File picture: Phill Magakoe
JOHANNESBURG - Geotechnical specialist companies in KwaZulu-Natal and Johannesburg established a “book club” or “breakfast club” at which tenders were allocated to each other according to their respective market shares, the Competition Tribunal heard yesterday. 

Kenneth Jones, a former general manager of the ground engineering division of Grinaker-LTA, which is part of listed Aveng, said members in the KwaZulu-Natal “book club” or cartel agreed in a meeting what conduct was required for members to stay in the cartel.

But Jones said a set of rules, with penalties for non compliance, was established similar to the arrangement in Johannesburg because it was clear that not all members were sticking to the verbal agreements.

Jones was giving evidence in a tribunal hearing yesterday (tues) in the prosecution of listed Esorfranki, now named Esor, and Diabor on charges of collusive tendering, price fixing and market, customer and territory allocation in contravention of the Competition Act.

They were initially charged with Rodio Geotechnics, Dura Soltanche-Bachy, Geomechanics and Grinaker-LTA.

The tribunal previously confirmed a settlement agreement entered into between Dura Soletanche-Bachy and the Competition Commission in terms of which the firm agreed to pay a fine of R988 589.08 for collusive tendering on 11 construction projects and a settlement agreement entered into by Geomechanics in terms of which it agreed to pay a fine of R1.65 million for collusive tendering on certain Gautrain projects and the Lesotho Water Highlands Water project.

Shortly before evidence was led yesterday (tues), the tribunal confirmed a settlement agreement between Rodio Geotechnics and the commission in terms of which it agreed to pay a fine of R885 963  for collusive tendering on nine projects in a joint venture with Grinaker-LTA’s ground engineering division.

Nelly Sakata, appearing for the commission, said the cartel conduct spanned nearly 15.

Sakata said they called themselves either the piling group or the group or the “Book Club or the Breakfast Club” with projects affected including hospitals, buildings, hotels, prisons and universities.

She said if a member breached the specific rules, they would be sanctioned with the evidence indicating the penalty was double the tender value.
Dirk Vetten, counsel for Esorfranki, said his client accepted collusive conduct related to two projects - the Lusip Dam grouting project in Swaziland in 2005 and the Sappi/Saiccor piling project in KwaZulu-Natal in July 2006 - but a further 11 or 12 identified projects were in dispute.

Vetten said claims of Esorfranki’s involvement in these cases were false, some cases raised questions of prescription and many of the documents and their contents would be disputed.

Chris Kotze, appearing for Diabor, said the content of the documents remained “very much in dispute”.

Jones said a cover price would be applicable to either a tender that was part of both the formal arrangement and ad hoc agreements because in either two scenarios it was agreed that a particular tenderer would get that job provided the price was within reason.

“Normally that cover price would be a minimum of 5 percent more than the tenderer that was allocated that particular project through one of those two arrangements,” he said.
Jones added that at a particular stage Frank van Niekerk, the owner of V&A Piling which only operated in Durban, was quite aggressive because he wanted a higher percentage.

He said Van Niekerk was threatening to “become a terrorist” in Gauteng because he knew there was a cartel arrangement in Johannesburg as well and by moving up to the area to conduct work there he would disrupt that cartel.

The case is continuing.