevant 1.3Irregularexpenditure Irregularexpendituremeansexpenditureincurredincontraventionof, ornotinaccordancewitharequirementofanyapplicablelegislation including the PFMA. Other income Other income is recognised on an accrual basis. Revenueisrecognisedasinterestaccruesusingtheeffectiveinterest rate. Governmentgrant Governmentgrantsarerecognisedintheyeartowhichtheyrelate, once reasonable assurance has been obtained that all conditions of thegrantshavebeencompliedwithandthegranthasbeenreceived.

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Treasury.Inadditiontheirregularexpenditurewillalsobeincludedin theentity'smonthlyreportonrevenueandexpenditureassubmitted bytheAccountingOfficertotherelevantTreasury.

Contributions to the defined contribution plan are charged to the statementoffinancialperformanceintheyeartowhichtheyrelate. 1.6Property,plantandequipment

If the irregular expenditure is subsequently condoned by the appropriateauthoritynofurtheractionisrequiredbythedepartment as the amount has already been expensed in the statement of financialperformance.Theregisterwillbeupdatedtoreflectthefact thattheirregularexpenditurewascondoned.If,however,theamount isnotcondonedbytheappropriateauthoritytheAccountingOfficer willtakeeffectiveandappropriateactiontorecovertheamountfrom theresponsibleperson,theseactionsmayalsoincludedisciplinary steps. 1.4Fruitlessandwastefulexpenditure Fruitlessexpendituremeansexpenditurewhichwasmadeinvainand wouldhavebeenavoidedhadreasonablecarebeenexercised.

Thecostofanitemofproperty,plantandequipmentisrecognisedas an asset when: · · itisprobablethatfutureeconomicbenefitsassociatedwiththe itemwillflowtotheentity;and thecostoftheitemcanbemeasuredreliably.

Property, plant and equipment are stated at historical cost less accumulated depreciation. Depreciation is calculated on a straight-line basis at rates considered appropriate to reduce the costoftheassetslesstheirresidualvalueovertheestimateduseful life.Usefullife,depreciationpolicyandresidualvalueareassessed annually. Theperiodoverwhichvariouscategoriesofassetsaredepreciated

The expenditure portion of any fruitless and wasteful expenditure is charged against income and the capital portion of irregular expenditure is charged against the related liability in the period in whichtheyaredetermined. 1.5Employeebenefits Short term employee benefits The cost of short-term employee benefits, (those payable within 12 months after the service is rendered, such as paid vacation leave, bonuses, and nonmonetary benefits such as medical care), are recognisedintheperiodinwhichtheserviceisrenderedandarenot discounted.Theexpectedcostofbonuspaymentsisrecognisedas anexpensewhenthereisalegalorconstructiveobligationtomake suchpaymentsasaresultofpastperformance. Pension and post-retirement benefits Paymentstodefinedcontributionretirementbenefitplansarecharged asanexpenseastheyfalldue.Paymentsmadetoindustry-managed (orstateplans)retirementbenefitschemesaredealtwithasdefined contribution plans where the entity's obligation under the schemes is equivalent to those arising in a defined contribution retirement benefitplan.Theentityoperatesadefinedcontributionplanforallits employees.

is detailed below: Item Furnitureandfixtures Motorvehicles Officeequipment IT equipment ·ComputerEquipment Leased Assets Average useful life 10-14years 5-7years 5-11years 3-8years Period of the lease

The residual value and the useful life of each asset is assessed at eachfinancialperiod-end.Eachpartofanitemofproperty,plantand equipmentwithacostthatissignificantinrelationtothetotalcostof theitemshallbedepreciatedseparately.Thedepreciationchargefor eachperiodisrecognisedinsurplusordeficitunlessitisincludedin the carrying amount of another asset. The gain or loss arising from the derecognition of an item of property, plant and equipment is includedinsurplusordeficitwhentheitemisderecognised.Thegain orlossarisingfromthederecognitionofanitemofproperty,plantand equipment is determined as the difference between the net disposal proceeds,ifany,andthecarryingamountoftheitem.

56

1.7Intangibleassets An intangible asset is recognised when: · · it is probable that the expected future economic benefits that areattributabletotheassetwillflowtotheentity;and thecostoftheassetcanbemeasuredreliably. Intangible assets are initially recognised at cost and are carried at cost less accumulated amortisation and impairment losses. Computer software costs that exceed beyond one year are recognised as intangible assets. These assets are amortised from the date the asset is brought into use, using the straight-line method over their useful lives.Theestimatedusefullifeofcomputersoftwareis3years.The useful lives of the assets are reviewed at each balance sheet date andadjustedifappropriate.Computersoftwarehasnoresidualvalue as the software is not resaleable. Expenditure on research (or on the research phase of an internal project)isrecognisedasanexpensewhenitisincurred. Anintangibleassetarisingfromdevelopment(orfromthedevelopment phaseofaninternalproject)isrecognisedwhen: · itistechnicallyfeasibletocompletetheassetsothatitwillbe availableforuseorsale. · thereisanintentiontocompleteanduseorsellit. · thereisanabilitytouseorsellit. · itwillgenerateprobablefutureeconomicbenefits. · there are available technical, financial and other resources to completethedevelopmentandtouseorselltheasset. · theexpenditureattributabletotheassetduringitsdevelopment canbemeasuredreliably. Intangibleassetsarecarriedatcostlessanyaccumulatedamortisation andanyimpairmentlosses. An intangible asset is regarded as having an indefinite useful life when,basedonallrelevantfactors,thereisnoforeseeablelimittothe periodoverwhichtheassetisexpectedtogeneratenetcashinflows. Amortisationisnotprovidedfortheseproperty,plantandequipment. Forallotherintangibleassetsamortisationisprovidedonastraight linebasisovertheirusefullife. The amortisation period and the amortisation method for intangible assets are assessd period-end. Reassessing the useful life of an intangible asset with a definite useful life after it was classified as indefiniteisanindicatorthattheassetmaybeimpaired.Asaresult

theassetistestedforimpairmentandtheremainingcarryingamount isamortisedoveritsusefullife. Amortisation is provided to write down the intangible assets, on a straightlinebasis,totheirresidualvaluesasfollows: Item Computer software Useful Life 3years

1.8Leases Aleaseisclassifiedasafinanceleaseifittransferssubstantiallyall therisksandrewardsincidentaltoownership.Aleaseisclassifiedas anoperatingleaseifitdoesnottransfersubstantiallyalltherisksand rewards incidental to ownership. Leased assets Finance leases are recognised as assets and liabilities in the statementoffinancialpositionatamountsequaltothefairvalueofthe leasedpropertyor,iflower,thepresentvalueoftheminimumlease payments.Thecorrespondingliabilitytothelessorisincludedinthe statementoffinancialpositionasafinanceleaseobligation. Leases of assets are classified as finance leases whenever the termsoftheleasetransfersubstantiallyalltherisksandrewardsof ownership to the lessee Assets held under finance leases are recognised as assets at their fairvalueattheinceptionoftheleaseor,ifloweratthepresentvalue of the minimum lease payments. The corresponding liability to the lessorisincludedinthestatementoffinancialpositionasafinance leaseobligation.Leasepaymentsareapportionedbetweenfinance charges and reduction of the lease obligation so as to achieve a constant rate of interest on the remaining balance of the liability. Financechargesarechargedtosurplusordeficit. Thefinanceleasesaremeasuredatfairvalueinsubsequentperiods. Leasesunderwhichthelessoreffectivelyretainstherisksandbenefits ofownershipareclassifiedasoperatingleases.Obligationsincurred under operating leases are charged to the statement of financial performanceinequalinstalmentsovertheperiodofthelease. Operating leases ­ Lessee Operating lease payments are recognised as an expense on a straight-line basis over the lease term. The difference between the amounts recognised as an expense and the contractual payments

57

are recognised as an operating lease asset. This liability is not discounted. Anycontingentrentsareexpensedintheperiodtheyareincurred. 1.9Inventory Inventoryaremeasuredatthelowerofcostandnetrealisablevalue. Netrealisablevalueforconsumablesisassumedtoapproximatethe costpriceduetotherelativelyshortperiodthattheseassetsareheld in stock. Inventoryaremeasuredatthelowerofcostandnetrealisablevalue onthefirst-in-first-outbasis. Net realisable value is the estimated selling price in the ordinary course of business less the estimated costs of completion and the estimatedcostsnecessarytomakethesale. The cost of reporting date comprises of all costs of purchase, costs of conversionandothercostsincurredinbringingtheinventorytotheir present location and condition. Thecostofinventoriesisbasedonthefirst-in-first-out(FIFO)method andincludesexpenditureincurredinacquiringtheconsumablesand other costs incurred in bringing them to their existing location and condition Whenconsumablesaredonatedorissuedtootherentitiesfornocost/ nominalvalues,consumablesshallbemeasuredatthelowerofcost andnetrealisablevalue. 1.10Provisionsandcontingencies Provisionsarerecognisedwhen: · theentityhasapresentobligationasaresultofapastevent; · itisprobablethatanoutflowofresourcesembodyingeconomic benefits or service potential will be required to settle the obligation; and areliableestimatecanbemadeoftheobligation. · The amount of a provision is the best estimate of the expenditure expected to be required to settle the present obligation at the reporting date. Where the effect of time value of money is material, the amount of aprovisionisthepresentvalueoftheexpendituresexpectedtobe required to settle the obligation.

The discount rate is a pre-tax rate that reflects current market assessmentsofthetimevalueofmoneyandtherisksspecifictothe liability. Where some or all of the expenditure required to settle a provision is expected to be reimbursed by another party, the reimbursement is recognised when, and only when, it is virtually certain that reimbursementwillbereceivediftheentitysettlestheobligation.The reimbursement is treated as a separate asset. The amount recognised forthereimbursementdoesnotexceedtheamountoftheprovision. Provisionsarereviewedateachreportingdateandadjustedtoreflect the current best estimate. Provisions are reversed if it is no longer probablethatanoutflowofresourcesembodyingeconomicbenefits orservicepotentialwillberequired,tosettletheobligation. Where discounting is used, the carrying amount of a provision increasesineachperiodtoreflectthepassageoftime.Thisincrease isrecognisedasaninterestexpense. Aprovisionisusedonlyforexpendituresforwhichtheprovisionwas originallyrecognised. Provisionsarenotrecognisedforfutureoperatingdeficits. Ifanentityhasacontractthatisonerous,thepresentobligation(net ofrecoveries)underthecontractisrecognisedandmeasuredasa provision. No obligation arises as a consequence of the sale or transfer of an operationuntiltheentityiscommittedtothesaleortransfer,thatis, there is a binding agreement. After their initial recognition contingent liabilities recognised in business combinations that are recognised separately are subsequentlymeasuredatthehigherof: · heamountthatwouldberecognisedasaprovision;and t · heamountinitiallyrecognisedlesscumulativeamortisation. t Contingent assets and contingent liabilities are not recognised. Contingenciesaredisclosedinnote24.

