Johannesburg – Collusion within the construction industry undermined government’s efforts towards social and economic transformation, Deputy Labour Minister Patekile Holomisa said on Monday.
“In South Africa, 2013 will always be remembered as the time in which anti-competitive behaviour in the industry came under the spotlight and exposed,” Holomisa said in a speech prepared for delivery at the 2014 Master Builder SA congress in Port Elizabeth.
“More than 15 major construction groups were found to have been involved in bid-rigging and collusion, and were fined a total of almost R1.5 billion.”
Holomisa said the congress had a responsibility to provide leadership and develop best practices to avoid a repeat of what he considered to have been the industry’s most embarrassing moment.
The investigation into the bid-rigging and collusion revealed there had been over 300 projects worth almost R30 billion that were rigged by the companies.
“Many… industry leaders that were implicated have since offered their apologies and made commitments to stamp out such behaviour in future,” the deputy minister said.
“It is said that for almost 10 years, various construction firms met secretly to form a cartel-like arrangement in which they knowingly allocated tenders to specific companies.”
The companies established set profit margins of 17.5 percent, and also arranged for a “loser’s fee”, effectively rigging tendering processes so everyone in the cartel “won”, regardless of who won the contracts.
“There were 69 bid rigging incidents in total, many of which were for 2010 Soccer World Cup stadiums and infrastructure upgrades,” Holomisa said.
“This cannot be the right way of doing business as it will no doubt undermine government’s efforts on social and economic transformation.”
From observing the headlines in mainstream media at the time of the investigation, it appeared headlines were chosen “very carefully”.
“There was nothing as strong as branding 1/8this 3/8 behaviour in the building and construction industry as corruption, a term that is used frequently if not loosely, when government is the target,” Holomisa said.
“If it is the private sector that is involved, it is called a cartel-like arrangement, but when it is government that is the main target then it is called corruption.”