Construction: Tribunal approves settlements with 13 companies

The competition tribunal on Monday approved settlement agreements with 13 of the 15 construction-sector companies. A statement issued by the competition tribunal on Monday afternoon said it was still waiting for undisclosed information from Aveng and Giuricich. 


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The tribunal last week heard evidence for two days from the companies while deciding whether to approve a R1.46-billion fine recommended by the Competition Commission

The fine was imposed after a fast-track investigation into the construction sector revealed widespread collusion between 2006 and 2009, with a special focus on the World Cup infrastructure, which included the stadiums and some roads. 

The case saw all the companies fined explaining steps they had taken to insure that such infractions did not occur again. All apologised for what they called "historic" behaviour.

Three companies – Group Five, Construction ID and Power Construction – will now face prosecution after they failed to come to a settlement agreement with the Construction Commission, despite Economic Development minister Ebrahim Patel appealing for them to do so before last week's hearing. 

Some of the companies who did pay their fines still face prosecution for not agreeing to settle some of their projects. These include Basil & Read, WBHO, M&R and Raubex. 

They still have time to make a deal with Competition Commission but obviously the terms will not be as favourable as the fast-track deal which gave them immunity for projects they disclosed first. 

Facilitate the fraud
Meanwhile, last week's two-day sitting of the competition tribunal hearing also revealed the extent of the collusion within the construction sector between 1999 and 2009.

It revealed many of the mechanisms used by the companies to facilitate the fraud.

The hearings held by the tribunal in Pretoria to decide if it would approve the settlement agreements arrived at through negotiations by the Competition Commission and 15 companies, saw companies revealing how payments were hidden on company books.

It was heard that cover pricing was also common, and the bid rigging, such as the dividing up of the World Cup projects, were also widespread and took place in other projects. Meetings were held between large construction companies around, not only the World Cup stadiums, but road projects in about 2006.

Cover pricing saw companies submitting bids where the prices offered by each company was known to competitors, and this generally happened when the other two bidders did not want the job.

Tender, or "losers" fees were paid to companies for the cost of submitting dummy tenders. These were hidden by a number of companies in their books under "plant hire". It appears that auditors did not query these payments.

In one case, Esorfanki said it had paid out half-a-million rand in fees to two companies for submitting dummy tenders on a project. It placed these expenses under plant hire.

In many cases companies said they paid fees but could not find the evidence of the payments because "it's hard to know how they were recorded in financial statements without knowing the full amount".

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