‘No blank cheque for builders’

The government’s plan to spend about R300 billion on major projects across SA over the next seven years means the Competition Commission will have a lot more work to do, according to Minister of Economic Development Ebrahim Patel. Patel was telling the Cape Town Press Club yesterday about the government’s New Growth Path and how infrastructure development could unlock economic opportunities for millions of South Africans. His comments came after President Jacob Zuma announced last week that the state would spend R300bn on capital projects over the next seven years.

The construction industry, which has been battling since the completion of projects for the 2010 soccer World Cup, will be integral to the new developments. However, the industry has come under heavy scrutiny by the Competition Commission lately. Patel said challenges to the new plans included a lack of requisite skills and corruption and anti-competitive behaviour in the construction sector. In answer to a question on collusion in the construction industry, he said there was an “enormous concentration” in the sector with a large number of cartels operating in SA.

He said one way of eradicating this was the signing of a business and labour integrity pact, with chief executives committed to competitive pricing and not being involved in anti-competitive behaviour or collusion. This on its own was a small contribution. The hard work would come from competition authorities who would now turn their focus to the infrastructure programme.

When the commission launched its investigation into the industry, it listed companies implicated in anti-competitive practices on more than 70 projects valued at R29bn. Shan Ramburuth, the competition commissioner, said earlier that the investigation had uncovered “widespread anti-competitive conduct” through various arrangements, including major companies in the sector. This included holding meetings to allocate tenders and police each other’s behaviour through a structure referred to as “The Party”. Murray & Roberts was the first company to undertake to report all anti-competitive behaviour by individuals and companies so that it could be the “first through the door” to qualify for immunity in terms of the leniency policy.

Patel said the diversity of the supply base needed to be addressed. “If the state can only buy from one company then they become the price setter.” The Industrial Development Corporation (IDC), the state-owned development financier, has been tasked with unlocking bottlenecks by bringing in new foreign and domestic suppliers. The government’s capital projects programme will include the following:

• West Coast: the “enormous potential” of the West Coast will be unlocked through major infrastructure developments such as the expansion of the iron ore rail line between Sishen in the Northern Cape and Saldanha Bay in the Western Cape to bring its capacity to 100 million tons a year.
• Limpopo: integrate rail, road and water infrastructure in the Waterberg and Steelpoort regions to unlock the enormous mineral belt.
• Durban-Free State-Gauteng: a logistics and industrial corridor will connect the major economic centres of Gauteng and Durban/Pinetown and link these to ports in Durban and Richards Bay.
• Eastern Cape: a major new south-eastern development node “will improve the industrial and agricultural development and export capacity” of the region and includes the construction of a new dam on the Umzimvubu River.
• North West: 10 priority roads will be upgraded and improvements will be made to water, rail and electricity infrastructure.