A consortium formed between two South African companies, Group Five, through its entity Group Five Nuclear Construction Services, and Lesedi Nuclear Services has secured a strategic nuclear construction contract for the design, manufacture and replacement of the 1 800 m³ Refuelling Water Storage Tanks (PTR Tanks) at Eskom’s Koeberg Nuclear Power Station.
South Africa’s largest investor, the Public Investment Corporation (PIC), says construction firms recently fined R1.46bn for colluding to fix tenders for soccer stadiums, roads and other major projects, should claw back bonuses from the crooked executives who fixed the projects.
Government is satisfied that it has broken the back of a longstanding cartel in the construction industry, it is the first time the competition commission has targeted an entire sector.
It is the first time the competition commission has targeted an entire sector, and the settlement amount — R1,46bn — is the largest it has ever administered.
But the industry’s main whistle — blower, Group Five, has failed to agree on a settlement with the commission, despite receiving corporate leniency for 25 projects, more than double any other firm.
Group Five believed itself to have immunity from penalties because of its early disclosures, made in 2009, two years before the commission announced its fast - track settlement process for the construction sector. The firm did not make provision for a fine, unlike almost all other large companies.
But Group Five has been implicated in collusion cases that go beyond the information it has volunteered to the commission. For that, says deputy competition commissioner Trudi Makhaya, it has to face penalties like any other firm would.
Group Five CEO Mike Upton says it came to the group’s attention late last Friday (June 21) that the commission proposed an administrative penalty higher than previously anticipated.
The dispute concerns four projects and is due to “factual and evidentiary discrepancies”, says Upton.
The commission has reached a settlement with 15 firms. Economic development minister Ebrahim Patel says the three firms that haven’t settled — Group Five, Construction ID and Power Construction — can still do so.
Patel says R28bn of the R47bn worth of projects implicated in collusion were public-sector projects. But not all projects were covered by the investigation. The commission’s investigation was limited to 140 (of 300) implicated projects which took place after September 2006, because of the three-year prescription provision in the Competition Act.
Competition commissioner Shan Ramburuth says it is difficult to calculate the overcharge on affected projects. International studies show overcharges are usually between 10% and 30%. But Ramburuth says calculating it in this case is complicated.
Government is still considering whether to take any civil action against firms that have admitted to the collusion. Patel says it will also engage with the Construction Industry Development Board. It wants the board to deregister companies that are found guilty of anticompetitive behaviour in the future.
Group Five remains committed to resolving matters regarding the Competition Committee’s investigation into the construction industry.
Group Five (GRF) said on Monday it remained committed to resolving matters regarding the Competition Committee’s investigation into the construction industry.
The Competition Commission announced on Monday that it had reached settlement with 15 construction firms for collusive tendering and that the firms had agreed to pay penalties totalling R1.46 billion.
The settlements were reached in terms of the Construction Fast Track Settlement Process launched in February 2011. The process incentivised firms to make full and truthful disclosure of bid rigging in return for penalties lower than what the Commission would seek if it prosecuted these cases.
Group Five was one of three companies that had thus far been able to reach agreement with the commission. But the company said it was committed to resolving outstanding matters with the commission.
The group pointed out that it had co-operated pro-actively since 2009 with the Commission‚ at a very early stage of the Commission’s investigations‚ and that it was the first company to approach the Commission in terms of matters of collusion in the construction sector.
“As previously communicated‚ the group secured conditional leniency from the Commission in terms of the Commission’s Corporate Leniency Policy in return for full disclosure of all matters that the group was able to uncover during its internal investigation process‚” the group stated.
The Commission had launched its \"Fast-Track\" process in 2011‚ mainly as a result of the group’s earlier co-operation. This triggered wider industry participation.
The group had consistently advised stakeholders that although the group received conditional leniency‚ a zero fine could not be guaranteed until the full industry investigation was concluded.
Late on Friday afternoon‚ 21 June 2013‚ it had come to the group’s attention that the Commission was seeking a proposed administrative penalty which was higher than previously anticipated‚ Group Five explained.
“As outlined in the Commission’s statement today‚ Group Five is the company with the highest number of projects (25) that received corporate leniency‚ which demonstrates the group’s comprehensive and timeous disclosure.
“The group has as yet not reached settlement with the Commission on four projects due to factual and evidentiary discrepancies between the Commission and Group Five on these projects. The group is not obliged to accede to final settlement until its matters have been fully investigated by the Commission.
“It has also been confirmed that Group Five has time to settle on the same penalty terms as those companies who have settled in the Fast Track process until the date on which the matter has been fully investigated and referred to the Tribunal.
The Minister of Economic Development in the media briefing this morning called upon companies who have not yet settled to reach an agreement with the Commission. As has been Group Five’s ongoing intention‚ the company remains committed to resolve the outstanding matters and in this regard‚ the group has been in ongoing discussions with the Commission‚ as recently as this morning‚” Group Five stated.
It added: “Based on the company’s current determination‚ and with reference to the Commission’s statement appendix 2 issued today‚ the group can confirm that even if a penalty is imposed on these four projects it does not expect the total final administrative penalty to materially adversely affect the group’s liquidity. The company remains committed to reaching a resolution with the Commission and will issue a further SENS announcement to stakeholders as soon as an update is available or when a final agreement has been reached.
“The group will continue to co-operate with the Commission.”