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Competion Commission FinancialStatementsfortheyearended31March2010

1.11Financialinstruments Classification The Commission's principal financial instruments are receivables, cashandcashequivalents,payablesandleaseliabilities. Classification depends on the purpose for which the financial instruments were obtained / incurred and takes place at initial recognition.Classificationisre-assessedonanannualbasis,except forderivativesandfinancialassetsdesignatedasatfairvaluethrough surplus or deficit, which shall not be classified out of the fair value throughsurplusordeficitcategory. Initial recognition and measurement Financial assets are recognised in the Commission's statements of financial position when the Commission becomes a party to the contractualprovisionsofaninstrument. Financial instruments are initially recognised using the trade date accounting method. Financialassetsareclassifiedasfinancialassetsatfairvaluethrough surplusordeficit,loansandreceivablesorheldtomaturityinvestment asappropriate.Whenfinancialassetsareinitiallyrecognisedtheyare measuredatfairvalue. TheCommissiondeterminestheclassificationofitsfinancialassetson initialrecognitionand,whereallowedandappropriate,re-evaluates thisdesignationateachfinancialyearend. Impairment of financial assets Ateachendofthereportingperiodtheentityassessesallfinancial assets, other than those at fair value through surplus or deficit, to determinewhetherthereisobjectiveevidencethatafinancialasset orgroupoffinancialassetshasbeenimpaired. Impairmentlossesarerecognisedinsurplusordeficit. Impairment losses are reversed when an increase in the financial asset's recoverable amount can be related objectively to an event occurring after the impairment was recognised, subject to the restrictionthatthecarryingamountofthefinancialassetatthedate that the impairment is reversed shall not exceed what the carrying amountwouldhavebeenhadtheimpairmentnotbeenrecognised. Reversals of impairment losses are recognised in surplus or deficit exceptforequityinvestmentsclassifiedasavailableforsale. Impairment losses are also not subsequently reversed for

available-for-saleequityinvestmentswhichareheldatcostbecause fairvaluewasnotdeterminable. Asset carried at amortised cost In relation to receivables a provision for impairment is made when thereisobjectiveevidence(suchastheprobabilityofinsolvencyor significantfinancialdifficultiesofthedebtor)thattheCommissionwill not be able to collect all the amounts due under the original terms of theinvoice.Thecarryingamountofthereceivableisreducedthrough use of an allowance account. Impaired debts are derecognised when theyareassessedasuncollectible. Loans and other receivables Loansandreceivablesarenon-derivativefinancialassetswithfixed or determinable payments that are not quoted in an active market. After initial measurement loans and receivables are carried at amortisedcostusingtheeffectiveinterestmethodlessanyallowance forimpairment.Gainsandlossesarerecognisedinsurplusordeficit when the receivables are derecognised or impaired, as well as through the amortisation process. Tradeandotherreceivablesareclassifiedasloansandreceivables. Payables Trade payables are initially measured at fair value, and are subsequentlymeasuredatamortisedcost,usingtheeffectiveinterest rate method. After initial recognition, payables are subsequently measured at amortised cost using the effective interest method. Gains and losses are recognised in surplus and deficit when the liabilities are derecognised as well as through the amortisation process. Cashandcashequivalents Cash and cash equivalents in the statement of financial position comprisecashatbanksandonhandandcashequivalentswithan originalmaturityofthreemonthsorless.Forthepurposeofthecash flowstatement,cashandcashequivalentsconsistofcashandcash equivalentsasdefinedabove,netofoutstandingbankoverdrafts. Cashandcashequivalentsarerecognisedatfairvalue. 1.12Impairmentofcashgeneratingassets Cash-generating assets are those assets held by the entity with the primary objective of generating a commercial return. When an

Competion Commission FinancialStatementsfortheyearended31March2010

59

asset is deployed in a manner consistent with that adopted by a profit-orientatedentity,itgeneratesacommercialreturn. Impairment is a loss in the future economic benefits or service potential of an asset, over and above the systematic recognition of the loss of the asset's future economic benefits or service potential through depreciation (amortisation). Carrying amount is the amount at which an asset is recognised in thestatementoffinancialpositionafterdeductinganyaccumulated depreciation and accumulated impairment losses thereon. A cash-generating unit is the smallest identifiable group of assets held with the primary objective of generating a commercial return that generates cash inflows from continuing use that are largely independentofthecashinflowsfromotherassetsorgroupsofassets. Costs of disposal are incremental costs directly attributable to the disposalofanasset,excludingfinancecostsandincometaxexpense. Depreciation (Amortisation) is the systematic allocation of the depreciableamountofanassetoveritsusefullife. Fair value less costs to sell is the amount obtainable from the sale of an asset in an arm's length transaction between knowledgeable, willing parties, less the costs of disposal. Recoverable amount of an asset or a cash-generating unit is the higher its fair value less costs to sell and its value in use. Usefullifeiseither: (a) theperiodoftimeoverwhichanassetisexpectedtobeused bytheentity;or (b) the number of production or similar units expected to be obtainedfromtheassetbytheentity. Cashgeneratingunits Ifthereisanyindicationthatanassetmaybeimpaired,therecoverable amount is estimated for the individual asset. If it is not possible to estimate the recoverable amount of the individual asset, the entity determines the recoverable amount of the cash-generating unit to whichtheassetbelongs(theasset'scash-generatingunit). If an active market exists for the output produced by an asset or groupofassets,thatassetorgroupofassetsisidentifiedasacash-

generating unit, even if some or all of the output is used internally. If the cash inflows generated by any asset or cash-generating unit areaffectedbyinternaltransferpricing,theentityusemanagement's bestestimateoffutureprice(s)thatcouldbeachievedinarm'slength transactions in estimating: the future cash inflows used to determine the asset's or cash· generatingunit'svalueinuse;and · thefuturecashoutflowsusedtodeterminethevalueinuseof anyotherassetsorcash-generatingunitsthatareaffectedby the internal transfer pricing. Cash-generatingunitsareidentifiedconsistentlyfromperiodtoperiod forthesameassetortypesofassets,unlessachangeisjustified. The carrying amount of a cash-generating unit is determined on a basis consistent with the way the recoverable amount of the cashgenerating unit is determined. An impairment loss is recognised for a cash-generating unit if the recoverable amount of the unit is less than the carrying amount of theunit.Theimpairmentisallocatedtoreducethecarryingamount ofthecash-generatingassetsoftheunitonaproratabasis,based on the carrying amount of each asset in the unit. These reductions in carrying amounts are treated as impairment losses on individual assets. In allocating an impairment loss, the entity does not reduce the carryingamountofanassetbelowthehighestof: · itsfairvaluelesscoststosell(ifdeterminable); · itsvalueinuse(ifdeterminable);and · zero. Theamountoftheimpairmentlossthatwouldotherwisehavebeen allocatedtotheassetisallocatedproratatotheothercash-generating assets of the unit. Whereanon-cash-generatingassetcontributestoacash-generating unit,aproportionofthecarryingamountofthatnon-cash-generating assetisallocatedtothecarryingamountofthecash-generatingunit priortoestimationoftherecoverableamountofthecash-generating unit. 1.13Relatedparties A related party transaction is a transfer of resources or obligations between related parties, regardless of whether a price is charged.

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Competion Commission FinancialStatementsfortheyearended31March2010

Parties are considered to be related if one party has the ability to controltheotherpartyorexercisesignificantinfluenceovertheother party in making financial and operating decisions or if the related partyentityandanotherentityaresubjecttocommoncontrol. Related parties include: (a) Entities that directly, or indirectly through one or more intermediaries,control,orarecontrolledbytheentity; (b) Associates (International Public Sector Accounting Standard (IPSAS)7,"AccountingforInvestmentsinAssociates"); (c) Individuals owning, directly or indirectly, an interest in the reportingentitythatgivesthemsignificantinfluence over the entity, and close members of the family of any such individual; (d) Keymanagementpersonnel,andclosemembersofthefamilyof keymanagementpersonnel;and (e) Entitiesinwhichasubstantialownershipinterestisheld,directly orindirectly,byanypersondescribedin(c)or(d),oroverwhich suchapersonisabletoexercisesignificantinfluence The following are deemed not to be related parties: (a) (i) P rovidersoffinanceinthecourseoftheirbusinessinthat regard; and (ii) Trade unions; in the course of their normal dealings with an entityby virtue onlyof thosedealings(althoughthey may circumscribe the freedom of action of the entity or participateinitsdecision-makingprocess);and (b) Anentitywithwhichtherelationshipissolelythatofanagency.

Competion Commission FinancialStatementsfortheyearended31March2010

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Notes to the Annual Financial Statements

2010 `000 2009 `000

2.

Government grants and subsidies Governmentgrantsandsubsidies 80,739 44,000

3.

Fee Income Facilityfee Filing fees 1,891 28,489 30,380 1,688 48,818 50,506

The amount included in revenue arising from non-exchange Transactions are as follows: Governmentgrants&subsidies Fee income

80,739 30,380 111,119

44,000 50,506 94,506

4.

Interest received Interest Revenue Interestreceivedoninvestments

1,987

4,526

5.

Other Income Conferences,skillslevyrefundandrecoveriesfrominsurance 186 183

6.

Employee related costs Basic Performance bonus Cellphone allowance Group life and pension administration Other 55,962 7,163 715 1,186 6,531 71,557 42,041 4,635 579 873 6,810 54,938

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Competion Commission FinancialStatementsfortheyearended31March2010

Accounting Authority's emoluments Annual Remuneration PerformanceBonus Group Life and pension admin cost Cell phone allowance 1,054 145 23 22 1,244 Executive Committee emoluments Annual Remuneration PerformanceBonus Group life and pension admin costs Cell phone allowance Other employees Annual Remuneration PerformanceBonus Group life an pension admin coss Cell phone allowance Other staff related costs 47,905 6,118 1,000 616 6,531 62,170 costs,employeeassistanceprogram,temporarystaffcostsandcontributionstoskillslevyandworkmen'scompensation. 7. Administrative expenditure Generalandadministrativeexpenses Auditorsremuneration-Externalauditfees 2,698 565 3,263 8. Finance costs Leased assets (Photocopiers) 9. Operating expenses Audit committee fees Internal audit fees Consulting and professional fees Case related costs Propertyrental 247 926 5,941 20,622 7,048 66 480 9,620 19,849 5,891 228 25 2,095 363 2,458 35,728 3,918 740 483 6,810 47,679 7,003 900 163 77 8,143 5,354 638 112 80 6,184 959 79 21 16 1,075

Includedinothercostsarecostsrelatedtoemploymentofgraduatetrainees,traininganddevelopment,socialeventsandteambuilding,staffrecruitment

Competion Commission FinancialStatementsfortheyearended31March2010

63

Researchanddevelopmentcosts Travelandaccommodation Education and awareness Maintenance, repairs and running costs Fees paid to Tribunal Otherexpenses

185 2,384 2,133 444 5,203 6,061 51,194

109 2,447 2,431 497 8,814 2,130 52,334

Includedinotherexpensesarecostsrelatedtocatering,security,storage,corporategifts,subscriptions,booksandpublications,softwarelicencesand upgradesandcostsrelatedtotheCommission's10yearreviewamountingtoR2,759 10. Comparative figures Therehavebeennoadjustmenttoprioryearfigures. 11. Trade and other receivables from exchange transactions Tradedebtorsfromexchangetransactions Sundrydebtors 190 462 652 Trade and other receivables pledged as security Noneofthetradeandotherreceivableshavebeenpledgedassecurityforanyobligations. Fair value of other receivables Thecarryingvalueoftradeandotherreceivablesapproximatesfairvalues. 12. Cash and cash equivalents Cashandcashequivalentscomprisecashthatisheldwithregisteredbankinginstitutionsandaresubjecttoinsignificantinterestraterisk.Thecarrying amountoftheseassetsapproximatestheirfairvalue. Cash on hand Short-termdeposits Othercashandcashequivalents 2,182 16,670 3 18,855 2,823 29,830 5 32,658 99 20 119

Cashandcashequivalentsheldbytheentitythatarenotavailableforusebytheentity.

