Business

'Collusion widespread in the construction industry'

Staff Reporter

Collusion is the cultural norm of large businesses operating in the construction industry, the head of the Competition Commission said on Friday.

Collusion was the cultural norm of large businesses operating in the construction industry, head of the country’s Competition Commission, Shan Ramburuth, said on Friday.

He was addressing Business Unity South Africa’s (Busa) anti-corruption forum in Sandton, Johannesburg.

Earlier this year, the commission announced that Aveng, Murray & Roberts, Grinaker, Stefanutti Stocks, Group Five, WBHO and others would be investigated for price-fixing and submitting uncompetitive bids.

“Bid-rigging is widespread in the construction industry,” Ramburuth told the forum. “Firms collude with each other and they decide in advance who will win a tender by the way in which they bid.

“For all those involved in the collusion to benefit, this requires a series of projects so everyone will get something.”

Ramburuth quipped that he was recently asked if the term “business ethics” was an oxymoron.

South African business had a reputation for resisting regulation, he said.

“Regulation is seen as costly,” he said.

If collusion prevailed and there was no rivalry, firms then became complacent about producing better and cheaper products.

“We’re better off if firms compete.”

Currently, he said, competition legislation penalised companies and not individuals and it had been the habit of South African business to pass on competition issues to their lawyers.

“All of this is about to change,” Ramburuth said.

“The Competition Amendment Bill has been introduced and it will in the future hold executives personally responsible for their parts in cartels—in fact they could face jail sentences of up to 10 years.”

Ramburuth said in 2006 the South African consumer became aware of cartels when the bread cartel issue emerged.

“Bread is a basic food that everyone can relate to and since then we have seen cartels in the milk and pharmaceutical industries,” he said.

However, the South African public had now “caught on to the consequences of collusion”.

“Collusion is ultimately theft and after the bread cartel issue there was moral outrage expressed.”

South African consumers now demanded more accountability and transparency from companies, Ramburuth said.

“It’s more difficult now to prey on the ignorance of consumers.

“Firms’ reputations now depend on their behaviour in the marketplace—no amount of public relations can replace that.”—Sapa

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