The contractors responsible for construction of the Cape Town Stadium have reached a R136 million settlement with the City after being embroiled in an eight-year legal battle.
The City of Cape Town has been determined to recoup some of the billions it spent on building the 2010 World Cup stadium after the initial construction budget, estimated at R2.9 billion, ballooned to R4.5bn.
Although it had been suspicious of the rising costs, it had no option but to continue to meet FIFA’s deadline.
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In 2011, however, the Competition Commission found that 15 construction companies had been involved in tender collusion and price-fixing for world cup stadium tenders, including Wilson Bayly Holmes-Ovcon (WBHO), Stefanutti Stocks, Murray & Roberts, and Group Five.
Cape Town Stadium, built in 32 months by Group Five and WBHO, was one of the affected stadiums. Although the 15 firms reached a settlement agreement and paid a combined R1.5bn in fines, the City of Cape Town lodged a civil claim to recoup some of the money it was overcharged.
- It claimed on insurance for design changes that were made to the structure while it was being built.
- It lodged a civil claim against the construction companies found by the Competition Commission to have been involved in tender rigging and price fixing for the project.
- It was also in talks with the professional team to settle a disputed R200 million for construction fees.
In a joint statement released today by the contractors – WBHO, Stefanutti Stocks, and Aveng Africa – and the City, the parties said they had “engaged positively” to reach an agreement to settle the dispute.
The settlement includes a payment of R31.3 million by each contractor over the next three years, and a commitment to Corporate Social Investment projects in the city by WBHO and Stefanutti Stocks. This, said Cape Town mayor Geordin Hill-Lewis in response to the settlement, includes a minimum R42.5 million social investment of solar energy systems, guaranteed to the City for sites of its choosing.
He welcomed the agreement, noting that the City has been the “only metro to succeed in bringing a claim to the point of settlement arising from the FIFA World Cup construction collusion”.
“This settlement serves to dissuade collusion of this type in the future, and concludes what would otherwise have been a protracted arbitration.”
Hill-Lewis added that the construction industry has felt the impact of the last decade of weak economic growth, and the recovery of this sector is crucial to growth and jobs.
“Cape Town is committed to enabling meaningful economic growth, backed by a programme of raised infrastructure investment and faster land release for development, especially for more affordable housing.
“We look forward to constructive partnerships with all stakeholders towards these goals, based on principles of fairness and public value.”
The joint statement said that, since 2010, the South African construction sector has contracted in scale and capacity, with limited infrastructure spend by government over the past decade. This was compounded by the lacklustre economy and the Covid pandemic.
“These challenges have seen several industry failures while others, including Aveng, have divested of their South African construction businesses.”
It also stated: “While both the City and the contractors remain confident of their respective legal positions, it has been mutually agreed that it is in the best interests of all parties to amicably settle the matter rather than prolong an extended and costly arbitration and court process. This will allow for future positive engagements between the city and the contractors.”