18,855

32,658

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Competion Commission FinancialStatementsfortheyearended31March2010

Credit quality of cash at bank and short term deposits, excluding cash on hand The credit quality of cash at bank and short term deposits, excluding cash on hand that are neither past due nor impaired can be assessed by referencetohistoricalinformationaboutcounterpartdefaultrates.Noneofthefinancialinstitutionswithwhichbankbalancesarehelddefaultedinprior periodsandasaresultacreditratingofhighareascribedtothefinancialinstitutions.Thecompany'smaximumexposuretocreditriskasaresultof thebankbalancesheldislimitedtothecarryingvalueofthesebalancesasdetailedabove.Allbankbalancesareheldwithonebankinginstitution increasingtherelatedconcentrationrisk.However,tomitigatetheriskofloss,thecompanyonlytransactswithhighlyreputablefinancialinstitutions. 13. Property, plant and equipment 2010 Cost / Valuation Furnitureandfixtures Motorvehicles Officeequipment IT equipment Photocopiersunderfinancelease Total 2,224 442 611 4,035 2,700 10,012 Accumulated depreciation (1,547) (129) (467) (2,132) (750) (5,025) Carrying value 677 313 144 1,903 1,950 4,987 Cost / Valuation 1,924 442 718 3,719 701 7,504 2009 Accumulated depreciation (1,393) (63) (491) (1,424) (672) (4,043) Carrying value 531 379 227 2,295 29 3,461

Reconciliation of property, plant and equipment - 2010 Furnitureandfixtures Motorvehicles Officeequipment IT equipment Photocopiersunderfinancelease Opening Balance 531 379 227 2,295 29 3,461 Additions 299 - 316 2,700 3,315 Depreciation (153) (66) (83) (708) (779) (1,789) Total 677 313 144 1,903 1,950 4,987

Reconciliation of property, plant and equipment - 2009 Opening Balance 566 197 117 1,425 262 2,567 Additions 70 437 104 1,080 1,691 Disposals (196) (196) Depreciation (37) (59) 6 (203) (233) (526) Impairment loss (68) (7) (75) Total 531 379 227 2,295 29 3,461

Furnitureandfixtures Motorvehicles Officeequipment IT equipment Photocopiersunderfinancelease

TheCommissionisleasingphotocopiersunderafinancelease.Theleaseagreementdoesnotimposeanyrestrictions.Theleaseagreementcanbe extendedattheendofthethreeyearperiodforafurtherperiod.

Competion Commission FinancialStatementsfortheyearended31March2010

65

14. Intangible assets 2010 Cost / Valuation Computer software Reconciliation of intangible assets - 2010 Opening Balance 1,533 Additions 960 Amortisation (643) Total 1,850 2,999 Accumulated amortisation (1,149) Carrying value Cost / Valuation 1,850 2,039 2009 Accumulated amortisation (506) Carrying value 1,533

Computer software Reconciliation of intangible assets - 2009

Computer software

Opening Balance 339

Additions 1,475

Amortisation (281)

Total 1,533

Theusefullifeofcomputersoftwarestillinusewereassessed.Therearenoresidualvaluesincomputersoftwareascomputersoftwareisconsidered not to be resaleable. 15. Finance lease obligation Minimum lease payments due -withinoneyear -insecondtofifthyearinclusive less:futurefinancecharges Present value of minimum lease payments Present value of minimum lease payments due -withinoneyear -insecondtofifthyearinclusive

1,061 1,237 2,298 (262) 2,036

23 23 23

880 1,156 2,036 1,156 880 2,036

23 23 23 23

Non-currentliabilities Current liabilities

Obligationsunderfinanceleasesaresecuredbythelessor'stitletotheleasedasset.Theaverageleasetermis3yearsandtheaverageeffective borrowingratewas10%.

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Competion Commission FinancialStatementsfortheyearended31March2010

16. Provisions Reconciliation of provisions - 2010 Opening Balance Provision Reconciliation of provisions - 2009 Opening Balance Provision 277 Additions 2,112 Utilised during the year (79) Reversed during the year (198) Total 2,112 2,112 Additions 154 Utilised during the year (2,112) Total 154

TheprovisionsforthecurrentyearincludesaprovisionfortheCommissioner'sperformancebonusfortheyearendingMarch2010. 17. Trade and other payables from exchange transactions Tradepayables Leaveduetoemployees Accrued performance bonus 8,858 2,768 6,854 18,480 Performancebonusistheaccruedamountduetoemployeesat31March2010.AmountaccruedwaspaidoutinApril2010. Thetradeandotherpayablesareinterestfreeandarealsounsecured. Fair value of trade and other payables Fairvalueapproximatescarryingvalue. 18. Net cash flows from operating activities Deficit ADJUSTMENTS FOR: Depreciation and amortisation Surplus on sale of assets Impairmentdeficit Movementsinprovisions CHANGES IN WORKING CAPITAL: Inventory Tradeandotherreceivablesfromexchangetransactions Tradeandotherpayablesfromexchangetransactions (15,381) 2,431 (1,958) (110) (533) 4,003 (11,548) (11,393) 808 (30) 75 1,835 (55) 426 (1,032) (9,366) 7,035 2,731 4,708 14,474

Competion Commission FinancialStatementsfortheyearended31March2010

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19. Movement in investments Acquisitionofproperty,plantandequipment Acquisition of intangible assets : computer software Proceedsondisposalofproperty,plantandequipment (3,797) (960) (4,757) 20. Retirement benefits Defined contribution plan AllemployeesaremembersofadefinedcontributionschemeadministeredbySanlamLtd.Theschemeiscurrentlyinvestedininvestmentpolicies underwrittenbyMetropolitanLife.Asaninsuredfund,theCompetitionCommissionPensionFundcomplieswithregulation28ofthePensionFunds Actof1956. 21. Income taxation exemption TheCommissionisexemptedfromincometaxintermsofSection10(1)(a)oftheIncomeTaxAct,1962. 22. Changes In accounting estimates Achangeinaccountingestimateisanadjustmentofthecarryingamountofanassetoraliability,ortheamountoftheperiodicconsumptionofan asset,thatresultsfromtheassessmentofthepresentstatusof,andexpectedfuturebenefitsandobligationsassociatedwith,assetsandliabilities. Changesinaccountingestimatesresultfromnewinformationornewdevelopmentsand,accordingly,arenotcorrectionoferrors. Theeffectofachangeinanaccountingestimate,otherthanachangetowhichthefollowingparagraphapplies,shallberecognisedprospectively byincludingitinsurplusordeficitin:(a)Theperiodofthechange,ifthechangeaffectstheperiodonly;or(b)Theperiodofthechangeandfuture periods, if the change affects both. Totheextentthatachangeinanaccountingestimategivesrisetochangesinassetsandliabilities,orrelatestoanitemofnetassets/equity,itshallbe recognizedbyadjustingthecarryingamountoftherelatedasset,liabilityornetassets/equityitemintheperiodofchange. Theusefullifeandresidualvalueofassetsstillinusewereassessed.Theusefullifeofassetsstillinusewereincreasedby1to3years. 23. Rental and finance lease commitments Officerental Thereisnowrittenleaseagreementwiththedti.Howeverpremisesarerentedfromthedtiandrentalpaymentsarebasedonamountsdeterminedby thedtiIincludingannualCPIXchanges. Finance lease commitments Photocopiers Upto1year 1to5years 880 1,156 2,036 23 23 (1,691) (1,475) 228 (2,938)

TheCommissionisleasingequipmentunderafinancelease.Theleaseagreementdoesnotimposeanyrestrictions. Theleaseagreementcanbeextendedattheendofthethreeyearperiodforafurtherperiod.

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Competion Commission FinancialStatementsfortheyearended31March2010

24. Contingencies liabilities Accumulated surplus TheaccumulatedsurplusofR5,8mhasbeenclassifiedasacontingentliabilityat31March2010astheCompetitionCommissionhadnotyetreceived approvaltoretaintheaccumulatedsurplus.IntermsofthePFMASection53(3)entitiesarenotallowedtoaccumulatesurplusesunlessapprovedby NationalTreasury.AnapprovalwasgrantedbyNationalTreasurytoretainthesurplusofR21,217m(March2009).TheCommissionisobligedtorepay toNationalTreasuryanyamountofthesurplusnotgrantedforretention.TheCommissionisoftheopinionthatNationalTreasurywillgranttheapproval andthereforetheCommisionwillnotberequiredtorepaythisamount. Litigations and claims TheCommissionhasnoknowledgeofanycontingenciesatdateofthefinancialstatements.However,theCommissionwishestoreportthataformer employeewassuspenedinSeptember2007forfraudandsubsequentlyfoundguiltyofgrossinsubordinationbyanindependentChairpersonata hearingandsummarilydismissed.TheformeremployeehassubsequentlyfiledanunfairlabourpracticedisputewiththeCCMAandtheCCMAruled infavouroftheCommission.ApplicationforreviewfiledbytheemployeetotheLabourCourtwasopposed.Thematterisnowoverasthetimelimitfor theemployeetoseekfurtherrelieffromtheLabourCourthasexpired. 25. Related parties Relationships The Competition Tribunal The Department of Trade and Industry Membersofkeymanagement 2010 `000 PublicentityinNationalsphere National Department in National sphere Mr. M. Ramburuth (Commissioner), Mr.T.Bonakele(DeputyCommissioner), Mr.J.Dreyer(CommissionSecretary), Mr.S.Roberts(Manager:Policy&Research), Ms.N.Pillay(ManagerCorporateServiceandCFO), Ms.W.Mkwanazi(Manager:LegalServices), Ms.N.Mokoena(Manager:StrategyandStakeholder Relations), Mr.M.vanHooven(Manager:MergersandAcquisitions), Mr.K.Weeks(Manager:Enforcements& Exemptions) Related party balances Amounts Included In Trade Payables Regarding Related Parties The Competition Tribunal The Department of Trade and Industry 2009 `000

721 85 806

11 64 75

Competion Commission FinancialStatementsfortheyearended31March2010

69

Related party transactions The department of trade and industry Governmentgrantreceived Rent paid Telephone and Internet costs paid AmountduebytheDepartmentofTradeandIndustryforthemaintenanceofthecase managementsysteminprioryearsetoffagainstgrantreceivedinyear2009 The competition tribunal Filing fees refunded FacilityFeeincomereceived Netemployeecostsrecovered Netadministrationcostsrecovered Penalties collected on behalf of related parties and transferred to related parties TheDepartmentofTradeandIndustry Compensation to key management Memberofkeymanagement Commissioner: Mr. M. Ramburuth Package Bonus DeputyComissioner:Mr.T.Bonakele Package Bonus ComissionSecretary:Mr.J.Dreyer Package Bonus Manager:Policy&Research-Mr.S.Roberts Package Bonus Manager:CorporateServices&CFO-Ms.N.Pillay Package Bonus Manager:LegalServices-Ms.W.Mkwananzi Package Bonus Manager:StrategyandStakeholderRelations-Ms.N.Mokoena(currentyear11months) Package Bonus 2010 R'000 1,099 145 1,114 177 827 83 1,071 172 1,025 128 900 139 823 2009 R'000 996 79 806 113 649 78 861 144 798 103 641 104 632 336,098 144,680

80,739 7,048 1,126 -

44,000 5,480 1,116 (205)

5,203 1,891 310 452

8,814 1,688 115 17

70

Competion Commission FinancialStatementsfortheyearended31March2010

Manager:Mergers&Acquisitions-Mr.MvanHooven Package Bonus Manager:Enforcements&Exemptions-Mr.K.Weeks(currentyear8months) Package Bonus ActingManager:Compliance-Mr.M.Rubushe Package Bonus Manager:Enforcements&Exemptions-Mr.T.Kunene Package Bonus Manager:LegalServices-Mr.M.Worsley Package Bonus

