Construction cartel: Firms agree to pay R1.5bn to fund

Cape Town – Seven listed construction companies have agreed on Thursday to collectively contribute R1.5bn to a fund earmarked for socio-economic development over a 12-year period. 

This is in addition to a R1.4bn fine imposed on WBHO, Aveng, Murray & Roberts, Group Five, Basil Read, Raubex and Stefanutti Stocks by the competition authorities. The companies have a combined annual construction revenue of approximately R45bn.

READ:Patel hails R1.5bn price fix fine as boost for SMEs

Minister in the Presidency for Performance Monitoring and Evaluation Jeff Radebe said at a post-cabinet media conference on Thursday that the companies have further agreed to either introduce an equity model whereby at least 40% of the shares will be sold to black South Africans, or a partner model whereby each company will work with up to three black-owned construction partner companies to help them generate turnover equal to 25% of its own turnover. 

“This commitment,” Radebe said, “has been valued in excess of R9bn annual turnover by the end of the 12-year period.” 

In addition, each company CEO will sign an “integrity commitment” to implement steps to ensure there are no collusive or corrupt practices in the company, in its dealings with government, competitors or any other private clients. 

The agreement provides a framework for settlement of claims by the industry regulator, the Construction Industry Development Board (CIDB) as well as civil claims by public entities against companies arising from the investigations by the competition commission for a period up to 2010, which were brought before the Competition Tribunal in 2013.

READ: Kicking the collusion habit 

In June 2013, altogether 15 construction companies agreed to pay fines totaling R1.4bn for collusive tendering. Settlements in the collusion cases were reached in terms of the “construction fast-track settlement process”, which had been started early in February 2011. 

In terms of this process, companies were encouraged to make full and truthful disclosure of bid rigging, in return for penalties lower than what the Competition Commission would have sought if the cases were prosecuted.

Gugile Nkwinti, Minister of Rural Development and Land Reform, and chairperson of the Management Committee of the Presidential Infrastructure Coordinating Commission (PICC), said the agreement that was reached heralds in a new relationship between government and the construction industry. 

“The success of government’s infrastructure programme requires strong internal capacity in the sector and competitive prices. Through the transformation commitments in the agreement, we can rebuild the relationship with the companies concerned and work in partnership in future,” Nkwinti said.

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