S. Africa Fines Building Companies for World Cup Collusion

South Africa’s antitrust body fined 15 construction companies a combined 1.46 billion rand ($140 million) after an investigation into collusion over contracts such as those to build stadiums for the 2010 Soccer World Cup.

The Competition Commission investigated 140 projects in both the private and public sectors over almost four years and has reached a settlement with 15 of 18 companies, members of the body said in Pretoria today. The building or expansion of six World Cup stadiums including Cape Town’s 4.5 billion rand, 68,000 capacity Green Point venue were part of the probe.

“It is the biggest collective fine” given to companies in South Africa, Shan Ramburuth, the head of the Commission, told reporters. “The industry has the opportunity to go on a more competitive path for the good of all of us and the industry itself.”

Murray & Roberts Holdings Ltd. was fined 309 million rand while Aveng Ltd. will pay 307 million rand, Ramburuth said. Wilson Bayly Holmes-Ovcom Ltd. was fined 311 million rand and Stefanutti Stocks Holdings Ltd. 307 million rand.

South Africa’s ruling African National Congress party said the antitrust body should now widen its investigation. The Competition Commission should initiate a process “to include other industries so as to fully assess the extent of the problem of bid-rigging and collusion,” party spokesman Jackson Mthembu said in a statement.

Adequate Provision

Aveng “has already made adequate provision for this amount,” the company said in a statement. “The Aveng Board welcomes the resolution of this matter.” Murray & Roberts said the settlement amount, payable in three payments over 24 months, “is not materially higher from what was provided for by the group.”

Aveng rose 5.2 percent to 29.29 rand at the close in Johannesburg. Murray & Roberts advanced 0.9 percent.

“The fine is a bit lower than the market was expecting,” Anashrin Pillay, an analyst at Stanlib Asset Management, said in a phone interview from Johannesburg. There were “concerns that the companies wouldn’t be able to pay without putting their balance sheet under strain.”

Irregular Behavior

The seven-member FTSE/JSE Africa Construction and Building Material Index rose 0.6 percent to 43.01. Aveng and Murray & Roberts account for about 45 percent of the index, according to data compiled by Bloomberg.

The Competition Commission’s verdict was an “overhang on the sector for a while,” according to Pillay. “It’s a relief” that the process has been concluded, he said.

Group Five Ltd. was among three companies yet to agree to a settlement and negotiations are continuing, according to the antitrust regulator. The company’s shares fell 3.2 percent, paring gains for the year to 27 percent.

“We haven’t been able to reach an agreement with Group Five on specific projects where Group Five has been implicated by others,” Trudi Makhaya, a deputy commissioner of the antitrust body, said in an interview. Group Five doesn’t expect a fine to affect liquidity and will continue to work with the commission, the company said in a statement.

Antitrust regulators identified 300 cases of illegal or irregular behavior by companies that won contracts worth a combined 47 billion rand, Economic Development Minister Ebrahim Patel said on May 7. The price fixing affected both public and private sector contracts, he told reporters today.

(Updates with closing share price in 7th paragraph.)
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