878 117 605 84 9,387

96 158 377 377 600 157 7,769

26. Financial risk management ThemainrisksarisingfromtheCommissionsfinancialinstrumentsaremarketrisk,liquidityriskandcreditrisk. Credit risk TheCommissiontradesonlywithrecognised,creditworthythirdparties.ItistheCommission'spolicythatallcustomerswhowishtotradeoncredit terms are subject to credit verification procedures. In addition, receivables balances are monitored on an ongoing basis with the result that the Commisionexposuretobaddebtsisnotsignificant.ThemaximumexposureisthecarryingamountsasdisclosedinNote11.Thereisnosignificant concentration of credit risk within the Commision. WithrespecttocreditriskarisingfromtheotherfinancialassetsoftheCommission,whichcomprisecashandcashequivalents,theCommission's exposure to credit risk arises from default of the counterparty, with a maximum exposure equal to the carrying amount of these instruments. The Commisioncashandcashequivalentsareplacedwithhighcreditqualityfinancialinstitutionsthereforethecreditriskwithrespecttocashandcash equivalentsislimited. Exposure to credit risk Themaximumexposuretocreditriskatthereportingdatefromfinancialassetswas: 2010 Cashandcashequivalents Otherreceivables Total 18,855 652 19,507 2009 32,658 119 32,777

Competion Commission FinancialStatementsfortheyearended31March2010

71

Concentration of credit risk Themaximumexposuretocreditriskforfinancialassetsatthereportingdatebycreditratingcategorywasasfollows: 2010 Cashandcashequivalents Otherreceivables 2009 Cashandcashequivalents Otherreceivables Ageing of financial assets ThefollowingtableprovidesinformationregardingthecreditqualityofassetswhichmayexposetheCommissiontocreditrisk AAA and government 18,855 AAA and government 32,658 Unrated 652 Unrated 119

2010

Neither past due nor impaired 18,855 652

Past due but not impaired-lessthan 2months Past due but not impaired-lessthan 2months

Past due but not impaired-more than2months Past due but not impaired-more than2months

Carryingvalue

Cashandcashequivalents Otherreceivables

-

2009

Neither past due nor impaired 32,658 119

Carryingvalue

Cashandcashequivalents Otherreceivables Market risk

-

Market risk is the risk that changes in market prices, such as the interest rate will affect the value of the financial assets of the Commission. Interest rate risk TheCommissionisexposedtointerestratechangesinrespectofreturnsonitsinvestmentswithfinancialinstitutionsandinterestpayableonfinance leases contracted with outside parties. TheCommission'sexposuretointerestriskismanagedbyinvesting,onashorttermbasis,incurrentaccountsandtheCorporationforPublicDeposits.

72

Competion Commission FinancialStatementsfortheyearended31March2010

Sensitivity analysis Increase/(decrease) in net surplus for the year Upwardchange Downward change 189 (189) (20) 20

2010 Cashandcashequivalents Finance lease 2009 Cashandcashequivalents Finance lease Liquidity risk

Change in interest rates 1.00% 1.00%

1.00% 1.00%

326 -

(326) -

TheCompetitionCommission'srisktoliquidityisarsultofthefundsavailabletocoverfuturecommitments.TakingintoconsiderationtheCompetition Commission's current funding structures and availability of cash resources the Commission regards this risk to be low provided National Treasury approvestheretentionofthesurplus Exposure to liquidity risk ThefollowingtablereflectstheCommission'sexposuretoliquidityriskfromfinancialliabilities: Contractual cash flowwithin1year 18,480 880 Contractual cash flowwithin1year 14,474 23 Contractual cash flowbetween1and 5years 1,156 Contractual cash flowbetween1and 5years -

2010 Otherfinancialliabilities Lease Liabilities

Carryingamount 18,480 2,036

Totalcashflow 18,480 2,036

2009 Otherfinancialliabilities Lease liabilities Financial Instruments

Carryingamount 14,474 23

Totalcashflow 14,474 23

ThefollowingtableshowstheclassificationoftheCommission'sprincipalinstrumentstogetherwiththeircarryingvalue: Financial instrument Cashandcashequivalents Receivables Payables Finance Leases Financial risk management Theentity'sactivitiesexposeittoavarietyoffinancialrisks:marketrisk,(fairvalueinterestraterisk,cashflowinterestrateriskandpricerisk),credit riskandliquidityrisk. Categories Loansandreceivables Loansandreceivables Financial liabilities Financial liabilities Carrying amount 2010 18,855 652 18,480 2,036 Carrying amount 2009 32,658 119 14,474 23

Competion Commission FinancialStatementsfortheyearended31March2010

73

27. New standards and interpretations 27.1 Standards and interpretations not yet effective Theentityhaschosennottoearlyadoptthefollowingstandardsandinterpretations,whichhavebeenpublishedandaremandatoryfortheentity's accountingperiodsbeginningonorafterApril01,2010orlaterperiods:

Standard GRAP18­Segmentreporting

Summary and impact This standard establishes principles for reportingfinancialinformationbysegments. The impact on the financial results and disclosure is considered to be minimal.

Effective date IssuedbytheASB­March2005 Effective date - To be determined by the Minister of Finance

GRAP21­Impairmentofnon-cash-generating assets

This standard prescribes the procedures that the Entity applies to determine whether a non-cashgeneratingassetisimpairedandto ensure that impairment losses are recognised. The impact on the financial results and disclosure is considered to be minimal. This standard prescribes the requirements for the financial reporting of revenue from non-exchange (grants and transfer payments transactions). The impact on the financial results and disclosure is considered to be minimal. However, in terms of Directive 5, the Entity, considered the accounting principles of GRAP 23 and developed an accounting policy to account for government transfers and foreign aid assistance. This standard requires a comparison of budget and actual amounts and an explanation for material differences. The impact on the financial results is consideredtobeminimal.Howevertheimpact ondisclosureissignificant. The standard prescribes the accounting treatmentanddisclosureforemployeebenefits. The impact on the financial results and disclosure is considered to be minimal.

IssuedbytheASB­March2009 Effective date - To be determined by the Minister of Finance

GRAP 23 ­ Revenue from non-exchange transactions

IssuedbytheASB­February2008 Effective date - To be determined by the Minister of Finance

GRAP24­Presentationofbudgetinformation inthefinancialstatements

IssuedbytheASB­November2007 Effective date - To be determined by the Minister of Finance

GRAP25-Employeebenefits

IssuedbytheASB­November2009 Effective date - To be determined by the Minister of Finance

74

Competion Commission FinancialStatementsfortheyearended31March2010

GRAP 26 - Impairment of cash-generating assets

This standard prescribes the procedures to determine whether a cash generating asset is impaired and to ensure that impairment losses are recognised. The impact on the financial results and disclosure is considered to be minimal. This standard establishes principles for recognising, measuring, presenting and disclosingfinancialinstruments. The impact on the financial results and disclosure is considered to be minimal. Improvements are proposed to the following standards of GRAP: GRAP 1- 4, 9-14, 16-17, 19and100aspartoftheASB'simprovement project. The impact on the financial results and disclosure is considered to be minimal. -Presentationoffinancecost -Amendmentdealingwithimproving disclosuresoffinancialinstruments -Amendmentsenhancingdisclosuresoffair valueandliquidityrisk. Thisstandardwillnothaveanimpactonthe financialresultsordisclosureasithasbeen removedfromtheframeworkprescribedin Directive5forperiodsbeginningon1April 2010. Clarificationsofdisclosures TheamendmenttotheStandardclarifies certain disclosures. Thisstandardwillnothaveanimpactonthe financialresultsordisclosureasithasbeen removedfromtheframeworkprescribedin Directive5forperiodsbeginningon1April 2010. New standard issued relating to the classificationandmeasurementoffinancial assets,whichwillreplacetherelevantportions of IAS 39. Thisstandardwillnothaveanimpactonthe financialresultsordisclosureasithasbeen removedfromtheframeworkprescribedin Directive5forperiodsbeginningon1April 2010.

IssuedbytheASB­March2009 Effective date - To be determined by the Minister of Finance

GRAP104­financialinstruments

IssuedbytheASB­October2009 Effective date - To be determined by the Minister of Finance

***ImprovementstothestandardsofGRAP

Proposedeffectivedate01April2011

*AmendmenttoIFRS7­Financial instruments: disclosures

IssuedbytheIASBinMarch2009butthe effectivedatewasbackdatedto01January 2009.AsperconfirmationwiththeASB,this standardisnoteffectivefortheyearended 31March2010.

**AmendmenttoIFRS7­Financial instruments: disclosures

01January2011

IFRS9­Financialinstruments

01January2013

75

*AmendmenttoIAS19­Employeebenefits

-Curtailmentsandnegativepastservicecost -Planadministrationcosts -Replacementofterm"falldue" -Guidanceoncontingentliabilities Theimpactonthefinancialresultsand disclosure is considered to be minimal Certainfinancialinstrumentswillbe classifiedasequitywhereas,priortothese amendments,theywouldhavebeenclassified asfinancialliabilities. Thisstandardwillnothaveanimpactonthe financialresultsordisclosureasithasbeen removedfromtheframeworkprescribedin Directive5forperiodsbeginningon1April 2010.

IssuedbytheIASBinMarch2009butthe effectivedatewasbackdatedto01January 2009.AsperconfirmationwiththeASB,this standardisnoteffectivefortheyearended 31March2010. IssuedbytheIASBinMarch2009butthe effectivedatewasbackdatedto01January 2009.AsperconfirmationwiththeASB,this standardisnoteffectivefortheyearended 31March2010.

AmendmenttoIAS32­Financial instruments: presentation

*AmendmenttoIAS39­Financialinstruments: -Reclassificationofderivativesintooroutofthe Issued by the IASB in March 2009 but the recognition and measurement classificationofatfairvaluethroughprofitorloss effective date was back dated to 01 January - Designating and documenting hedges at the 2009. As per confirmation with the ASB, this standard is not effective for the year ended 31 segmentlevel -Applicableeffectiveinterestrateoncessationof March2010. fairvaluehedgeaccounting This standard will not have an impact on the financial results or disclosure as it has been removed from the framework prescribed in Directive5forperiodsbeginningon1April2010. 01July2009 AmendmenttoIAS39­Financialinstruments: Clarifiestwohedgeaccountingissues: recognition and measurement -Inflationinafinancialhedgeditem -Aone-sidedriskinahedgeditem This standard will not have an impact on the financial results or disclosure as it has been removed from the framework prescribed in Directive5forperiodsbeginningon1April2010. Amendment to IAS 39 ­ Financial instruments: - Treating loan prepayment penalties as closely 01January2010 recognition and measurement relatedembeddedderivatives - Scope exemption for business combination contracts -Cashflowhedgeaccounting This standard will not have an impact on the financial results or disclosure as it has been removed from the framework prescribed in Directive5forperiodsbeginningon1April2010. [*StandardsandinterpretationsaffectedbytheImprovementstoIFRS] [**StandardsandinterpretationsaffectedbytheImprovementstoIFRSissuedinanexposuredraftasED272­ImprovementstoIFRSs:Proposed amendmentstoInternationalFinancialReportingStandards] [***StandardsaffectedbytheImprovementsProjectoftheASBissuedinanexposuredraftasED63-ImprovementstotheStandardsofGRAP]

76

28. Unspent donor funds TheInternationalDevelopmentResearchCentre(IDRC)providedagranttotheCommissiontoenabletheCommissiontoundertaketheresearch support project entitled: `Evaluation of Competition issues in the production, supply and pricing of staple foods". The total amount received was R435,995,atyearendR430,798wasutilised.TheremainingR5,197willbeusedafteryearend

