The collusion and bid rigging exposed in the construction sector was the biggest corporate scandal in post-apartheid South Africa, Roger Jardine, the former group chief executive of listed construction and engineering group Aveng, said last night.
And the fallout that followed the Competition Commission’s investigation into the industry was definitely justified, Jardine told the Wits Business School.
“The public sense of betrayal in this matter, compounded by being bombarded daily with stories of government sector corruption and the perception of collusion between political and economic elites in questionable BEE deals, is almost the last straw for an increasingly cynical public,” he said.
The commission’s investigation and fast-track settlement process resulted in 15 construction firms agreeing to pay fines totalling R1.46 billion for more than 300 cases of bid-rigging. He said it was clear from the public outrage that the fines were not deemed to be sufficient.
He said the commission was an administrative body, which created a paradox for a would-be whistle-blower. In theory, a whistle-blower could be applauded by the commission for disclosures while running the risk of being criminally pursued by the National Prosecuting Authority (NPA).
Jardine believed the best way to deter cartel behaviour while strengthening the prospects of success in prosecution was to have strong co-operation between the competition authorities and the NPA so any person who approached the commission with evidence of involvement in illegal behaviour would have the comfort of knowing immunity would apply across the agencies.
Jardine said the government was understandably cautious about what to do next about the construction industry because the country would be unable to deliver a R4 trillion infrastructure programme or play a meaningful role on the continent without this industry.
He said the Construction Industry Development Board was considering blacklisting construction firms but indicated this was “a blunt policy instrument” that would be impractical for the country.
The leaders of construction firms must actively demonstrate a commitment to ethics and integrity in their companies by making more serious efforts to bring new people into their teams – black professionals, women and young bright engineers who did not carry the baggage of the industry’s cultural history.
There was also a need for an “integrity pact” signed by the government and all bidders for public sector contracts.