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BBCBE wants seven listed construction companies blacklisted

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The Black Business Council for the Built Environment (BCBE) is demanding that the seven JSE-listed companies that are signatories to the Voluntary Rebuilding Programme (VRP) settlement agreement* – reached with government following their involvement in collusion and bid-rigging in the building of stadia for the 2010 Soccer World Cup – be blacklisted by National Treasury.

It is also demanding that the Construction Industry Development Board (CIDB) deregister the companies.

A blacklisting will prevent any of these companies from doing business with the state, and deregistration will prevent them from trading as contractors.

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The BBCBE’s demand results from its extreme unhappiness about how the VRP settlement agreement has been implemented.

BBCBE president Danny Masimene said the BBCBE wants to re-engage government about this agreement because black-owned construction companies have not benefitted from it.

Masimene said collusion is another word for corruption and a criminal offence but the VRP settlement agreement cushioned these companies from any further litigation or punitive measures, apart from a civil damages claim instituted by the City of Cape Town.

‘Cushion’ wasn’t the intention

The VRP settled any civil claims and potential claims for damages against the seven companies from government and state-owned entities arising from admissions of collusion and bid-rigging in their settlement agreements with the Competition Commission.

“Corruption knows no colour,” Masimene has now said.

“It cannot be correct that when an emerging contractor finds themselves on the wrong side of the law that they are quickly deregistered and blacklisted but when those with deep pockets do that, we find a political solution to try and protect them.”

Masimene said the BBCBE was the architect of the VRP and that an agreement was initially concluded in December 2013 between it and the SA Forum of Civil Engineering Contractors (Safcec).

He said it was presented to government in 2014 and a diluted version of that agreement was signed by the government and the seven companies in October 2016.

Masimene said the BBCBE is also demanding that the representatives of the colluding companies must be removed as trustees of the Tirisano Fund, which was established as part of the agreement.

Protest march planned

Masimene said the BBCBE has withdrawn its representative on the Tirisano Fund and is organising a protest march to the Union Buildings at the end of September to express its unhappiness about the way the settlement agreement has been handled by government.

He said the BBCBE will also be writing to state entities to urge them to write to National Treasury to blacklist all those companies found guilty of collusion and also to the CIDB to follow their due process in terms of deregistering all 15 companies that reached settlement agreements with the Competition Commission.

In terms of the Competition Commission’s fast-track settlement process, 15 construction companies, including the seven listed companies, concluded consent agreements in 2013 in terms of which they agreed to pay penalties totalling R1.46 billion for collusion and bid-rigging.

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Masimene said black construction companies have not benefitted from the VRP settlement agreement apart from those already in the “system” of the seven companies.

Site invasions a response

He said this situation has contributed to construction site invasions, although criminal elements had also got involved in this practice.

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“The main reason it started is because opportunities are not coming our way and we go there forcefully to take those opportunities that belong to us.

“The companies make sure that 30% goes to their subsidiaries. It doesn’t go to independent or community-based organisations.

“They also choose to subcontract difficult trades where there is less meat and you are not going to make profit, which leaves us much poorer than before,” he said.

Masimene said one of the BBCBE’s main gripes is that the trustees of the Tirisano Fund are representatives from the companies who were found guilty of collusion, which makes them “a referee and player”.

Conflict

He said the BBCBE believes the trustees should not be conflicted because it is natural that nobody “wants to assist in building the capacity of a competitor”.

“In a nutshell, we wanted to use the VRP to bridge the capacity gap between emerging contractors and established contractors.

“When they decided they [the Tirisano Fund] are going to build creches, bridges, libraries, we felt that is not really addressing our needs.

“Some of our members have tried to apply for funding from the Tirisano Fund but they have been disqualified,” he said.

Tirisano Fund chair Mahomed Vawda said he was unable to comment on the BBCBE’s claims and allegations and is not involved in the policy of the agreement.

“It was negotiated and now the undertones are like political undertones and we have got nothing to do with that,” said Vawda.

“We just run the trust based on the mandate that we have got. It’s the framework we have, the trust deed, and we have to spend the money on the basis of that trust deed.”

He said the agreement that was signed between the parties also determines the representatives on the Tirisano Fund.

“It’s not like the people who sit on the fund get work for themselves. The money is used for social infrastructure projects, for giving student loans and grants and giving funding to small black contractors and so on.”

Reacting to the BBCBE claims that funds are being used for community projects rather than assisting emerging black contractors, Vawda said the fund dispenses funds in terms of the framework of the trust deed.

‘Not supposed to be some secret process’

Master Builders South Africa (MBSA) executive director Roy Mnisi said in August last year “the VRP is dead”.

Mnisi said he was cautioned after making that statement because his view was incorrect and the Tirisano Fund would share what it was doing with him, but: “That is the last time I have heard about the VRP.”

Mnisi stressed that “the VRP is not supposed to be some secret process that is sitting somewhere run by a few people”.

“The projects for the industry must be known by every roleplayer in the industry because it was for the advancement of the construction sector,” he said.

“It was not for specific people and it was not supposed to be some secret deal of some sort.”

Mnisi said MBSA shares the same concerns as the BBCBE, adding that it has emerging contractors as members and believes those emerging contractors should be benefitting from the VRP.

Wider benefits

He said the VRP must provide industry-wide benefits to people irrespective of the construction organisation they belong to and that the organisations should be able to understand what is happening because they all share membership that is supposed to benefit from that programme.

“But it does not look like that is the situation on the ground and there are those who are worried about it,” he said.

A black construction industry executive who did not want to be named questioned what assistance has been given to black contractors who have been badly impacted by the Covid-19 pandemic, and why black contractors were not assisted before funds were earmarked for community social projects.

He said the Department of Higher Education is mismanaging everything – from Sector Education and Training Authorities (Setas) to the technical and vocational education and training (TVET) colleges.

The funds from the Tirisano Fund are “not meant to augment the budgets of departments which fail to provide” but should instead go “towards the upliftment and transformation of the industry to provide support to black contractors and social projects”.

*Footnote:

The VRP resulted in the seven companies agreeing to collectively contribute R1.25 billion over 12 years to the Tirisano Fund for socio-economic development and to undertake further transformation initiatives.

These initiatives include mentoring up to three emerging black-owned contractors to enable them to sustain a cumulative annual revenue equal to at least 25% of the mentor companies’ annual revenue from civil engineering and building works delivered in South Africa by 2024, or disposing of at least 40% of their South African civil engineering and general building construction businesses to an enterprise that is more than 51% black-owned, managed and controlled.

The companies that signed the VRP settlement agreement are Aveng, Basil Read, Group Five, Murray & Roberts, Raubex, Stefanutti Stocks and WBHO.

The VRP excluded a multi-million rand civil damages claim instituted by the City of Cape Town against Stefanutti Stocks, WBHO and Aveng for collusion and bid-rigging on the Green Point Stadium, now called the Cape Town Stadium.

A settlement was reached in May this year in terms of which the three companies each agreed to pay the City of Cape Town R31.3 million over the next three years.

Read: Stefanutti, WBHO and Aveng settle multi-million-rand civil damages claim

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