In his own words: Roger Jardine explains reasons for quitting Aveng, why he “hopes” construction sector is now clean

Roger Jardine’s decision to quit as CEO of construction group Aveng has been five years in the making. In a wide ranging interview, he explained that it became clear the industry wasn’t for him just one month into the job. That was when this man schooled at the feet of the late Eric Molobi became aware of collusion which has since become public knowledge. Jardine realised he had gotten himself into a totally unexpected challenge. But took a decision to stay the course and become part of the solution rather than walking away from the problem – something which he would surely have been fully entitled to do. Jardine opened up in this discussion on CNBC Africa’s Business Tonight programme. But hinted that there is more to come. He will be co-operating with Pat Pillai who will be writing Jardine’s biography. The book is set for publication mid-2014.  

ALEC HOGG: After five years at the helm of South Africa’s second largest construction group, Aveng CEO Roger Jardine has announced he will step down in ten days’ time. That’s at the end of August. In studio with us is the man himself. Roger, busy day? Was it a board meeting that precipitated this?

ROGER JARDINE: No, the finalisation of the Competition Commission issue about six weeks ago, was really when the whole matter crystallised in my mind. I informed the

Chairman of the Board that I had reached this decision, and over the past few weeks we concluded my decision to move on.

ALEC HOGG: We’ve known each other a long time. Eric Molobi, the late Eric Molobi, was your role model, from Kagiso. Do you think he would be applauding you today? Or

Roger Jardine: Says he "hopes" the construction sector is now clean
Roger Jardine: Says he “hopes” the construction sector is now clean

saying, Roger, you should have got out of there long ago? Or, Roger, why did you go there in the first place?

ROGER JARDINE: It’s interesting that you ask that question, because I was mentored by Eric Molobi, and he was a man of profound dignity, ethics and integrity, and he’s helped to guide me through this last few years.

The one decision I made, which was influenced by Eric Molobi, was when the Competition Commission matter came to my attention. About a month after I joined Aveng, I thought, what have I got myself into? I also understood that when you are a CEO of a major corporation, things will come at you that you never anticipated. But what I definitely understood was I couldn’t up and leave. I needed to see this thing through. It was my duty as a CEO, so I stuck it out for five years, and worked very diligently at unravelling the cartel behaviour within our company, and in the industry at large. It was also in the middle of the unprecedented global financial downturn, post World Cup infrastructure spend coming down, so the trading environment was quite tough. The regulatory stuff was very challenging which I like as you know, but I thought with the conclusion of the Tribunal and the Competition ruling that was a good time for me to move forward, and for the company to also move forward, having cleared all of these issues.

ALEC HOGG: Yes. You didn’t answer my question, though, what would Eric be saying today?

ROGER JARDINE: I think he would wish me all the best, going forward. And I think if Eric were around, he would certainly be commenting on the way I’ve handled this issue, which I would like to believe as being correct and transparent, and trying to live those values that he taught me.

ALEC HOGG: You really had a tough ride, starting on 7th July 2008, share price R65. I think Reuters are very naughty today.


ALEC HOGG: They’ve said the shares have dropped 48% since you joined there.

ROGER JARDINE: I saw that.

ALEC HOGG: But if you look at what happened, it collapsed within three months of your joining. You timed your entrance pretty poorly. Are you timing your exit badly too?

ROGER JARDINE: Well, there are two things. The whole sector is down. In fact, valuations in 2008 and today are very different, so it was quite naughty. Am I timing my exit poorly? I think life is about timing, but ultimately you need to look deep within yourself and decide what’s good for you, and I understood that the timing of my exit wasn’t optimal, because, as you know, our South African construction business is taking a lot of strain. The rest of our businesses are very strong, so it lends itself to a different narrative around my exit, but I knew I had to do this, and notwithstanding the noise around it, I’m proceeding with my very personal decision.

ALEC HOGG: Our co-hosts are desperate to ask you a question. One last one, the way I read your statement was that you got thrown a hospital pass, the guys jumped on top of you, you got up, said, well, as soon as I can get off this field I’m getting out.

ROGER JARDINE: I don’t think I was thrown a hospital pass, or, not consciously by anyone. You must remember, I joined Aveng in July 2008, the Board was already, asking questions about this issue, and in fact, my predecessor, in April 2008, made a statement in the media, there are no Competition issues; nothing to worry about here. I don’t think there was a conscious decision to do that, but certainly, as I’ve been through year one, two, three, four, five, I also set personal goals within the organisation. Safety is a big issue in construction, environmental issues too. Last week I was in Australia with our Australian business, so it’s been very fulfilling for me, professionally, notwithstanding the Competition issues.