29. Going concern Theannualfinancialstatementshavebeenpreparedonthebasisofaccountingpoliciesapplicabletoagoingconcern.Thisbasispresumesthatfunds willbeavailabletofinancefutureoperationsandthattherealisationofassetsandsettlementofliabilities,contingentobligationsandcommitmentswill occurintheordinarycourseofbusiness. Theabilityoftheentitytocontinueasagoingconcernisdependentonanumberoffactors.ThemostsignificantoftheseisthattheDepartmentof EconomicDevelopmentcontinuetoprocurefundingfortheongoingoperationsfortheentityandTreasuryapprovestherolloveroftheaccumulated surplus. 30. Reconciliation between budget and statement of financial performance Reconciliationofbudgetdeficitwiththedeficitinthestatementoffinancialperformance Net deficit per the statement of financial performance Adjusted for: Decrease in mergers & acquisitions Increaseinexemptionapplications Decreaseinadvisoryopinions IncreaseinfacilityFees IncreaseinVotedFundsreceived IncreaseinInterestReceived:GeneralFunds Decrease in other income Savingsonhumanresources Savingsonpremises&equipmentexpenditure Savingsonotheroperationalexpenses OverexpenditureonIT&systemdevelopment Overexpenditureonresearch&information Savingsoneducationalawarenessprogrammes Overexpenditureoncaserelatedcosts Savingsonotherprogrammecosts Overexpenditureondepreciation Net deficit per approved budget 3,696 (22) 83 (108) (13,018) (682) 211 (15,336) (3,744) (1,465) 114 56 (1,475) 14,877 (911) 2,433 (0) (15,381)

77

Part 5

Performance against targets

No. Goal

Key performance indicators

Target

Performance results

Reason for variance

Core programme: Enforcement and Exemptions

1 Ensureefficient evaluationof exemption applicationsfiled underSection10of the Competition Act (1999) Turnaround time in relation to making and communicating a decision To be completed within12monthsof beingreceived 7ofthe9exemption applications carried forward havenotbeenfinalisedwithin 12months.Thisisdueto thenatureandcomplexityof themattersandtodelaysin receivinginputfromexternal stakeholders. Further, some exemptionsaresubjectto ongoingpolicyprocesses,such as applications from medical practitionersandattorneys 11exemptionapplicationswereunder considerationforthefinancialyear: 2receivedinthefinancialyearand9carried forwardfromthepreviousyears. The2receivedinthefinancialyear (December2010)arefrom:theSouthAfrican PetroleumIndustryAssociation(SAPIA); andSpringLightGas.Ofthe11exemption applications,3werefinalisedasfollows:SAPIAwasgrantedanexemptionuntil 31August2010forcertaincategoriesof agreements and practices in the petroleum andrefineryindustries;theapplication fromtheBoardofHealthcareFunderswas rejected;andtheAllensMeshcoapplication relating to wire and wire products was rejected 203complaintswerefiledintheyear(151 werereceivedinthepreviousyear). Ofthese,172werereceivedfromthepublic and31wereinitiatedbytheCommissioner. Ofthe31complaints,19(61%)werein prioritysectors:5ininfrastructureand construction,6inintermediateindustrial products,8infoodandagro-processing. 12wereinothermarkets(tyremanufacturing, advertising,franchising,property retailing, transport, furniture retailing, skin products retailing, and windscreen glass manufacturing) 140complaintswerescreenedwithinthe 7daysatthemanagementmeeting.These includes124complaintsoutofthe172total complaintsreceivedfromthepublicinthe financialyearand16complaintscarriedover fromthepreviousfinancialyear. Thefloodofmattersforinitiation andcomplaintsreceived from the public had not been anticipated

Report with substantiated recommendation

3-4exemption applicationsexpected

2

Conduct initiations inprioritysectors

Numberofinvestigations 4initiationswithin12 initiated months

3

Ensureefficientand All new complaints effectivecomplaint screened investigationsin prioritised cases

Within7daysof receipt of complaint to management meeting

80

Casesfinalisedon time and substantiated recommendations made inreportstoExco

Within20daysof receipt of complaint to Exco

47complaintsreceivedbetweenOctober 2009andMarch2010werecarriedoverto thenextfinancialyear

Ittakesanaverageof32 daystoscreenacomplaint andpresentittoExco.This is due to the higher number ofcomplaintsreceivedthan anticipated. In order to address this, a new dedicated screening unit has been formed. Thefloodofapplicationsrelates mainlytoonesectorwhere application is made for each project/contract

4

Encourage and facilitatevoluntary assistance in cartel investigations

Informing stakeholders ofcorporateleniency where applicable. Informing process includes: feedback; progress report on applications; number of meetings regarding leniencyapplications; finalreports Report on compliance with conditions and undertakings monitored, evaluatedandreported bypartiestoExco

Increase prosecutions forcartelactivity. 3 to 4 applications expected

79applicationsreceivedintermsofthe CompetitionCommission'scorporate leniencypolicy

5

Monitor and evaluatecompliance withexemption conditions and undertakings

Thorough monitoring of compliance with conditional exemptionapprovals and undertakings. Quarterlyreportsto Exco.Estimated2 cases to be monitored

Monitoring occurs when there isreapplicationforexemption conditions. This did not occur duringthefinancialyear

Deviationsfrom conditions detected and addressed 6 Explainprocess of complaint investigation andexemption evaluationto wider group of stakeholders Relevantandinformative 4articlesperyear contentoninvestigation of complaints and evaluationofexemption applications.1to2 articles per issue. 7,500copiesoftheCommission's3 newsletters with a total of 31 articles were published and distributed. Ofthese,7relatetoinvestigationsof enforcementandexemptionmatters.

Core programme: Mergers and Acquisitions

7 Fulfillthe Commission's mandate in relation totheinvestigation of mergers, as set out in Chapter 3 of the Act Investigationreportsare acceptedbyExcoand the Competition Tribunal Tofinalisecaseswithin Allmergercaseswerefinalisedwithinthe theservicestandard statutorydeadlines.208mergercaseswere commitments finalised(54large,140intermediate,and 14small).Ofthese,190wereunconditionally approved,8approvedwithconditions, 1 prohibited, and 9 withdrawn. The internal servicestandardtimeframesare:20daysfor phase1;25daysforphase2;and45days forphase3mergers.40%ofphase1(noncomplexmergers)werecompletedin20 days,13%ofphase2mergerswithin25days, and14%ofphase3mergerswithin45days Althoughaverageturnaround timeshaveexceededthe servicestandards,theyremain withinthestatutorytimeframes. Thecomplexityandnatureof the cases as well as timeous input from stakeholders, impact on turnaround times

81

8

Fulfillthe Commission's mandate in relation totheinvestigation of mergers, as set out in Chapter 3 of the Act (1999)

Thequalityofthe merger reports is in line with international best practice, and where necessary,thetheoryof harm is well set out

No reports sent backbyExcoorthe Tribunal for further investigationand analysis,unlessthere has been a material submission that was made after the recommendation was submitted Internaldivision procedures that facilitate efficientmerger investigationsinline with international best practice and applicable deadlines Each staff member undergoes an orientation programme coveringtheinternal procedureswithin10 daysofjoiningthe division At least 1 training seminar/workshop per month is held 2trainingsessions

Appeared before the Tribunal in 48 large merger cases in which our recommendation ofunconditionalapprovalwasacceptedby the Tribunal. 1 large merger was prohibited bytheCommission,butapprovedbythe Tribunal

Thisisaninternalquality assurance process and reports are therefore sent back to the divisionfortheincorporationof Exco'scomments

9

Create procedures andsystems to support the fulfillmentofthe Commission's mandate as set out in Chapter 3 of Act

Efficientandcorrect investigationand analysisofcases

Division'sinternalprocedureswereupdated andservicestandardswerereviewedby September2009andpublishedonthe Commission'swebsite

Staff compliance with procedures

Staffmembersareorientatedwithin10days ofjoining.Compliancewithprocedures (monitoring) takes place on an ongoing basis through internal meetings

10

Ensure the developmentofstaff

Improvedqualityofwork

18 workshops relating to mergers were conducted Staffattendedcapacitybuildingsessions facilitatedbythePolicyandResearch division,whichincludedtrainingsessions byexternalproviders.Therewere7training sessionswithinvitedeconomists Submissions were made to the OECD on failingfirmdefence,genericpharmaceuticals andthestandardformergerreview.The manager of the Mergers & Acquisitions divisionparticipatedintheOECDconference wherethestandardsformergerreviewwas discussed. The workshops of international guidelines took the form of participation in teleconferences of the ICN as well as a teleseminar International precedent is used on an ongoingbasiswhererelevant,interactedwith theGermancompetitionauthorityandthe UnitedStatesDepartmentofJusticeonpriorimplementation and merger issues.

Number of training sessions held. Skilled and trained staff deliveringquality analysisandreports. 11 Create and maintain relations with mergerdivisionsof other competition authorities around the world

Ongoing Investigationsconform with international best practice. Ensure that mergeranalysisisinline with international best practice Useofinternational precedent in the Commission'scases Coordination of investigationof international mergers with other agencies. 4 workshops

Ongoing

82

12

Monitor the conditions imposed onmergersbythe Commission and the Tribunal Maintain sound relationswithkey stakeholders that contribute to the investigationof mergers

Compliance with the conditions imposed. Number of conditions monitoredorfinalised. Cordial relations with practitioners, trade unions and sector regulators

Ongoing

Thedivisioncontinuouslymonitorsall mergersthatareapprovedwithconditions andensuresthatconditionsaretimeously compliedwith.Between20and24cases havebeenmonitoredoverthe4quarters 1practitioner'sworkshopheld;5tradeunion workshops,1publicsectorconsultative forum

13

Ongoing

Number of complaints from stakeholders regardinginvestigating issues during investigations Input of sector regulators intheinvestigationof mergers 14 Promote public awareness of the division'swork Promote stakeholders' awareness of the Commission's approach to merger analysis Public awareness of mergers and acquisitions Ensure that stakeholders and practitioners are updated on the Commission'spositions and policies Ongoing

Followedupon19caseswithemployment issues

Consulted with the Council for Medical SchemesandNationalTreasury Publications of mergers on websites, 12articlesonmergersinthenewsletter, 2mediareleasesonmergers Mergerservicestandards were published in place of the practice notes

15

4 practice notes workshopped and published

16

TrackingofallnonEnsure compliance with Chapter 3 of the notifiedmergersand Competition Act ensure that small mergers raising competition concerns arenotified

Ongoing

Thedivisioncontinuouslytracksmerger activityintheeconomyandwhererequired, engagewiththepartiestonotifytoensure compliance

Core programme: Policy and Research

17 Conduct economic research into specificsectors Research reports produced and used for identifyingcomplaints andspecificadvocacy actions 4prioritysectors ongoing: Infrastructure and construction, intermediate industrial products, food, and banking. Increased focus on tracking. Other majorareas:possible marketenquiryinto supermarkets;Policy and Research leading on interchange and ATMs Reports for the Department of Economic Developmentonfood,infrastructureand telecommunications; input to ICASA; analysisofEskom'spricehikes;input to the Department of Communications onbroadbandpolicy.Trackingconduct in the food sector is ongoing. Initiated supermarketenquiry.Ongoingworkon interchangeandATMswithNationalTreasury and the steering committee that was set up aftertheBankingEnquiry

83

18

Betterinter-divisional Effectivelyidentify economic questions coordination and work organisation on which cases hingeandidentify theanalysisrequired

Inter-divisional team building with the Mergers & Acquisitionsdivision. Monthlyprogress meetings with the Enforcement & Exemptionsdivision

Merger screening memos are now circulated

Meetings with the Enforcement &Exemptionsdivisionareheld every2monthsorasrequired

