The road cartel that took Sanral for a ride

2013-07-21 14:00

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Tender-rigging took place in 2006 and 2007, according to testimony from construction bosses this week

As more details of the construction cartel emerged during settlement hearings at the competition tribunal this week, a spotlight was shone on the cartel within the cartel.

Details emerged of a road-construction cartel during the competition tribunal’s hearings into consent-order agreements, which are the documents containing the settlement between the individual construction firms and the competition commission.

According to these consent-order agreements, a meeting was held in 2006 where construction companies that work in the road sector met to agree to divide up contracts between them.

This mirrors the meetings, also in 2006, where construction companies met to divide work on World Cup stadiums.

One of the affected parties, the SA National Roads Agency Limited (Sanral), has already indicated that it is looking into civil damages claims, which suggests that settlement with the commission is not the end of the road for the road cartel.

The affected roads include national roads like the N1, N2, N5, N12 and N17, as well as major provincial routes like the R61, R51 and R40, among others.

These were not the only road projects rigged by the construction cartel, but are the ones that were rigged through the road contractors meeting.

Other road projects that the construction cartel colluded on include the Gauteng Freeway Improvement Project and the Bayhead Khangela Bridge Project.

This raises the possibility that the costs that Sanral is trying to recoup via e-tolls may have been inflated by collusion.

At the road contractors meeting were representatives of major construction firms WBHO, Basil Read, Grinaker-LTA, a subsidiary of Aveng, and Concor, which was acquired by Murray & Roberts later in 2006.

Also represented at the meeting were smaller construction players Raubex, Haw & Inglis and Rumdel.

According to the consent-order agreements, “these firms who were attendees at the 2006 road contractors meeting agreed to allocate tenders for the construction of roads”.

“Firms who were not interested in the project or in winning the tender or were not allocated a project would submit uncompetitive bids to ensure that those that were interested in winning particular bids, won them.”

The rigging of these road tenders took place in 2006 and 2007, according to testimony from construction bosses before the tribunal this week.

In total the road tenders represent thousands of affected kilometres of South African roads.

Basil Read’s deputy chief executive officer, Donny Gouveia, testified before the tribunal this week that at the meeting numerous road projects were discussed and divided up.

He also stated that an agreement was reached that future road projects would be divided up by follow-up phone calls.

Gouveia said that two Basil Read employees attended the meeting and one had since left the company.

When tribunal chairperson Norman Manoim asked for the employee’s name that was still at Basil Read, the commission intervened and said no other executives had been named, so it was unfair to ask this of Basil Read.

Adrian Robinson from Haw & Inglis said that the controversial collusion had only taken place over a short period of time.

“We should never have done this,” said Robinson.

Robinson said all the senior employees who were involved in the meeting had left the company since 2006.

When Manoim asked if by supplying cover tenders to other construction firms, Haw & Inglis had prevented Sanral from offering the work to other smaller players, Robinson admitted this was the case.

Asked if Haw & Inglis would be taking action against former employees implicated in collusive meetings, Robinson said the company would look into that.

Raubex chief executive officer Rudolf Fourie said the company regretted its acts of collusion.

“What we did was wrong,” said Fourie. “This will not occur again.”

Fourie said that the road collusion ceased in mid-2007.

Asked why Raubex had colluded, Fourie said that it was the massive roll-out ahead of the 2010 soccer World Cup that had led to the collusion.

“The World Cup brought this kind of action into play,” said Fourie. “It was not only stadiums that were built in this country; there were substantial road networks upgraded.”

The companies consent-order agreements, when confirmed by the tribunal, will open the door for the clients of these roads to launch civil damages claims.

Two clients are Sanral and the Eastern Cape provincial government.

Sanral had representatives present at the tribunal hearings this week and had a statement placed on the record at the tribunal.

It stated: “Sanral is disturbed and outraged by the collusive conduct of the construction companies in question.

“They have breached our trust, and have acted to our detriment and against the public interest.”

Sanral said it reserved its rights to institute proceedings for civil damages.

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