SWC collusion hearing opened

2013-07-17 21:00
Soccer City (File)
Pretoria - A hearing into "shameful" collusion by construction companies that led to bid rigging and price fixing on 2010 World Cup projects opened on Wednesday, tarnishing the legacy of South Africa's historic tournament that was initially praised as a glowing success.

A tribunal is being asked to confirm fines totaling R1.46 billion for 15 companies that conceded to "rigged" projects in the general construction industry in South Africa between 2006 and 2011.

World Cup-related work is included in the findings by the Competition Commission, which uncovered the wrongdoing by the country's biggest building firms in a two-year process in which the companies came forward and acknowledged their roles and the extent of price fixing in exchange for guarantees they wouldn't face criminal prosecution.

There was "a shameful pattern of collusion" by the companies, David Unterhalter, a lawyer representing the commission, told the hearing.

The collusion by the companies led to inflated prices on projects like the new $730 million Cape Town Stadium and a $200 million contract to redevelop Soccer City stadium and the surrounding precinct in Johannesburg, the World Cup's showpiece venue that hosted the opening game and the Spain-Netherlands final.

The revelations chip away at the national pride and unity still felt by South Africa after it was widely praised for pulling off a successful World Cup despite initial doubts.

An association representing some of the nine host cities for the World Cup estimated that at least five of the cities were overcharged by between 10 and 30 percent on stadiums and World Cup-related infrastructure. The South African Local Government Association says Cape Town, Johannesburg, Durban, Port Elizabeth and Polokwane could collectively be owed up to $390 million back because of the price fixing.

Lawyers representing SALGA and the Gauteng provincial government, which controls South Africa's commercial hub, Johannesburg, asked for permission at the start of the two-day tribunal hearing to intervene in the process, wanting more disclosure on the rigged projects. Tribunal chair Norman Manoim dismissed their application, but the cities can pursue damages from the companies in civil court once the hearing has ruled on the fines.

South Africa's central government spent about $3 billion on the first World Cup in Africa, including the building of six new stadiums, the rebuilding of Soccer City and the upgrading of the other three venues.

SALGA, the local government association, argued that the fines handed down by the commission — one of which was only about 3 percent of the company in question's annual turnover — might not be appropriate to the scale of the price fixing, but the cities will now likely have to go to a civil court to get money back in damages.

If the tribunal agrees with the $147 million fines proposed by the commission, that money will go to South Africa's national treasury.

Read more on:    cup  |  soccer

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