Opinionista Alex Eliseev 22 July 2013

The magic of (de)construction: unveiling the biggest losers

The Competition Tribunal will soon rule on whether it’s prepared to bless a R1.4-billion settlement reached with fifteen major construction companies. It’s not likely to announce any dramatic changes, nor to reject it outright. Having attended the two-day hearing, I am now more convinced than ever that everyone has been made to suffer… except the construction company bosses.

The settlement was reached behind closed doors and announced as a victory for the Competition Commission and the people of South Africa. In essence, the companies came clean and revealed that what we had all suspected to be a giant waste of money – the 2010 World Cup – was also a corrupt affair in the sense that stadiums and roads were built through multi-billion Rand collusion.

A construction cartel met to divide up the work, agreeing that some companies would launch inflated, bogus tenders and will be compensated through “loser fees”. As the cigar smoke filled the lounges, and the whiskey glasses clinked, profit margins were set and golf dates arranged.

There is a line of thinking that says the industry was facing crippling pressure and unrealistic deadlines from Sepp Blatter and the Fifa mafia, and that construction companies did the best they could with a bad situation. We’ll leave that debate for the moment as it deals with motive rather than effect.

The Competition Commission rightfully argues that it would take years and millions of Rands to prosecute the companies individually. This means a mass confessional and a fine that hurts was the best option in return for a full picture of the collusion (“the stables have been cleaned”) as well as atonement. I can’t argue against this logic, safe to say that I agree with Corruption Watch that, regardless of how sound the deal is, a criminal investigation needs to follow and those responsible should be prosecuted.

As far as scandals go, the construction cartel eclipses Nkandlagate, Oilgate, Travelgate and just about every other “gate” the country has ever seen.

Yes, it was in the private sector but, and this is important, the bid rigging that took place effected government and its coffers, which are diligently filled up with taxpayer’s money. So in the end, it was a multi-billion Rand scam – the Jupiter of rackets – involving public money which poured into the pockets of over-paid executives. As theMail & Guardian reports, the only reason the construction cartel crumbled was because somebody failed to pay their dues – not because of some collective strike of conscience.

The tribunal that was held last week began with a failed application by the South African Local Government Association (Salga) and the Gauteng Provincial Government to intervene in the proceedings. They argued many points, but crucially they claimed that the R1.4-billion deal had been struck in secret, much of the paperwork was (and remains) classified and the concept of open and transparent justice has been trampled on. They said the only way to assess whether the punishment meets the crime is to open all the books and let the public decide. With the application failing, the locks remain in place on some of the important details surrounding the controversial agreement.

Once that was out of the way, there were two presentations from Corruption Watch and Roads Agency Sanral (the unlikely activist) before each of the individual agreements were scrutinised. This was really just formality, with a senior representative from each company making a short statement.

The line from each of the companies went something like this: We are really sorry. This won’t happen again. But please remember it did happen a long time ago. Most of the people implicated have left. We’re still considering our legal options against those who haven’t. Having said that, let’s try and move on shall we?

One company, Murray and Roberts, went a little further by describing the scandal as the “bleakest moment in its history” and quoting Nelson Mandela (on his 95th birthday) talking about “goodness and forgiveness”.

But most of the others just went through the motions of their apologies, prompting one of the Competition Commission officers to joke about whether there was collusion in respect of some of the excuses offered by the companies.

The company bosses danced around questions of firing the guilty, laying on thick their responsibility to explore the legalities around this complex concept.

One company didn’t bother to send representatives, with its lawyer claiming the directors couldn’t find the time because business waits for no man. Especially with a fine hanging over your head. It also emerged that some companies refused to disclose or settle everything and are still going to be prosecuted by the commission.

Unlike a criminal court case, there was no emotion in the testimonies of the company bosses. There was, however, corporate jargon, expensive suits and enough obfuscation to make a politician proud.

In short, it didn’t feel sincere.

The tribunal panel did its bid and asked probing questions. As an observer, I wish they had done more grilling, but – as was pointed out repeatedly – this was not a re-trial, but merely a process to check that the fine imposed was appropriate and administratively sound.

And yet, the whole thing felt like an inconvenience to those running the mega firms and, I imagined, they couldn’t wait to hop in their Mercs, drive back to their offices and get on with the day. Back to making money.

I’m not attacking the free market or the system of capitalism. I’m not about to join any communist party or wear a beret. I have no trouble understanding that brave, hardworking people who take risks and run business should be allowed to reap the rewards. But somehow, the whole construction cartel affair just felt ugly and grotesque – like some kind of abomination.

I realise there’s a grey area between corruption and… what do they call it? Ah yes: “horizontal interaction” (or anti-competitive behaviour). But one was still left with a feeling that not one individual responsible for the collusion has been brought to book and that well-paid lawyers had done exactly what they were supposed to, namely make problems go away.

To make matters worse, a day after the tribunal, a trade union released a media statement accusing the same companies of threatening to retrench hundreds of workers in order to pay their fines. The injustice of this boggles the mind.

What we are left with is this: the settlement reached remains opaque; the outcome of any civil claims and the criminal prosecution is uncertain; and the companies are not the biggest losers here (no matter how much the fines sting) because the public and the workers are. Not to mention open justice.

And I, for one, struggle to believe that all collusion in the industry has magically seized, never to return. DM

Eliseev is an EWN reporter.

Gallery

ANALYSIS

Zondo Commission will be long and thorough – will it outlast President Ramaphosa?

By Ferial Haffajee

Microwave popcorn is nothing special. You can have the same effect with normal popcorn kernels and a brown paper bag.

0