cartels behind high cost of water pipes

CUTTING THE CAKE: The Competition Commission reports that prices were fixed.  Pic. Robert Tshabalala.03/05/2007. ©  FM
Damaged Electricity  pipes in Bedfordview,JHB.03/05/07 pix Robert Tshabalala
CUTTING THE CAKE: The Competition Commission reports that prices were fixed. Pic. Robert Tshabalala.03/05/2007. © FM Damaged Electricity pipes in Bedfordview,JHB.03/05/07 pix Robert Tshabalala

WHILE municipalities battled over the past decade to deliver sanitation and safe drinking water to millions of poor South Africans, manufacturers colluded to drive up the price of pipes needed for these services.

WHILE municipalities battled over the past decade to deliver sanitation and safe drinking water to millions of poor South Africans, manufacturers colluded to drive up the price of pipes needed for these services.

An investigation by the Competition Commission into the activities of certain major companies producing concrete and plastic pipes has revealed evidence of secret cartel meetings.

Many of the companies are now negotiating with the commission and appear set to incur massive fines.

"Municipalities, construction companies and members of the public were the main end users of plastic piping, and therefore the victims of the cartel arrangement," the commission says in its 2008-09 annual report, tabled in Parliament on Thursday.

The report says members of the cartel were careful to meet away from their offices.

"(They) conducted the cartel mainly through meetings that took place in hotels, restaurants, coffee shops and golf clubs."

Manufacturers of pre-cast concrete products - mainly pipes, culverts, manholes and pre-stressed concrete sleepers - had also formed their own cartel.

"The commission concluded that (these firms) had reached agreements to fix prices and trading conditions; to divide markets geographically; and to allocate tenders, contracts and customers among themselves.

In allocating contracts, the companies would identify and compile a list of available tenders, agree who would be allocated what work (as well as) on prices to be allocated for tenders."

The report says the cartels, described as "hard core", have been operating since the 1970s and 1980s. In February, the commission referred both matters to its Competition Tribunal.

According to a report in the commission's March newsletter, the extensive nature of the cartels has sparked wider investigation.

"These two cartels have directly affected the costs of investing in water reticulation. The extensive nature of the cartel arrangements confirms the commission's concerns about the possibility of widespread collusive conduct in infrastructure and construction."

Concrete pipe firms Rocla, Southern Pipeline Contractors, Concrete Units, Cape Concrete, Aveng Africa, Cobro, Grallio, Craig Concrete Products, Concrite Walls and D&D "had met and reached various agreements to fix prices and trading conditions".

It found plastic pipe companies DPI Plastics, Marley Pipe Systems, Petzetakis Africa, Swan Plastics, Amitech South Africa, Flotek & Irrigation, Andrag, Gazelle and MacNeil Agencies "were involved in fixing prices, rigging tenders and dividing markets by allocating contracts and customers".

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