Construction collusion entrenched?

There are also questions to be asked about the extent of collusive business practices in the SA economy, which some experts believe are rooted in the closed pre-1994 economy. To date SA Airways, Telkom, Sasol, bread companies and many others have been fined for anti-competitive behaviour. The competition commission is busy with more investigations, including one into the private health-care sector.

Tembinkosi Bonakele of Bonakele Advisory Services is a former deputy competition commissioner and believes the cases uncovered so far are the tip of an iceberg. Pointing to the cases concluded to date, he says that even though price-setting marketing boards have long since been dismantled by law, the networks and behaviour that once prevailed continue.

"It is as if the law never changed," he said.

He also says the conduct of the LOC in the period leading up to the World Cup requires examination. "The pressure the LOC was under to deliver facilities on time is well understood."

Contribution to collusion

The discussions it held with various parties like airlines and construction companies may have contributed to collusive behaviour. In some cases the reported discussions were too detailed to take place among competitors, including sharing information on operational capacity." It would have been wise for the LOC to seek the advice of the competition commission before those meetings," says Bonakele.

While he understands and supports the commission's corporate leniency policy, he feels that public hearings need to be incorporated into the process. "The biggest hurdle to fighting anti-competitive business practices is that many people believe they constitute normal business. They don't understand the extent of the economic damage they cause and are still not sufficiently informed even though we have such a high-profile case."

In its submission to the competition tribunal, the NGO Corruption Watch recommended criminal investigations against the executives involved in the collusion. "Cartel conduct and in particular collusive tendering, we submit, falls within the scope of the Prevention and Combating of Corrupt Activities Act. As is clear from Section 13, any person who accepts any gratification as an inducement to make, award or withdraw any tender for any work may be found guilty of an offence," it said.

In a note released in February, leading law firm Norton Rose Fulbright agreed with Corruption Watch's belief that corruption charges may be pursued in cases of tender collusion. "The Corruption Act creates a specific offence relating to the procuring and withdrawal of tenders."

Lack of co-operation

Some major construction companies say they have received no co-operation from the former executives involved in the construction cartel. They have also not yet found out whether any of their remuneration incentive schemes contribute to the desire to collude at the level of individuals.

Murray & Roberts communications executive Ed Jardim says the company has not yet come across any evidence that this is a contributor. "What does not help in this case is that the former employees who were involved have no desire to co-operate with us. At the time the collusive arrangements were made we had not yet bought these companies that later turned out had engaged in such improper behaviour," he says.

Whether criminal charges will be pursued in relation to construction cartel activity will depend on the outcome of an investigation by the Hawks.

In February this year the Hawks confirmed that an investigation into long-standing tender rigging by executives of some major construction companies was under way but refused to provide further details until it had been completed.

The probe commenced after executives of Stefanutti Stocks Holdings submitted explosive affidavits detailing a decade-long history of collusion, cover pricing, racketeering and division of markets. The individuals implicated came from some of the country's major construction firms.

Unlike the competition commission, the Hawks investigation is not limited to offences committed during or after 2004. The Stefanutti submissions reveal a culture of collusion that has been entrenched for many years.

Projects involved include the Gautrain, the extensive Gauteng Freeway Improvement Project and others over a period of a decade.

It was in the context of such entrenched practices that the LOC invited some of the implicated companies to its July 2006 meeting. Its letter of invitation made it clear that it wanted to get an understanding of what capacity the construction industry had in the light of government's approval of R5bn in expenditure for World Cup stadiums.

If the Hawks probe results in prosecutions we may see a rare occasion where the alleged corruption does not include public-sector officials, as has often been the case in the past.

Should the prosecution succeed, those convicted could face minimum sentences of 15 years for corruption. Convictions premised upon the Prevention and Combating of Corrupt Activities Act could result in a fine or up to 10 years' imprisonment.

Source: Financial Mail via I-Net Bridge