Roy Cokayne
All five of South Africa’s major listed construction firms have been implicated in anti-competitive practices during the Competition Commission’s probe into 65 bid-rigging cases in the sector involving more than 70 projects valued at R29 billion.
However, deputy commissioner Tembinkosi Bonakele confirmed yesterday that not all of these firms had lodged corporate leniency applications or were co-operating with the commission in its probe into collusion and bid-rigging.
South Africa’s top five construction companies are Aveng, Group Five, Murray & Roberts (M&R), Wilson Bayly Holmes-Ovcon and Basil Read.
Bonakele was speaking at a briefing yesterday to announce a “fast-track settlement” process for firms in the construction industry that had been party to collusive practices in bidding for projects in the public and private sector.
Shan Ramburuth, the competition commissioner, said the bid-rigging had artificially raised the cost of contracts and resulted in the public sector paying more of taxpayers’ money for projects than it otherwise would have if firms had been competing for contracts.
Ramburuth said bid-rigging was involved in quite a number of projects, some of which were related to the construction of the 2010 World Cup soccer stadiums, the Gautrain and various road construction projects.
The Competition Commission had some information related to the Cape Town Stadium and a pilings contract related to a sub-contractor on the Moses Mabhida Stadium in Durban.
Ramburuth was unable to quantify the amount that the government had overpaid for contracts because of the bid rigging because the Competition Commission had not done the calculation.
He added that the commission had received 150 marker applications, which indicated an intention to apply for corporate leniency, with some applications relating to more than one project.
Ramburuth said most of these corporate leniency applications were submitted by Group Five, which had been cooperating with the commission since 2009.
But Ramburuth added that applications had also been received from Grinaker-LTA and M&R, which had committed to co-operate with the watchdog.
Grinaker-LTA is the locally based multidisciplinary building company within Aveng.
Ramburuth said that the commission’s investigation had uncovered “widespread anti-competitive conduct” through various arrangements.
Major companies in the sector, for example, had held meetings to allocate tenders and police each other’s behaviour through a structure referred to as The Party.
Meetings of The Party were attended by the managing directors and chief executives of construction companies.
Markets for construction products such as long steel, mining roof bolts, concrete pipes, plastic pipes, wire mesh and reinforcing steel bar have also been investigated by the commission, with several big construction companies involved in these cartels.
Ramburuth said the commission had devised the fast-track settlement procedure to incentivise firms to enter into a comprehensive settlement that was financially advantageous.
He said it aimed to minimise the associated legal costs and speedily resolve cases, while the process would also strengthen evidence against those firms not taking advantage of the initiative.
Ramburuth said that this process was designed to get disclosure on many more cases because some firms were in complete denial and did not admit anything was wrong.
The Competition Commission would prosecute firms that failed to take advantage of the procedure and ask for the maximum penalties for each project.
It would also advocate that the government cease conducting business with companies found guilty of collusion following prosecution.
Bonakele stressed that the commission was not only interested in retribution, but was cleaning up the construction industry.
“This is an industry that has had a culture of collusion where senior executives found it easy to meet and allocate largely public sector contracts and… decide how to milk the state. You have to break that culture,” Bonakele said.
Construction sector firms must submit applications to settle their bid-rigging and collusive conduct transgressions in terms of the fast-track settlement procedure by noon on April 15.