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Price fixing and collusion drive project costs up

Posted On Thursday, 16 February 2012 02:00 Published by eProp Commercial Property News
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The issue of corruption relating to price fixing and collusion goes far deeper than just one or two infrastructure contracts, says Economic Development Minister Ebrahim Patel

Ebrahim PatelSpeaking at the Cape Town Press Club on Wednesday Patel said that a forensic investigation by the Competition Commission showed collusion ran deep within the construction sector and has driven up project costs.

"There has been an enormous concentration (of companies) and there are a large number of cartels in the SA economy," Patel said when answering questions after addressing the Cape Town Press Club on Wednesday.

He said the private sector would be an essential element of the infrastructure build programme that was announced by President Jacob Zuma in his state of the nation address last week.

According to Zuma's speech the state would embark on a R300 billion infrastructure build programme that would include constructing railway lines, upgrading ports and electricity supply.

The idea was to create a 10 to 20 year project pipeline, said Patel.

"It is not that we have not been spending money on infrastructure, but we have found that if it was not properly managed, the taxpayer ended up footing a massive bill," he said.

However, Patel steered away from directly answering a question by Independent Democrats Shadow Public Enterprises Minister Lance Greyling who asked if there would be any move to prohibit any investment fund belonging to any political party from benefiting from the awarding of the contracts.

Greyling was specifically referring to the delay at Eskom's Medupi power station caused by the boilers that were to be provided by Hitachi Power Africa in which the African National Congress' investment company Chancellor House has a 25% stake.

"Because the boilers have not arrived on time, it means that the whole country would be faced with rolling blackouts for the next year," Greyling said.

As part of his answer Patel said that government was committed to ensuring that its procurement processes gave value for money and that proper considerations would be given to winning bidders to hold them accountable for delivering to the contract specifications.

He said that corruption ran far further than just one or two contracts.

Patel said that forensic investigations done by the Competition Commission showed there were high levels of collusion within the construction sector that had driven up the cost of contracts.

"We are exploring with the business community and labour an integrity pact in which CEOs commit to certain kinds of behavior including a commitment to non-collusion," Patel said.

He said that the Competition Commission investigation had uncovered where the networks of the information sharing and price fixing were.

"Companies can disclose under the corporate leniency programme and disclose market intelligence about how the market collusion takes place and cast sunlight into those dark corners," Patel said.

 

Last modified on Monday, 28 October 2013 16:40

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