Construction firms to pay $90m into sector's development fund

October 11, 2016 3:49 PM

Construction companies will be required to make a collective annual payment into the fund over the next 12 years

Cranes are seen at a construction site in Sandton outside Johannesburg

Six South African construction companies will contribute a total of 1.25 billion rand ($90 million) over the next 12 years towards a fund to develop skills in the sector and give black workers a bigger role, a cabinet minister said on Tuesday.

Economic Development Minister Ebrahim Patel said the voluntary contribution would be in addition to a 1.4 billion rand penalty imposed 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 investigated 140 projects in both the private and public sectors over almost four years before imposing the fine paid by 15 of 18 companies found to have breached tender rules in Africa's most industrialised country.

Over the next 12 years, construction companies will be required to make a collective annual payment into the fund, which will be managed by industry representatives and government officials, the minister said.

The deal also settles potential claims for damages from 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.

South Africa's economy is still mainly in white hands more than two decades after the end of white-minority rule.

As part of the deal, each firm also committed to either transfer 40 percent of its equity to black South Africans or to help 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 seek approval of the deal by its board and is expected to join the other firms within a week, said Patel, increasing the total contribution to 1.5 billion rand.

South Africa's construction industry has slowed sharply as government contracts, which big companies depend on, stall and weak commodity prices hit demand from the mining industry.