ALEC HOGG: Brigid?

BRIGID TAYLOR: Yes, I take my hat off. I think it’s been a hard journey, and I certainly admire that. However, just give us an idea in terms of what you’ve learned along the journey, what your advice would be to other participants in this sector, and where to, from here?

ROGER JARDINE: Well, next year, in July/August Pat Pillai of eTV has just been given a contract by Pan McMillan to write a book on my journey from being the youngest Director General to Kagiso, to Aveng and the other things I have to say about the general state of our society. So at the risk of a cheap punt, you’ll have to read the book next year.

But I think one really just has to be prepared to deal with adversity that you don’t anticipate, and stick true to your principles, and what you believe in. Trust your gut, and most importantly, when I reflect on the past five years, I must admit, and I think most human beings would have, as this Competition issue started to gain currency and really look like a big problem, you lie awake at night and you think, gee wiz, okay, should I just bail from this thing? But I understood it was my duty to see it through, and I think we should always be mindful of that.

ALEC HOGG: Ashraf?

ASHRAF MOHAMED: Roger, you came in at, almost, from a timing perspective, at the wrong time. We all knew that the peak would be the World Cup, in terms of contracts, and there would be a challenge post that, especially given the financial crisis. Are you seeing any turnaround in the sector?

ROGER JARDINE: Yes, look, I think, firstly, when I decided to join Aveng infrastructure was very hot, and in fact, I bumped into someone who was a top rated analyst in the media world, who is now a construction analyst, and he said to me, I covered you in media, and now I’m covering you in construction, and we both seem to be chasing the good growth, sexy areas, and we chuckled about it.

The main thing that changed was October 2008, when the world changed. In the run up to that date steel prices were going up 70%, volumes 40%, and Aveng, again, is not purely construction. We have a steel business; we have a manufacturing business. So, if you look at what subsequently happened, I think that downturn was linked to the global situation, in the middle of a credit crisis. You can’t fault the South African government, in 2008, for taking a step back, and saying, let’s not proceed with nuclear, etc.

Where we are now, is seeing some smaller projects coming to the market, but generally the big, heavy, civil stuff still needs to come in as well. It’s very important that the national infrastructure plan gets rolled out, for job creation, for stability in the sector, and so forth. There isn’t enough traction on the infrastructure spend yet.

ASHRAF MOHAMED: But do you think that impetus will come? Elections are eight months away, and people normally start dragging their heels when it comes to election time.

ROGER JARDINE: I think there is that political dynamic with the elections, but we must also remember, if you look at the growth forecast in South Africa, seemingly revised downward from time to time, at 2% growth, 1.8% growth, the affordability of some of these things really comes into question. Given the general economic situation we will have to find, as SA Inc, new ways of funding much needed infrastructure, and this is where I think private sector balance sheets should really be leveraging the whole thing.

ALEC HOGG: The potential of that R4 trillion of infrastructure, and if you have a longer term view, you would say, you’ve got to be buying into this sector now, but from the inside, would that be too optimistic?

ROGER JARDINE: Look, if you take a long term view on infrastructure, you need to be very clear on your appetite for risk first of all. It takes one big project to make things go pear-shaped. You’ve seen in the last five years a few of our competitors posting losses once, two consecutive years. Thankfully that hasn’t happened in my five years at Aveng, but you need to take a view of your risk profile and your investment horizon and I think you will do well. But this isn’t a sector that you just get in and get out the next day. You need to take a view.

BRIGID TAYLOR: What do you think with regards to the outcome of the Competition Commission? Has it had a negative impact on your sector or do you think that there’s still hope with regards to business going forward?

ROGER JARDINE: I think it’s had a profound impact on the sector. It has come at a very bad time, especially as we now, more than ever, need government and business to work together. This has certainly undermined trust, and I think there’s a lot of fixing of the relationship between the construction industry and the government. But there is no way around it. I think parties have to get together if we’re going to move forward. It’s too important to have a standoff forever with the government saying those construction crooks and the construction industry being defensive. The Commission process has clear issues and the question now is if we’re going to deliver on infrastructure spend Someone was telling me last night there’s a big difference between pipeline and pipedream and you should be able to establish that. If we’re going to deliver on that, we need the South African construction industry. So with this issue, there needs to be some kind of resolution on this relationship issue.

BRIGID TAYLOR:  And then with regards to your own integrity around this, surely the outcome of it has to be some form of transparency? Do you think that that’s a positive outcome with regards to moving forward in this sector?

