Construction firms to pay R9bn as a way of cleansing their tender rigging sins

21 Oct 2016


The South African government has concluded an extraordinary settlement agreement, yielding R9bn, with the country’s major construction firms that were found guilty of rigging public tenders. The agreement will be seen by some as an attempt to pacify a movement that wants to haul the implicated firms to court in class action. there were also calls to lay criminal charges against concerned executives.

A cabinet statement released this week says the agreement with seven JSE listed construction companies saw them commit to a programme of initiatives which will accelerate transformation in the industry. Various layers of commitments will see the companies’ fork out about R9 billion into initiatives like social investment and black economic empowerment (BEE) shares.

Here follows the full cabinet statement:

The interventions by government to combat corruption, malpractices and hold industries accountable has led to an agreement with seven listed construction companies on a programme of initiatives, which will accelerate transformation in the industry. The agreement has a number of elements, including: Financial contribution for development projects; Transformational commitments in the sector; a Framework to settle claims by the public sector; and Integrity Commitments by Chief Executive Officers.

Key foundations of the agreement include a R1,4 billion fine imposed by the competition authorities which will be paid by the companies into the National Revenue Fund. A further R1,5 billion will be contributed to a fund to support social investment initiatives targeting previously disadvantaged communities.

A transformation commitment will be introduced by each of the seven companies, which may take the form of either an ‘equity model’, where at least 40% of the shares in the company will be sold to black South Africans; or the ‘partner model’ where a company will work with up to three black-owned construction partner companies’ to help them generate turnover equal to 25% of its own turnover. This commitment has been valued in excess of R9 billion annual turnover by the end of the agreement period.

An integrity commitment will be signed by each CEO that commits to wide-ranging steps to ensure no collusive or corrupt practices in the company, in its dealings with competitors, government or other private sector clients.

The settlement agreement provides for certain formal processes to be finalised within the next few weeks and these are being processed and attended to and an announcement will be made on conclusion of these processes.

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