Investigations against anticompetitive behavior in the construction industry got a mentioning in the state of the nation address underlining the seriousness of the situation.
In his address President Jacob Zuma said “The state has collected a substantial dossier of information on improper conduct by large construction companies. This is now the subject of formal processes of the competition commission and other law enforcement authorities”.
The president featured this in the middle of a section that emphasized the role of government’s infrastructure development program. This program is deemed as the centre piece in efforts of reenergizing the South African economy. But then the massive initiative may be vulnerable to alleged collusive behavior in the mainstream construction industry. Collusion has the effect of inflating prices of products and services.
Zuma said “Last year, I addressed the nation on government’s infrastructure plans. By the end of March this year, starting from 2009, government will have spent about R860 billion on infrastructure. Various projects are being implemented around the country. I will discuss just a few”.
Zuma added that “The infrastructure development programme has been a valuable source of learning for government. In the year ahead, we will fast-track many of the projects that the PICC has announced. The lessons are that we must coordinate, integrate and focus on implementation”.
His reference to the investigation shows that government is worried about the impact of collusion on its infrastructure development plan. This concern may be represented in news that the Hawks, a special police investigative unit, has joined the probe of the construction industry. This comes after the competition commission has run investigations for almost five years around the industry.
Persistent news of collusion in the construction sector has irked many other stakeholders. The Black Business Council in the Built Environment (BBCBE) expressed grave concern.
“As a representative body of black contractors and professionals in the built environment in the country, the BBCBE has kept a close watch on the investigation by the Competition Commission (Commission) and has on numerous platforms expressed its concern about the length of time its taking the Commission to finalize this matter”.
“The construction industry plays an important role in the economy as it creates and sustains millions of jobs in its value chain and contributes significantly towards the GDP. The industry is expected to underpin the imminent rollout of the government infrastructure investment programme estimated at R4 trillion over the next 15 years. However, this role will be negatively impacted if the investigation of alleged collusion by industry players is not concluded expeditiously because the entire country will view the construction industry, especially contractors, with extreme suspicion”.
“Should these allegations proven to be true it will mean that these companies and the actions of the implicated individuals would have undermined the industry’s transformation and empowerment initiatives”
The Construction Sector Charter Council (CSCC) a body tasked with policing transformation in the industry has also added its voice of concern. CSCC CEO Thabo Masombuka said “Although this is still the subject of extensive and on-going investigation by law enforcement and competition authorities, the CSCC find and view these allegations in a very serious light”.
“This is of deep concern as the projects referred to were meant to be used as a platform to fast track access and empowerment of small emerging firms into the main construction projects during the world cup projects and beyond”.
“Although only a few major construction firms have been mentioned in the report, the CSCC, as the representative body of all construction industry organizations, is particularly perturbed concerned that an impression was being created that the entire industry has potentially engaged in unlawful conduct and price fixing activities. Something that is certainly not the case. The CSCC has urged all its affected affiliates to co-operate fully with the investigation and commit to root out all incidents of alleged uncompetitive behavior within the construction sector”.