Twicemonthly Agreementontypeof inputsfromthedivision: case management committee meetings consultations;analysis ofspecificcomponentof cases;in-depthanalysis ofoverallcase. 19 Conduct rigorous economicanalysis of complaints cases Conduct rigorous economicanalysis in merger cases Aimforeffective prosecution based on economic evidence, includingeffective presentation of economicevidence at hearings Rigorous economic analysisnecessaryfor referring and winning cases Rigorous economic analysisnecessaryfor referring and winning cases Ongoing

Case management committee meetings held on an ongoing basis

Economicanalysisprovidedon70 complaints cases

20

Ongoing

Economicanalysisprovidedon30merger cases

21

Bettercoordinationwith Ongoing legal team preparing and prosecuting cases. Economic arguments are supported and sustained in Tribunal hearings

Bettercoordinationwiththeprosecutionof34 complaint referrals

Economic arguments are supported and sustained in Tribunal hearings. 22 Conductareviewof Morecompetitive outcomes following behavior a merger or complaint decision Reviewandgive inputsintoadvisory opinions Reviewtheimpact of the Commission Morecompetitive behaviour Betterunderstandingof Commission'sworkand internalandexternal impact 4reviews

Assisted with Tribunal hearings including: Pioneer;Sasolfertilisercases;Chlor-Alkali andBotash;MasscashandFinro;Imperial andMidas;andSenwes'appeal Outcomeswerereviewedinthefollowing matters: Astral Foods and Natchicks, andMurray&RobertsandCementation Company(Africa) Ongoinginputbychiefeconomistat Commission meetings Thetargetof4reviewswas notachievedduetoworkload and lack of information from merging parties and other stakeholders

23

Ongoing

24

ExpandasTenYear TenYearReviewbookpublishedand Reviewofcompetition conference held authorities

84

25

Influencepolicy andlegislative processes

Number of submissions made and considered bytherelevant departmentoragency. Reduced number of anticompetitiveclauses in new legislation and policy.Consistencyin application the Act. Economicandpolicy briefs completed and circulated

Make submissions on allbillswithamajor competition impact

Commentedonconcurrentjurisdiction between ICASA and the Commission; ICASA'sdraftinterconnectionregulation; thebroadbandpolicy;analysisofEskom's proposedpricehike;andtheIndustrialPolicy ActionPlan2.PublicSectorConsultative Forum held

26

Explaineconomic principlesonkey issues and cases to Commission staff

8

8 economic briefs were completed and circulated

27

Giveinputsat Presentation of papers international forums ­theICNandOECD

3(demanddriven)

Papers submitted to the OECD on banking, procedural fairness, collusion in public procurement, techniques used to tackle bid-rigging,marginsqueeze,failingfirm defence, generic pharmaceuticals, two sided markets, and the standards for merger review 31 articles published in total

28

Increase awareness Completed articles oftheCommission's work Establish the Commission as leading centre of competition economics Presentation of papers

8

29

4

Participated in 15 conferences during which submissionsofpresentations/paperswere made 6publishedarticlesinpeerreviewed journals/newsletters/books

Publications

4

30

Monthlysessions Buildcapacityinthe Good understanding facilitatedbythe Policy&Research acrossthedivisionof division keyareasofcompetition division'ssenorteam economics and application in cases Sessionsonkey Buildcapacityin economicanalysis, concepts,keyjournal understanding, and articles collecting and using information and data 4 23externaltraininginterventionsintotalwere attendedbydifferentstafffromthedivision

31

3majortrainingsessions 3 of2to3dayseach Appropriatelytargeted trainingfordivisionstaff 6

7sessionsheldbyinvitedeconomists Staffattendedcapacitybuildingfacilitated bypolicyandresearch;12internaltraining sessionsand22in-houseseminars Ongoingdatabaseofkeycases/readingsis maintained and discussed

Good understanding Ongoing ofkeycasessetting precedents on economic analysis 32 Create awareness andprovide information Seminar attendance 6

40capacitybuildingseminarswerearranged and attended

85

Monthlyworkshopson analysisformajorcases Onemajorevent,and ad hoc presentations: Annual conference on South African competition law and economics Masters dissertations andresearchpapersby students and academics 33 Ensureeffective knowledge management Betterknowledge management

10

Participated in 15 conferences during which submissionsofpresentations/paperswere made 10yearreviewand3rdAnnualcompetition law conference was held

1

Grants for 5 Masters dissertations and papers 95% user uptake ofnewsystem. Increased and more consistent user application of knowledge management practices

1studentfromtheUniversityofKwaZuluNatal was awarded a grant Allstaffusethesystemforcaseandnoncase related work

Only1Mastersgrantwas awarded due to poor uptake

Betterknowledge management Highlevelofuser acceptanceofsystem

Ongoingtrainingoccursonanindividual All users trained on newsystem.Ongoing basis. Support is ongoing support. 1formalpostimplementationreview ofthesystem Thesystemimplementation reviewdidnottakeplacedue todevelopmentdelaysbyan externalserviceprovider,which are being managed Thereisavisibleincreaseindocument retention,post-presentationsharing,system functionalityusage,continuedincreasein team,divisionalandcross-divisionalsharing capacitybuildingsessions No formal independent knowledge culture assessments. However,knowledgeculture wasformallyreassessedatthe strategic planning session for 2010-2013,toinformplanning. Thereasonforthevarianceis thattheplannednewsystem is fundamental to supporting and growing the knowledge management culture, and the focus has been on maintaining the growth momentum of knowledge management anyway,andmanagingthe developmentprocess

Highlevelofuser 2formalknowledge application of knowledge culture assessments management practices

86

Increased knowledge management awareness and better knowledge management

Procedure manual on knowledge management and related training moduledeveloped and implemented foralldivisions/ staff.System overviewdeveloped and included in orientation for new staff.Knowledge management training module included in induction Ongoing

Userguideshavebeendevelopedand madeavailableonthesharepointserver

Knowledge management culture in the Commission strengthened 34 Providespecialised bibliographic services Requests for informationfulfilled, from newspapers, periodicals,journals, market research andindustrydata, on-linepublications and reference works including books, reports

Useoftheknowledgemanagementsystem has been included in staff performance assessments Trained68staffmembersontheuseof thedatabase.30newstaffmembers receivedorientationoftheresourcecentre's resources.1,048loansofpublications recorded, with 18 new titles added and 398 requests for information

To assist with more complexcasesand research undertaken bytheCommission

Core programme: Legal Services

35 Providetimeous legaladviceto facilitate informed decision making andefficientand effectivecase investigation Well researched and substantiatedadvice and opinions accepted byExcoandthe Commission Ongoing Ongoinginputbychieflegalcounselat Commissionmeetings.Internalquality assuranceprocessincorporatesExcoand Commission'scomments

The turnaround time tobe2weeksinnoncomplexmattersand 4 weeks in the case of advicesonevidence andcomplexmatters 36 Ensure the proper andeffective presentation of merger cases before the Tribunal

Monthlymanagement report to track adherence to timeframes

Monthlymanagementdataisbeing maintained to monitor compliance with timeframes

Complexityofmattersaswell asworkloadmayimpacton timelines. It has been decided that these internal timelines will berevised

3complexmerger Properlyprepared prohibitions andwell-presented cases. Commission recommendations acceptedbytheTribunal andcommentarybythe Tribunal

Appeared before the Tribunal in 48 large merger cases in which the recommendation ofunconditionalapprovalwasacceptedby the Tribunal. 1 large merger was prohibited bytheCommission,butapprovedbythe Tribunal

87

Adherence to hearing timetable

Monthlymanagement report to track adherence to timeframes as determinedbythe Tribunal

Monthlymanagementdataareused to monitor hearings and adherence to timeframes.

37

Ensure the expeditiousand effectiveprosecution offirmsthat contravenetheAct. The successful defence of legal challenges in the Tribunal and the courts

Casestrategymeeting to be held with the Enforcement & Exemptionsdivision

Casestrategymeeting Casestrategymeetingsheldonanongoing basis as and when required as teams are with the Enforcement &Exemptionsdivision involvedincasesfromtheoutset within2weeksof theCommission's decision

Consent agreements to be concluded within2monthsofthe Commission'sdecision Consent agreements to be referred to the Tribunal

Consent agreements to be concluded within 3 months of theCommission's decision 5 consent agreements concluded. Consent Consent orders to be referred to the Tribunal agreements are referred to the Tribunal within 1 week of their completion within 1 week of their conclusion with respondents If there is no consent agreement, negotiations complaints to be referred to Tribunal within6weeksof Commission decision 13referralsfiledwiththeTribunal

Consent agreements take longer to conclude depending on the negotiation itself, the cooperationoffirmsandthe process of litigation.

Where there are no consent agreement negotiations complaints to be referred within 6weeksofthe Commission'sdecision

Complaints are not referred within6weeksofthe Commission'sdecisionasthis dependslargelyonexternal counsel,theiravailabilityand additional requirements such as additionalevidenceoranalysis required for pleadings.

Properlydrafted documents.Properly prepared and well presented cases. Decisions in the Commission'sfavour andcommentarybythe Tribunal Adherence to hearing timetable

6reviewsandappeals Thisisdeterminedbyconsideringhowmany judgementswereintheCommission'sfavour. Appeared before the Competition Appeal Court5timeswithjudgmentsinfavourofthe Commission. Appeared before the Supreme CourtAppeal1timewithjudgmentinfavour of the Commission Monthlymanagement report to track adherence to timeframes The hearing timetable was adhered to

88

Contested cases to be finalisedwithin1yearof their referral

6complexcomplaint prosecutions. Contested complaint referrals to be finalisedwithin18 months of referral

Contested cases are not finalisedwithin18monthsas litigation has been protracted byinterlocutorychallengesand appealsraisedbyrespondents asinthedairycartelcase,and inthecasesinvolvingTelkom, Pioneer and Senwes Staffattendedcapacitybuildingfacilitated bypolicyandresearch;12internaltraining sessionsand22in-houseseminars

38

Buildcapacityon legal issues within the institution

Good understanding across institution of keylegalaspectsof competition law and application in cases

2trainingsessions per month

39

Promote stakeholders' awareness on Commission's policyapproachto specifiedissues

2internalguidelines Internal guidelines aimed at standardising theinstitution'sapproach tospecificprocedures

Prioritisation framework published for internal use and internal memoranda circulated on dealingwithleniencyapplications.31articles publishedrelatingtotheCommission'spolicy approachtoprioritysectors Guidelines not drafted due to workloadwithinthedivision

2externalguidelines. GuidelinestobedraftedbytheLegal Externalguidelines Updateallexisting Servicesdivisiondeferredtothenext aimedatgiving financialyear guidance to practitioners externalguidelines and stakeholders on the Commission'sapproach to particular aspects of its work

Core programme: Compliance

40 Developarisk management strategy Well managed risk on a daytodaybasis Workshops and training sessions with managers and divisions.Completed by30September 2009 Fraudprevention planadoptedby 30July2009.Plan workshopped at staff meeting of August 2009 Finalisedby September2009 Workshop and training sessions completed timeously

41

Developafraud preventionplan

Fraud free institution. Fraud is detected and reportedtimeously

Fraudpreventionplanwasadoptedin September2009

Comments were incorporated inJulyandAugust2009,which resultedintheslightvariance

42

Conduct a forensic ITreview Reviewtheregistry process

SecureITsystems

Forensicinvestigationwascompleted timeously.TheITdivisionisintheprocessof addressing issues raised in the report

43

Registryprocess complies with corporate governanceprinciples and is linked to knowledge management system

Compliantregistry Thereviewprocesshasstartedandisbeing systembyMarch2010 coordinated with knowledge management systemsdevelopment

89

44

Implement and monitor the functioning of governance structures Providestrategic direction on Commission's functions

Decision making is compliant with sound corporategovernance principles. Decisions are madetimeously. Coherence in the functioning of the Commission as a whole. Commissioner is kept up to date. Decisions are madetimeously.

