Stadiums fraud is still to be resolved

peter mokaba stadium Stadiums fraud is still to be resolved

Most of the alleged tender-fixing around World Cup stadiums has not been dealt with in the settlement announced this week – and can come back to haunt the construction cartel in a fully fledged competition hearing.

The impasse around the stadiums appears to be over a number of meetings that occurred in 2006, where senior employees of South Africa’s largest construction companies are alleged to have divided up the stadiums work while building in guaranteed margins for themselves.

Two firms, Aveng and Stefanutti Stocks, have admitted to meetings where the stadiums tenders were divided. The rest of the firms were allegedly there, but have not settled with the Competition Commission yet over their involvement in these meetings. These firms are WBHO, Group Five, Murray & Roberts and Basil Read.

In Aveng’s consent order agreement, which has yet to be approved by the Competition Tribunal, details about the meetings to split World Cup tenders are provided.

“During or about 2006, Grinaker LTA, WBHO, Murray & Roberts, Group Five, Concor, Basil Read and Stefanutti Stocks met twice and reached an agreement in respect of the construction of the 2010 World Cup stadia,” says the consent order agreement.

“The firms agreed to allocate the Mbombela, Peter Mokaba, Moses Mabhida, Soccer City, Nelson Mandela Bay and Greenpoint stadia tenders among themselves and to exchange cover prices.

“They further agreed that they should all aim to obtain a 17.5% profit margin in all the 2010 Fifa World Cup stadia projects.”

In total, these rigged stadiums cost R15.4 billion, which makes the margin the companies were trying to achieve through the rigging just short of R2.7 billion.

According to a source familiar with the commission’s investigations, “these meetings made the World Cup stadium tenders a sham”.

“I don’t know why these firms have not settled the World Cup stadium tenders,” said the source. “They are going to force the commission to do a full investigation, where all the dirt will come out in a tribunal hearing.”

The source added: “The commission is obligated now to fully investigate and prosecute the rigging of the World Cup stadiums.”

This could, in theory, lead to new, higher fines.

WBHO was involved in joint ventures to build the R4.4 billion Green Point Stadium in Cape Town, the R1.24 billion Peter Mokaba Stadium in Polokwane and the R3.4 billion Moses Mabhida Stadium in Durban. Its partners were Murray & Roberts for Green Point, Paul Building Joint Venture for Peter Mokaba, and Group Five and Pandev in Durban.

Basil Read partnered with Bouygues to build the R1.05 billion Mbombela Stadium in Nelspruit, Mpumalanga.

Grinaker LTA, a subsidiary of Aveng, partnered with Dutch firm BAM to complete the R3.3 billion upgrade on the FNB Stadium and partnered with the Interbeton Ibhayi Joint Venture to build the R2.05 billion Nelson Mandela Bay Stadium in Port Elizabeth, Eastern Cape.

In its consent order agreement, Aveng admits its subsidiary Grinaker LTA agreed with Stefanutti Stocks to provide a cover price in respect of Soccer City (FNB Stadium) so that Grinaker could win the tender. In the Stefanutti consent order agreement, the firm confirms the cover price.

Group Five, the only major cartel member to pay no fines in this week’s settlement after receiving leniency for 25 violations, still has four projects for which it will pay fines.

“Late on Friday afternoon, June 21 2013, it came to the group’s attention that the commission is seeking a proposed administrative penalty which is higher than previously anticipated,” said Group Five this week. “The group has, as yet, not reached settlement with the commission on these four projects due to factual and evidentiary discrepancies between the commission and Group Five on these projects.”

WBHO also has four projects for which it has not yet settled, despite settling 11 others for R311.3 million.

In a Sens announcement released on Monday, WBHO said there are alleged prohibited practices that the company believes are not actually contraventions of the Competition Act.

Basil Read also has four unsettled projects after settling seven for R94.9 million.

A Basil Read statement said: “The administrative penalty relates to a number of isolated, past contraventions of the Competition Act related to projects carried out by the Roads and Civil Engineering divisions of Basil Read.

“None of these projects relate to the 2010 Fifa World Cup.”

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