How cement cartel was set in stone

2015-03-01 17:00

Natal Portland Cement ­Cimpor still refuses to admit it colluded with three other companies

South Africa’s cement-cartel members held meetings at luxury venues as far afield as Paris and Lisbon to discuss how they would collude, claims the Competition Commission.

This is included in the commission’s referral affidavit, which it lodged with the Competition Tribunal this week in its bid to prosecute the cartel.

The referral affidavit details a two-day meeting held at the Selborne Golf Estate near Port Shepstone on the south coast in 1998. Here, the commission alleges, members of the cartel agreed to collude and divide up cement markets in South Africa, Lesotho, Botswana, Namibia and Swaziland.

The agreement that resulted from this two-day meeting became known in the industry as the “Port Shepstone agreement”.

The affidavit says the agreement ­included market share allocations for producers in each province, the agreed pricing of different ­cement products, the agreed closing of some ­cement depots, the scaling back of marketing and agreements on discounts offered.

The affidavit also contains minutes from a meeting in Paris in April 2003, where reference is made to another gathering in Lisbon in December 2002.

“PPC and Lafarge were also shareholders in a ­company called Ciments de Bourbon [now known as Holcim], a cement company based in the French island of Réunion, and therefore sat on its board,” the commission states in its affidavit.

“Directors would periodically attend meetings in Paris, where there was an opportunity to discuss the South African cement market.”

The commission started its investigation into the cartel in June 2008 and, in June 2009, launched search-and-seizure operations against South Africa’s cement manufacturers.

PPC was granted corporate leniency by the commission in August 2009. It agreed to help with the prosecution of the remaining cartel ­members.

The three remaining alleged cartel members were AfriSam, Lafarge SA and Natal Portland Cement-Cimpor (NPC), who all stood accused of price fixing and market division.

In November 2011, the commission reached a ­settlement with AfriSam, which agreed to pay a fine of R125?million.

At the time, its CEO Stephan Olivier said he was “saddened and embarrassed by what has ­happened”.

In March 2012, the commission reached a settlement with Lafarge, which agreed to pay a fine of R149?million.

This left NPC as the only alleged member of the cartel that had not admitted guilt and settled with the commission.

“PPC, AfriSam and Lafarge agreed to cooperate ­fully with the commission in its investigation, as well as the prosecution of the remaining respondent, NPC,” reads the affidavit. ­“Despite [an] invitation to do so, NPC has not settled with the commission.”

The referral affidavit gives some historical context to the cartel.

“For many years in South Africa, dating back to the 1940s, cement producers were granted exemptions in terms of legislation then in force to conduct the manufacture and distribution of cement under the aegis of a lawful cartel.

“The Competition Board, the predecessor to the Competition Commission, withdrew the exemption in 1995.”

According to the commission, the cement manufacturers were given a grace period until September 1996 to compete fairly in the market, which resulted in a price war between 1996 and 1998.

“As a result of the price war, in 1998 all of the ­cement producers showed poor financial performance, leading them to hold several preliminary meetings to attempt to bring back ‘stability’ in the market,” states the affidavit.

The end result was the meeting at the Selborne Golf Estate and the conclusion of the Port Shepstone agreement.

The affidavit states NPC MD Piet Strauss told the commission he had attended the Port Shepstone meeting and submitted an affidavit to the commission in this regard.

City Press attempted to get comment from NPC, but the company did not respond to questions.

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