‘Jail the shady bigwigs’

2011-02-05 14:49

Alleged anti-competitive behaviour by a number of South Africa’s large construction companies has raised fresh calls for tougher punishment for businesses that break the law.

The firms are accused of rigging R29 billion in government contracts.

A competition lawyer with Phukubje Pierce Masithela ­Attorneys, Malesela Phukubje, said stricter measures should be implemented to curb anti-competitive behaviour.

“This could include steeper fines – maybe 20% of the company’s turnover.

“Also, a great deterrent would be for the offending company’s directors to personally face steep fines and a criminal sanction, in addition to the punishment that is levied on their companies,” said Phukubje.

Deneys Reitz director Heather Irvine said amending the competition law to start holding company directors criminally responsible for anti-competitive behaviour would most likely reduce collusion.

“Instead of having company shareholders paying the price for directors’ anti-competitive conduct, criminal sanctions would be effective in preventing such behaviour as the directors would now be personally accountable and face jail sentences,” she said.

Cosatu and the National Union of Mineworkers (NUM) called for the incarceration of chief executives and directors of the accused construction firms.

The unions also supported the Competition Commission’s call to have guilty companies blacklisted from doing business with the state.

Union Solidarity preferred to have the companies fined.

“The fines should act as punishment. They vary between 1% and 12% of turnover. This will have a severe effect on the companies ­involved,” said spokesperson Ilze Nieuwoudt.

Solidarity did not want to see the companies involved being banned from tendering for future government contracts.

“This would ultimately put job ­security in jeopardy and we will not stand for that,” said ­Nieuwoudt.

“Employees cannot be held ­accountable for the bad decisions that are made by executive management and directors, who should be made personally liable for their involvement in these ­actions,” she said.

The unions were commenting after the Competition Commission this week identified the ­country’s top five construction firms – Group Five, Murray and Roberts, Wilson Bayly Holmes-Ovcon, Aveng and Basil Read – among those accused of commercial collusion in building projects that included soccer ­stadiums and the Gautrain.

The companies’ chief executives and directors are alleged to have met and formed a structure called The Party which helped them to allocate tenders and monitor each other’s behaviour.

Cosatu president Sidumo Dlamini said that as soon as the Competition Commission reached its verdict in the case, criminal charges should be brought against individual construction bosses as they had abused the taxpayers’ purse.

“This is a crime. People should be arrested for colluding to corrupt the state if the allegations are proved to be true,” said Dlamini.

“They must be charged with fraud and corruption for fleecing the state.”

Dlamini said that the JSE-listed construction companies were usually not involved in serious ­initiatives that helped small black-owned firms to develop in the sector.

“If these companies are implicated in collusion while they also fail to transform the industry, why should the government continue giving them business contracts?” he asked.

The commission said it would offer leniency to companies that came forward with information to fast-track the probe.
This was rejected by the NUM.

“We must not allow the commission to offer leniency to these companies as this sends out a message that the state condones corruption,” said NUM spokesperson Lesiba Seshoka.

He said the commission should claim back all the profits, with interest, which the companies generated from the projects.

“I don’t think this would lead to retrenchments, but if it does happen, so be it. We cannot condone corruption in the name of fighting unemployment,” said Seshoka.

National Consumer Forum chairperson Thami Bolani said anti-competitive conduct in the construction sector negatively ­affected the marginalised.

“If the prices of construction material are high, this increases property prices to a level where previously disadvantaged groups end up being unable to afford to enter the housing market,” said Bolani, adding that he supported the probe.

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