Cartel behind colossal construction frauds

2013-02-04 00:00

TWO World Cup stadiums, the Coega development project in the Eastern Cape, the Nelson Mandela Bridge in Johannesburg, the international conference centre in Durban and key projects across the country — these are a few examples of the projects that some of South Africa’s largest construction companies and their executives are accused of rigging over more than a decade.

These activities were exposed in City Press and Rapport yesterday from details revealed in 11 affidavits by top executives from one of the country’s biggest construction companies, Stefanutti Stocks.

The statements form part of a Hawks fraud and racketeering probe and a Competition Commission inquiry into price-fixing of tenders worth some R30 billion and some 300 projects.

The 11, who implicate themselves in fraud, corruption and illegal business practices, want to become state witnesses.

They have also implicated the top executives of the five biggest construction companies — Murray & Roberts, Group Five, Aveng, Basil Read and WBHO.

They claim company executives had formed a cartel to decide during secret meetings which contract would be awarded to which company. The allocation was based on the market shares of the companies.

The company that was awarded the tender by the cartel would also build in a “tender fee” into its price, which would be paid out to the “losers” in order to compensate them for their “dummy tenders”.

After the cartel had awarded a contract, the “winner” would pay out tender fees ranging between R100 000 and R5 million to each of the “losers”.

Stefanutti chief executive Willem Meyburgh stated in his affidavit that membership of the cartel allowed him access to quality projects.

Meyburgh, who has also been the chief executive of Group Five, admitted in his affidavit: “This action was illegal and criminal”.

Stefanutti’s executive director, Schalk Ackerman, a former CEO of Grinaker-LTA civil engineers, admitted that at one stage he had been the “co-ordinator” of the cartel.

He said the illegal allocation of contracts and tenders had been standard practice in the industry for a “very, very long time”.

Ackerman said he was aware of 58 contracts where tender fees had been paid to other companies.

Stefanutti has on its own paid R34 million in fees to other companies.

Companies also decided on a “cover price”, the price at which the designated winner would tender while the losing companies would submit “dummy tenders”.

Meyburgh said that Stefanutti requested a covering price from WBHO for the construction of the Green Point soccer stadium. It also requested a covering price from Grinaker for the construction of Soccer City in Johannesburg.

Stefanutti’s head in the Middle East, Casper Steenkamp, said in his statement that Stefanutti and Group Five fixed the price for the Bofokeng World Cup stadium in Rustenburg.

Ackerman also provided the Hawks with a list of 23 large projects in which Stefanutti connived with other companies over the tender and covering prices.

Grinaker had to dish out millions of rands to other construction companies after the cartel had awarded the construction of the Mandela Bridge to it.

In exchange for that, Grinaker on its part collected millions after it had “stood back” and allowed other companies to build the Coega project.

Grinaker paid millions to WBHO and Basil Read after the construction of the Durban harbour wall had been allocated to Grinaker.

But it was not only public contracts that were fixed. Companies such as Toyota, Sappi, Mondi, Sun City, Unilever, Volkswagen and mining companies have also suffered as a result of the cartel’s price fixing.

Stefanutti on Friday admitted in a statement that it had participated in “illegal practices” that had been the accepted norm for many years in the construction industry.

• investigations@media24.com

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