South African construction firms to pay US$90M into development fund

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A total of Six South African construction firms will contribute a total of 1.25 bn rand ($90 million) in the next 12 years towards a fund kitty towards skill development in the construction sector and give black workers a much bigger role, a cabinet minister said recently.

Ebrahim Patel, the Economic Development Minister said this voluntary contribution by the construction companies would be in addition to a 1.4 bn rand (US$98.1mn) penalty that was introduced by antitrust authorities on the sector in 2013 for collusion in tendering processes.

“There are financial penalties for not complying (with the pledged contributions),” Patel added.

The Competition Commission has carried out investigation 140 projects in both the public and private sectors for over four years before imposing the fine on 15 of 18 companies that were found to have breached tender rules in South Africa.

For the next 12 years, construction companies will make a collective payment annually into the fund, which will be under the management of industry representatives and government officials

The penalty will also settle claims for damages caused by state-owned entities against companies in the sector, a provision that most of the firms implicated have had to flag in their financial results for the past few years.

The economy of South Africa is still dominantly in white hands more than two decades after the end of the apartheid rule.

In the deal, each company committed to either transfer 40 percent of its equity to black South Africans or to assist emerging black-owned enterprises to grow.

“The objective of the fund will be the development, enhancement and transformation of the construction industry, as well as the promotion of social infrastructure for all South Africans,” one of the signatories, Group Five, said in a statement.

The others include Wilson Bayly Holmes-Ovcon, Stefanutti Stocks, Raubex, Aveng and Basil Read.

Murray and Roberts will be seeking approval of this deal by its board and will join the other companies within a week, said Patel, increasing the total contribution to 1.5 billion rand.