The Many Faces of Corruption in South Africa

17 Aug 2016
17 Aug 2016

On 10 February 2009, South Africa’s Competition Commission commenced investigations into allegations of collusion between the construction companies building the 2010 FIFA Soccer World Cup stadiums in South Africa. The Competition Commission is an investigative and enforcement body created by the Competition Act 1998 as one of the three independent regulatory agencies:  the Competition Tribunal (the Tribunal) and the Competition Appeal Court.  The purpose of the Competition Commission is to investigate, restrictive business practices that undermine competition in the South African economy. The investigations into the 2010 FIFA Soccer World Cup construction collusion revealed that collusive tendering was pervasive within the sector and applied to many projects. The investigation exposed 300 instances of collusion.

On the 15th of July 2013, Mr Peter Bruce, the Editor-in-Chief of South African newspaper Business Day, published a piece titled What were construction firms thinking? In it he argued that collusive tendering in the construction industry had been inevitable because the construction companies were ‘faced with an almost impossible challenge.’ This is because they had to build five new football stadiums in three and half years as well as complete other major infrastructure development projects such as the Gautrain and airport expansions in Johannesburg and Cape Town. Furthermore, had the construction industry not colluded and divided the projects amongst themselves, Mr Bruce argued, it was theoretically possible that one company would have won the contracts for all five stadiums, which would have made completion before the deadline difficult. 

However, in April 2016 Mr Bruce retracted his earlier comment, claiming  that in hindsight he had ‘made serious errors of judgment.’ Mr Bruce accepted that by failing to acknowledge that ‘collusion is corruption’ he had ‘been living in an ethical glass house.’ Mr Bruce quoted Chief Justice Mogoeng Mogoeng commenting on public sector corruption in the country, saying that ‘We are where we are as a result of what unethical leadership did to us as a nation.’

I think Mr Bruce’s reconceptualization is important in the fight against corruption. He rightly notes that ‘We cannot hope to cure the state of corruption, while business applies different rules to itself.’ Indeed, the South African National Planning Commission in 2015 identified that both the private and public sector are involved in corruption; the ‘private sector plays a role on the supply side of corruption, for example through paying bribes for government contracts. There are incidences of corruption within the private sector itself such as price-fixing and collusion between businesses, as well as charging inflated rates for government contract.’

The collusion by construction companies in the 2010 FIFA World Cup was particularly egregious both because the public paid the bill for the projects, and because disadvantaged members of society are disproportionally impacted by this collusion. For example, the City of Cape Town filed a civil damages claim worth R428 million against the construction companies who colluded on a tender to build the Greenpoint football stadium for the 2010 FIFA World Cup. The initial estimated budget for the stadium was R2.9billion but it ended up costing R4.5billion. The City believes that it was overcharged and that tender rigging by the construction companies had a detrimental effect to pricing the project. The financial harm suffered by the City potentially affects its residents as the money could have been used to implement much needed service delivery programmes.

Furthermore, collusion undermines the Constitutional requirement that the tender process be fair, just and transparent. Government policy to give previously excluded groups access to business opportunities through the public tendering process is also undermined because the dominant construction firms collude amongst themselves and exclude new entrants in the market.

In order to adequately address corruption, it is necessary to acknowledge that it occurs through different forms; ‘respectable’ business leaders are just as culpable of engaging in corruption as unscrupulous politicians and both need to be held to the same standard of accountability. As the honourable Chief Justice Mogoeng Mogoeng noted, South Africa is in desperate need of ethical leadership which ‘leaves no room for corruption.’