ROGER JARDINE: I definitely think so. The big learning from this particular investigation is that even if you argue that it’s the way things were done, it’s not an excuse for this kind of behaviour. And the sooner it’s put on the table and cleared, my personal view is that some of these behaviours are the unfinished work of the transition. South Africa was a small, closed economy and now we’re a small open economy and so how do we compete domestically and internationally? And the sooner we have an honest conversation about that, the better.

ALEC HOGG: You’re 48 next month. What’s next?

ROGER JARDINE: You know Alec, as you said you know my career and me over the past 20 years. I’m going to just step back, come up for some air and reflect on what the next step is for me. I’m certainly very excited about the future of South Africa and the role that I can possibly play in the private sector or anywhere else, so I’m going to take a view and just think about it for a change. Since becoming a Director General at the age of 29 I’ve basically been on this treadmill and I think I need a bit of time to reflect.

ALEC HOGG: I would suggest that you do your diligence a little more carefully next time before you take a job.

ROGER JARDINE: I don’t think it’s the first time a CEO steps into a role with regulatory issues or something else so, You asked the question earlier, what advice would I give?  To be mindful that there are inherent risks and to develop the temperament very quickly for things coming at you and to have that composure to work with your people and deal with it. As a leader you can’t be the first person to panic and jump out of the window because behind all of this, if you look at the construction industry, Aveng employs 34,000 people. Those people are ordinary people who do extraordinary things. Who has failed them? Managers, leaders at a point in the business. Those people need encouragement. It’s been tough on the people in this industry, the leaders and the executives who have been fingered in the whole issue. Yes, it’s a big story, but behind the story are the people who have built the stadiums and all these things. They weren’t involved in collusion. They were proud of the products.

ALEC HOGG: But how bad, and I think that’s the most important question that people in South Africa are asking; how bad is it today? Is it clean today, the construction industry?

ROGER JARDINE: I hope so. The Competition Commission gave every company an opportunity to come and talk about what had transpired in the past. They handled the issue quite responsibly. The law says you can be fined up to 10% of your revenue. They worked out a formula which basically made it practical, in terms of how they could deal with it and the timing of the investigation. It would have taken years and years to conclude, as well as for companies to be able to pay these fines. So I hope that every company has used the opportunity to clean out everything that thay are aware of.

ALEC HOGG: Ashraf. You’re quite comfortable? You’re going to buy the stock, now that Roger’s leaving? I see the market is up 1%.

BRIGID TAYLOR:: I’m buying the book. I want to read this book.

ALEC HOGG: The share price up 1% today. I suppose it’s a little bit sad that when you leave a company it doesn’t go the other way.

ROGER JARDINE: You must remember a few weeks ago our share price went down dramatically on the back of a trading statement and my personal view was it was an over-reaction. And it’s been drifting up slowly so I’m not surprised by that movement today.

ALEC HOGG: And you were well paid over these past five years. That was another point that Reuters was making. How do you respond to that?

ROGER JARDINE: I think the issue of executive pay is a very sensitive subject in South Africa today. I was discussing with a friend the other day, as one often does, about the difficulties. He paused and said for that sort of thing you can never be paid enough. So I don’t want to get into the realm of debating was I paid enough or not, certainly for me it’s been a very, very tough five years.

ALEC HOGG: Are you going back into national service?

ROGER JARDINE: I think when you’re in the private sector you are national service.

ALEC HOGG: It’s just not as well paid anymore. You’re not going back into the state sector then?

ROGER JARDINE: I have no plans but I encourage professionals to do so having been a Director General in the beginning of my career. We need to shift this culture about the civil service being the place where all the intellectual dregs and the underperformers go, because we really need a professional public service that can deliver. If at a point in my life I decided it was something I wanted to do, I would certainly consider it. And if anyone else out there wants to do it I would encourage them to consider it. Of course the public service needs to make it attractive, and I’m not talking about money. But they need to make it attractive for people, young South Africans who want to make a difference.

ALEC HOGG: Roger Jardine, Chief Executive of Aveng for the next ten days. We’ll be heading into a short break right now but we wish Roger the very best. It’s nice to see he’s looking healthy at 47 and it reminds me what Roger had to say of a man Eugene Meyer who was the Federal Reserve Chairman at the American Bank, the latter day or the earlier day Ben Bernanke. He said from ages 20 to 40 you learn, from 40 to 60 you earn and 60 upwards you serve. Well, Roger’s got quite a long way to go until he has to start serving.