Ongoing

Monthlymeetingsareheldandminuted. Decisions are timeous and implemented. Companysecretaryensuresthatdecisions are implemented

45

Monthlymeetingswith Monthlymeetingsareheld divisionalmanagers

46

Establishhighlevel relations between the Commissioner and strategic stakeholders

Highlevelandbeneficial Meetings with the Minister of Trade relations established andIndustry,the departments of MineralsandEnergy, and Agriculture, and the National Agricultural Marketing Council 1workshopMay2009 Approvedamended business plan. Plan submitted to the Department of Trade and Industry Evaluationreport enabling us to plan forward Reportfinalisedby May2009 Workshop with senior management June 2009.Workshopwith the Commission. Submit to the Department of Trade andIndustryby September2009. Ongoing

Meetings coordinated with the Minister ofTradeandIndustryandtheMinisterof EconomicDevelopment.Meetingsheldwith thedepartmentsofMineralsandEnergy, and Agriculture, as well as the National Agricultural Marketing Council

47

Review2009-2010 business plan

ExcoworkshopheldinMay2009.Extensive reviewcompletedandreportfinalised

48

Evaluateexisting strategy

ExcoworkshopheldinMay2009andreport finalised ManagementworkshopheldinJune2009.3 yearstrategicplanandbudgetsdeveloped and submitted to the Department of Trade andIndustry

49

Planforthe:3year Anapproved3year strategic plan and strategic plan, 1 yearbusinessplan, business plan andthebudgetary implications for both.

50

Monitor the implementation of the strategic plan Maintain international relations

Timeousandfully implemented strategic plan Consistent application of competition law principles in the region. Commission is aware of and up to date on international competition developments

Monitoringofimplementationviaquarterly reportsandmonthlymanagementmeetings Written contributions submitted to the ICN workinggroupsonagencyeffectiveness, cartelsandadvocacy,participationinICN workshops,UNCTAD,SADC,SEACFand SACUmeetings,presentedattheopening of the Namibian Competition Commission, 3 secondmentsfromBotswana,participatedin JointFoodProjectmeetingswithEgyptand Zambia

51

AttendFebruary/ June/OctoberOECD meetings, June ICN meetings as well as ICN working group meetings, Fordham, and SADC. Attend and facilitate annual South East African Competition Forum meeting

90

52

Promote consistent application of competition principles Strengthen regional co-operationon competitionpolicy

Promoted more consistent application of competition principles Emergence of credible institutions in the region

Ad hoc, as and when requestsarereceived

Technical assistance to Mauritius Competition Commission, presenting at the CUTSInternationalworkshopinNigeria The training programme for African competition authorities did not take place due to budgetaryconstraintsandthe capacityconstraintsofAfrican countries 22casediscussionsheld

53

Annual training course to be held in October 2009

54

Improveinternal communicationKom Praat Saam (case discussion) sessions

Higher turnout for case discussion sessions. Staff more informed about important Commission matters. Improvedstaffmorale Staff are better informed about important Commission matters. Improvedstaffmorale. Staff awareness and participation in national events.Improvedstaff morale Staff participation. Improvedstaffmorale

1KomPraatSaam session per month

55

Usetheintranetas a tool for internal communication Commemorate nationalevents

Number of hits on websitereceived

Intranet is used on an ongoing basis to keep staffabreastofdevelopmentswithinthe organisation Awarenessinitiativestocelebratenational eventswereimplemented(eg.candle lightingceremonytocommemorateNational AidsDay) 9internaleventswereheld

56

1eventper selected national commemorativeday 1awardceremony and1staffeventper month

57

Conduct internal events Improveinternal newsletter Newsflash publication

58

Feedbackreceivedfrom 1Newsflashissueper 12internalnewsletterswerecirculated staff. Wide readership month from staff Templatesdeveloped and implemented duringthefinancial year Internal Reviewoninternalcommunicationstrategy communication currentlyunderway strategyreviewedand implemented 1,500copiesofannual 1,500copiesofannualreportsprintedand distributed. 3 newsletters published reportdistributedby September2009. 1 Newsletter per quarter. It was decided that the internal communicationstrategymust be aligned with the strategic prioritiesfor2010to2013

59

Enhance the Usefulandrelevant Commission'sbrand templates.Useofset internally templates Enhance and update the internal communication strategy Maintain and produceexternal publications to keepexternal stakeholders informed Internalstrategyaligned totheCommission's strategy Well managed and timeous publication of publications. Minimum stocklevelof1,000 units is maintained. Feedbackreceivedfrom readers and users Publications remain up to date with latest developments

60

61

As required

Publications are up to date

91

62

Improvethe Commission's website

Numberofhitsreceived. New website launched Anewwebsitewaslaunchedearlyin2010 andimplementedby andisregularlyupdated Feedback from users. June2009 Moreeasilyaccessible information.Timeously updated website Documentversioncontroltemplatesare being implemented

Thedelayinthelaunchisdue toconstraintsexperiencedby theexternalserviceprovider

63

Ongoing Enhance the Useofsettemplates. Commission'sbrand Adherence to the Commission'scorporate externally identity.TheCommission isadequatelybranded atallitsevents Enhance and updatetheexternal communication strategy Proactivelyfocus education and advocacyonpriority sectors of the Commission Externalstrategyaligned Reviewedexternal toCommission'sstrategy communication strategybyOctober 2009 EducationandAdvocacy As and when areas of advocacyhasbeen staff members able to identified educateandadvocate across stakeholders intheprioritysectors. Improvedknowledge ofactivityinpriority sectors.Improved knowledge of education andadvocacyneedsin prioritysectors Professions are able toclearlyunderstand andcomplywiththe Competition Act. Firms clearlyunderstandtheir obligations in term s of the Competition Act Businessclearly understands the implications of the amendment bill and thecorporateleniency policy

64

Reviewoftheexternalcommunication strategyiscurrentlyunderway

Itwasdecidedthatthereview must be aligned with the strategicprioritiesfor2010- 2013

65

31 articles published relating to the Commission'spolicyapproachtopriority sectors.39stakeholdereventsheld

66

Promotevoluntary compliance withtheActby firms,industry associations and professional associations

Guidelinesdeveloped GuidelinestobedraftedbytheLegal byNovember2009 ServicesDivisiondeferredtothenext financialyear.Complianceprogrammesare reviewedandpresentationsmadeonanad hoc basis

Guidelines not drafted due to workloadwithinthedivision

6workshopswith business

Workshops are attended when a request is made. Workshops to educate business on theamendmentbillandcorporateleniency policywereheld,includingpresentationsto BJMHoldings,theSouthAfricanInstituteof InternalAuditors,meetingswithco-directors, theBlackSash,SALGA,BUSA,NEDLAC and FASA Workshops with SMMEs held with a focus onfranchisees.Updatedfranchisenotice published and seminar held with franchise association members

67

Ensure that SMMEs: understand how the Act works for them;applyfor exemption;lodge relevantcomplaints; and participate in Commission and Tribunal processes

FASA is updated on current competition concerns and its expectedrole.Qualityof complaints,exemption applications and informationreceived fromSMME's

1franchiseexhibition; noticeupdatedby July2009;1workshop and as requested

92

68

Ensure that consumers are aware how the Act works for them (damages, confidentiality, receiveinformation), lodgerelevant complaints and participate in the Commission and Tribunal processes

Consumer organisations increasinglyrequire Commission'sinputand participation

Presentations at nationaleventsof targeted consumer organisations

Participated in the conference on national consumer law conference and the consumer protection forum

Consumer organisations participate in the processes of the Commission and the Tribunal,whererelevant 69 Increase the participation of trade unions in theCommission's activities Tradeunionsregularly participate in Commission'sprocesses

Maintain ongoing Ongoing contact with consumer contact with consumer organisations is maintained organisations

4 training workshops

5 trade union workshops held

Tradeunionsprovide relevantinputinto Commission'sprocesses 70 Updatelegal practitioners on theCommission's policyapproach andensurethey understand their and theirclients'rights and obligations under the Act Advocatefor Parliament and government departments to developcompetition compliantpolicy and legislation Legal practitioners are appraised of the Commission'spolicy approach. Legal practitioners understand their rights and obligations in terms of the Act Government departments are aware of areas of mutual interest.Government departments participate intheCommission's processes. Legislation needs to take competitionpolicyinto account when being drafted

1 trade union consultativeforum 1practitioner's workshop

1 trade union forum held

1practitioner'sworkshopheld

71

1 public sector consultativeforum meeting

14stakeholdereventsheldincludingpublic sectorconsultativeforum,conferenceon consumerprotectionlaw,andbid-rigging workshopsforgovernmentprocurementand treasuryofficials

Stateemployeesidentify Ongoing andreportbid-rigging practices. Checklist thatgovernment departmentscanclearly understandandapplyto bedeveloped

Checklist circulated

93

72

Partner with government departments to ensurethatfirms complywiththeAct

Feedback from government departments

1bid-rigging workshop per province.Updated manual distributed togovernment departments

Bid-riggingworkshopsheldwithnationaland provincialgovernmentofficialsandNational Treasury,submissiontoTreasuryontheuse ofacertificateforindependentbidding, workshop held with Eskom, presentation to miningprocurementmanagers.Bid-rigging booklet drafted and distributed.

73

Partner with regulators to ensure thesmoothexercise of concurrent jurisdiction

Clear areas of communication and areasofjurisdictionare established between the Commission and regulators

Memorandum of understanding with NERSA Allexisting approved memoranda of understanding updatedbyDecember 2009 Memorandum of understanding signed offbyAugust2009 Negotiations on the memorandum of While substantial progress understanding with the National Prosecutions has been made with the Authorityareunderway memorandum of understanding with the National Prosecutions Authority,ithasnotbeen concludedduetouncertainty around the Competition AmendmentBill

74

Smoothexerciseof Partner with the National Prosecuting jurisdictioninrespective areas Authoritytoensure thesmoothexercise ofcivilandcriminal jurisdictionin amendment bill

Support programme: Information technology services

75 Maintain integrated andhighlyeffective ITsystems Reliable,highquality and performance based information and ITsupportsystems. Commissionstaffhave accesstoallavailable hardware and software Therewasonly1hourofdowntimeasa Highlyeffective resultoftheCommission'sownITsystems ITsystems.100% systemavailability. Usershaveaccessto ITsystemsatalltimes The 1 hour downtime was due to hardware failure and the Commission has since replaced the hardware. Problems in the Department of Trade and Industry'sserverwhichhosts theCommission'snetwork disruptedtheCommission's operations. The Commission has requested that it be allowed to host its own network.

Public access to the Commission'swebsite without downtime. 76 Upgrade/replaceall Faster access to old hardware programmes and less downtime UpgradeSAN system Data accessible to staff at all times

Regularlyupdated andavailablewebsite Updatetechnology and faster user access Fullyfunctional emailsystemwithno downtime

Thewebsiteisregularlyupdatedand available. AnewSANsystemwasprocured.The databasesarerunningontheSQLcluster servicesdatabase Majorinterruptionshavebeen duetotheCommission's reliance on the Department ofTradeandIndustry's network, which is out of the Commission'scontrol

77

94

78

Manage and monitor knowledge management systemsand automated business processes Improveremote access across allzones(VPN connections) Provideefficient disasterrecovery facilities

A knowledge managementsystem with access to all research data and case information and automated processes Efficientonlineand offlinemailaccess

Efficientknowledge managementsystem

Otherthanimprovementstoonlinereporting, Thesystemimplementationhas casemanagementandprojectmanagement, beendelayedduetotechnical this did not occur difficultiesanddelaysonthe partoftheexternalservice provider.Thisistheprimary driverforautomation

79

Effectivecollaboration VPNaccessgiventorelevantstaffand ofsystems.24hrs, trainingprovided 365daysofsystem accessfromanywhere Reviewandimplement ForensicinvestigationintoITsystems newsystemsand completed. All changes on hardware hardware duetoknowledgemanagement/content managementsystemsdevelopment havebeenincorporatedintopoliciesand procedures

80

Backupsystems upgraded to do online real time backup onto a disk.

Support programme: Financial management services

81 Ensureeffectiveand efficientfinancial management and costefficiencies Budgetvs.Actual variances.Monthly projectionsbased on assumptions from divisionsforzerobased budgeting Surplus funds deposited with the corporate public depository(CPD).Net bank balances not in overdraft 82 Ensureaneffective procurementsystem 40%,35%,25%,10% Varianceshavebeenreduced.Zerobased budgeting is used.

Optimal interest earned on surplus funds

Optimal interest earned on surplus as per financialstatements

Newsystemfullyapplied Full implementation andimplementchanges/ anduseofsystem adjustmentsasrequired Databaseinclusiveof expertiseinavarietyof fields Updatedatabase withcurrentexpertise known.Expand professionalservice expertstoinclude niche market Report on use of experts/consultants. (costsnottoexceed benefit) Appointment of suppliers in line with work stream requirements and deadlines

Ongoing population of database

Monthlyanalysisoftheuseofconsultantsis conducted

Quarterlyreportsonuse andservicedelivery

Quarterlyreportsgeneratedtoensurethat costsdonotexceedbenefits

Improveduseofsupply chain management policies and procedures. Compliancewithsupply chain management and procurementpolicy

7tendersissuedincompliancewithpolicies and procedures. All appointments are in line with requirements and deadlines

95

83

Ensure regular financialreporting

improvedandtimeous financialreporting. Compliance with GAAP, PFMAandTreasury regulationsUnqualified audit reports

Regular and accurate financialreports availableonthe15th dayofthefollowing month. Principles of GAAP, GRAP and PFMA applied in line with best practice

Regularmonthlydiscussionsofexpenditure against the budget are held with managers fromtimeouslyproducedmanagement accounts.Developmentofelectronicreports from Pastel in line with best practice

84 85

Implement best practice policies Manage the Commission'sfixed assets

Revisedbestpractice financialpolicies Monthlyreconciliation

Revisethroughoutthe Thesupplychainmanagementpolicywas financialyear reviewedandapproved Reconciledfixed assets register to physicalandexisting assets. Donation to educational institutions Full implementation & Monitoring Utilisationbydivision managers, personal assistants and divisionalassisitants Fixedassetsverificationhasbeencompleted

In compliance with Treasuryregulations Effective&trustworthy fixedassetsystem 86 Implement the knowledge management system Easyaccesstofinancial reports on the share pointservers,business plans, management accounts,quarterly reports

NoITequipmentwasavailablefordonation

TheHardcatITsystemwasimplemented and 4 staff were trained to use it Templates were created and use is being monitored for access to reports.

Support programme: Human resources

87 Ensure compliance with legislation Complete understanding andusebystaff, management and Human Resources division Bettermatchbetween appointed candidate and organisation Allemployeestofully understand changes inpoliciesbythe2nd quarter Tosubjectshortlisted candidates to acompetency assessment centre for abetterperson-job match Little or no gaps in performance ofdivisiondueto departingemployees and period to fillvacancy.No performance gap shouldbevisibleina divisionduetosudden resignations AllpositionswithinHR'scontrolhavebeen filledwithin7weekswiththeexceptionsof DivisionalManagersforEnforcementand Exemptions,andStrategyandStakeholder Relationsdivision Thepolicymanualwasapprovedinsecond quarter.2workshopswereheldwithstaffto ensure understanding.

88

Undertakeeffective staff recruitment and ensure staff retention

Competencyassessmentswere notusedduetobudgetary constraints. Practical work examplestoassessskillsare usedintheinterviewprocess Thepositionofdivisional managertakeslongertofill duetotheseniorityofthe positionsandthesubjectmatter expertiserequiredofsuitable candidates

89

Undertakeeffective capacitybuildingin the organisation

Positionstobefilled within7weeksfromthe resignationofprevious incumbent

96

Availabilityofskilled consultants to assist and transfer skills within division.Headhunters to be able to assist with supplyingcandidatesat short notice. 90 Manageemployee performance Uniformapproachand more standardised performancecontracts- refinebehavioral competencies

To reduce turnaround time for scarce skilled senior candidates and candidatesreadily available

Allpositionswithinthedivision'scontrolhave beenfilledwithin7weekswiththeexception of2divisionalmanagers

Subjectivityin assessments minimised and evendistributionof assessment scores

Implementation of performance management systemspolicywasreviewedandchanges arising therefrom were effected. Process document compiled and discussed prior to assessments to ensure a uniform approach. Infosessionsheldwithsomedivisions. Performance scores discussed and approvedbymoderationcommittee.Good distributionofscoresagainstnormalcurveis evident Graduates completed training in computers, presentationskills,projectmanagement, business writing skills, time management and stakeholder relations Database compiled of suitable candidates. Candidates are also sourced from pool ofgraduatesintheCommission'strainee programme.Commissionalsovisits universities

91

Ensureeffective learning and development

Graduate curriculum followedbyall graduatesfrom2009 mentorship programme implemented Complete database of currentskillsprofileof staff members

Graduates trained according to curriculum, which is structured and managed Employeesand learning and development coordinator to know where skills gaps are and how to address them Updatedandwell communicated L learning and developmentstrategy to support the culture of learning in the organisation Availabilityof updated info on staff. Supporting the culture of knowledge sharing in the organisation. Allrelevant documents to be on fileforauditpurposes

92

Deviseand implement learning anddevelopment strategy

Updatedstrategywith best-practiceprinciples incorporated

Learninganddevelopmentstrategywas approvedinApril2009.Thestrategyhas been communicated and implemented. 20seniorstaffmembersattendeda managementdevelopmentprogrammethat beganinSeptember2009 Theknowledgemanagementsystem allows for the updating and uploading of all information

93

Implement knowledge management system

Uploadalllearningand developmentinfoand otherrelevanthuman resource documents on the knowledge managementsystem Ensure all documents onfileasperchecklist and other documents inthedivisionfiledas per allocated reference numbers

94

Carryoutgeneral human resources management

Successful audit completed with outstanding documentsrequestedandfilesupdated.

97

Increase in staff morale andmotivationsince the implementation of certain human resource initiatives E-basedleave application and access toinfo:payslips,IRP 5's,personalinfo

To know whether strategicobjective to staff morale and motivationshas beenmet.Constantly improve.

TheCommissionusedtheDeloitte's"Best CompanytoWorkFor"surveywithatotalof 90questionnairesreturned.TheCommission wontheawardinitscategory.

Allemployeestomake Theemployeeself-servicesystemisfully functional useoftheemployee self-servicesystem electronicallyand reduce the number of queriestothedivision All positions to haveupdatedjob descriptions and clear understanding from staff Codeofconductwasdevelopedand incorporatedintothehumanresourcespolicy manual, which was workshopped with staff Jobdescriptionreviewis currentlyunderway

Updatedjob descriptions in line with growth in positions in organisation Obtain staff input into developmentofcode of conduct and ensure proper communication

Support programme: Security and facitilties

95 Provideeffective securityandfacility management Bestpracticesecurity policies and practices in line with legislation and the Department of Trade andIndustrycampus regulations Reducesecurityrisk and breaches. Mitigate threats. Detect material weaknessofsecurity systemsandcontrol securityriskand deficiencies 96 Monitor and manage Safe and secure access control environment.No unauthorisedentry Effectivesafety and management systems.Comply with legislation and Department of Trade andIndustrycampus requirements Ongoing Thesesystemsareinplace.Furtherpolicies areintheprocessofbeingupdated:security manual;emergencyresponseplan;smoking policy;andoccupationalhealthandsafety policy

Screeningconductedonemployeesvia theNationalIntelligenceAgency.Staffand managementadvisedonsecuritymatters and measures

Ongoing

Access is controlled with signing in and out of staff after hours

Anamplifierwasreported missing and insurance compensated the Commission forthis.CCTVisnowusedto monitoraccesstopreventsuch occurrences

97

Implement and coordinate Emergency Response Plan

Improveresponsetime toevacuationdrills. Improvedemergency response to disaster

Ongoing

Staff informed of processes. Staff trained on firstaid.Newstaffinducted,walkthrough drillconducted,fireassessmentsconducted, monthlymeetingsheldwithemergency response team

98

98

Occupational HealthandSafety legislation (OHS)

Safeandhealthy environment,in compliance with legislation

Compliance with occupational health & safetylegislation.

OHSauditcurrentlybeingconducted. OHSrepresentativehasbeentrained.OHS incidentsareinvestigatedasandwhen theyarereported.Workshopincludedin discussiononpolicymanual Ongoing building audits conducts to ensure conduciveworkingenvironment Liaise with the Department of Trade and Industryonanongoingbasis

99

Well maintained facilities

Well-maintainedfacilities Ongoing andservices Liaisewithexternaland internal stakeholders in line with dti campus regulation Ongoing

100

Effectiveand professional management of reception

Well managed reception area and internal meeting rooms.

Ongoing

Ongoing monitoring of reception to maintain professional image

Support programme: Security and facitilties

101 Provideefficient records management Timelyaccesstorecords Efficientinformation and information retrieval:Within2 hours for electronic documents, and 8 hoursforhardcopies/ originals Compliancewithversion Implementation of control principles across versioncontrolin the Commission line with knowledge managementsystem Secureanddeliveryof records within stated turnaround times of servicelevelagreements 102 Manage public access to the Commission's information Complywithrelevant legislation. (This includes the Competition Act (1999), the Public Access to InformationAct(2000) and the Promotion of AdministrativeJustice Act(2000) Complywithrelevant legislation Retrievalofrecords according to terms agreed with the Commission and serviceprovider Improvedturnaround on access to information from averageof5to6days Retrievalismadetimeously

Documentversioncontroltemplatesare being implemented

Retrievalismadetimeouslyandinlinewith theservicelevelagreement

Relevantlegislationiscompliedwithand accessisgiveninlinewithconfidentiality provisions

103

Reviewand implement records management policies

100%compliancewith 100%compliancewithrelevantlegislation relevantlegislation

99

104

Providepostaland courierservices

Timeousdeliveryofmail and consignments to externalstakeholders. Internal mail distributed within2hours

Distribution of mail and consignments done within the required timeframe of the Competition Commission and stakeholders As informed byknowledge managementsystem strategy

Mailisdistributedtimeously

105

Alignexisting information and records management approach with knowledge management system

All departmental information processing aligned with knowledge managementsystem

Regular spot checks are conducted on the contentmanagementsystem,andwhere rectificationisnecessary,divisionsare advisedaccordingly

100

COMPETITIONCOMMISSION Tel:+27(0)123943200|Fax:+27(0)123940166 PostalAddress:TheCompetitionCommission,PrivateBagx23,LynnwoodRidge,0040 PhysicalAddress:TheDTICampus,Mulayo(BlockC),77MeintjiesStreet,Sunnyside,Pretoria email:[email protected]| www.compcom.co.za RP217/2010 | ISBN:9780621396409

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