Africa's Public Procurement & Entrepreneurship Research Initiative – APPERI


Private sector

All South Africa construction majors ‘involved’ in collusion, price-fixing – Patel

Engineering News

By: Natalie Greve

11th April 2013

Economic Development Minister Ebrahim Patel has said that all the major South African civil engineering and construction companies currently active in the sector have been involved in infrastructure-related collusion and price-fixing.

“This problem is huge and pervasive in the infrastructure space,” he said at the inaugural Project and Construction Management Professions Conference on Thursday.

The State reportedly lost billions of rands through large-scale collusion and price-fixing by private sector companies during several past infrastructure projects, which instigated investigations by the Competition Commission into several completed public build projects.

These enquiries, which included investigations into the Gautrain project and several stadium developments, uncovered substantial evidence of collusion and price fixing by private sector participants, the Minister noted.

In cases involving critical projects, a number of companies came forward to acknowledge their involvement in the unlawful practises, Patel added.

“We have received about 400 admissions of incidents of collusion by companies in the sector,” he commented.

South African Council for the Project and Construction Management Professions (SACPCMP) president Professor Raymond Nkado said he was “shocked” that registered members of the SACPCMP had been found to have been involved.

“As a council, we have decided that we might take additional disciplinary action against these [companies],” he said.

Fast-Track Process
Based on the evidence gleaned from the commission’s investigations, which indicated the pervasiveness of the involvement by private companies, it was decided to introduce a “fast-track settlement process”, which would avoid lengthy legal processes that could persist for up to eight years, and which Patel said could potentially distract the project management process.

“We approached the industry and said we were prepared to put a voluntary disclosure process on the table, which would bring this to a conclusion expeditiously. In return, what is required is full disclosure, a commitment to end the cartels and an acceptance that the law must take its course,” he explained.

Once the disclosure process had been completed and admission of guilt received, the commission would then determine appropriate fines or penalties related to the value of the project.

Several such processes between the Competition Commission and private companies were currently under way, with most in the final stages, where the extent of the penalty was being determined in cases where organisations were “improperly enriched”.

Patel added that the first company to come forward and admit collusion would receive preferential treatment in terms of the penalty levied.

“We also take into account the extent of cooperation, so that there is an incentive to come clean. However, these companies will still have to pay substantial penalties as prescribed by the Competition Act,” he cautioned.

In cases where investigations implicated public servants, this information would be referred to law enforcement agencies.

There would be public disclosure once settlements had been reached.


Public Works Minister Thulas Nxesi added that the findings of the investigation challenged the common perception that corruption and malgovernance was only pervasive in the public sector.

“The opinion that only government has such problems has been proved incorrect. There are huge problems in the private sector and we must expose them,” he said, encouraging the private sector to engage in “self reflection”.

Nxesi noted that key to the prevention of corruption in infrastructure projects was the establishment of a strong financial system, transparent procurement processes and incentivisation.

Moreover, Patel advised that the competition authorities had used the findings of the investigations to identify networks and channels used by companies in collusive practises and had identified the lead players and managers.

This would be used to develop internal preventive controls to reduce the opportunity for future collusion.

In addition, Patel said the CEO of any company awarded an infrastructure tender would be required to sign an “integrity pact” that committed them to competitive and noncorrupt practises and to create a culture in their organisation in which anticompetitive behaviour was discouraged.

“This will require executives to commit personal responsibility and liability,” he said.

The integrity pact was currently being piloted in a number of infrastructure tenders and would be fully implemented throughout the course of this year.

Patel said it was critical that the new phase of national infrastructure development not be characterised by similar high levels of collusion and price-fixing.

“Companies will have to make an important calculation. In the past, they thought collusion was a no-brainer; that they would secure the contract and walk away with the money. Now they see that we have developed the investigatory capacity to track the evidence down and to bring companies to book. That is the most important breakthough for us,” he said.

Edited by: Chanel de Bruyn

Mozambique: former water officials arrested for corruption

WASH News Africa

November 6, 2012

Mozambique’s anti-corruption agency GCCC has arrested the former director and financial administrator of the central regional office of the government’s Water Supply Investments and Assets Fund (FIPAG).

José Duarte and Henriques Leonardo were expelled from FIPAG in mid-2011, but it apparently took over a year to compile the case against them.

Duarte is accused of creating a private water supply company, Recta, which competed with FIPAG to supply water to ships in Beira port. FIPAG is reported to have suffered a loss This is

The activities of Duarte and Leonardo are said to have caused FIPAG losses of 37 million meticais [US$ 1.23 million].

The IRC International Water and Sanitation Centre is supporting Cowater Consultores Lda. to develop an appropriate anti-corruption strategy and plan with the Direcção Nacional de Águas (DNA) in Mozambique [1].

In April 2012, the government decreed that FIPAG would outsource water distribution to the private sector and restrict its activities financing and managing water assets [2].

[1] Developing a water anti-corruption strategy in Mozambique, IRC, 29 Nov 2011

[2] Mozambique: government relaunches water supply privatisation, Agencia de Informacao de Mocambique /, 04 Apr 2012

Here’s a new trend to watch – ‘managed competition’

Strategic Partnerships, Inc.

By Mary Scott Nabers, CEO of Strategic Paternships, Inc.

Public officials in many parts of the country are testing their own internal teams. Simply put, they are engaging in what is called “managed competition.” Here’s how it works. Private firms are invited to compete with government departments on contracts. The result is that taxpayers can be assured that services are being provided at the lowest possible cost.

Local governments are beginning to solicit proposals from private firms for various services including infrastructure maintenance, facilities maintenance, utilities and water and wastewater projects. The competitive process is considered to be “managed” by the government, which sets guidelines for private and public bidders. This allows the city to conserve resources through the efficient provision of services that naturally result from the competition.

This trend is gaining momentum because it streamlines processes and encourages efficiency.

Examples include the following:

  • The city of Indianapolis was one of the first to adopt managed competition and has become a leader because of its success with this process. Competitive bidding was introduced initially to encourage efficiency and cost savings and to test the validity of in-house operations.
  • Tulsa, Oklahoma, has also adopted the use of managed competition. The city had previously employed a consulting firm to review the cost savings and efficiency generated by this process, and it was found that the Department of Public Works had the most opportunities for managed competition. Interestingly enough, in spite of awarding some contracts to private firms, the city selected city employees for city hall maintenance after a competitive process.
  • The city of Phoenix had outsourced its trash collection since 1979, using managed competition to ensure low costs and efficiency. And, attempting to be even more efficient, the city divided waste collection areas into 10 different contracts which were re-bid every six years each. After 2009, however, city employees won the contracts back from a private sector incumbent firm.
  • Mayor Rahm Emmanuel introduced managed competition into Chicago’s recycling program. Recently, the city accepted bids for the Blue Cart Recycling program, which facilitates the collection of recycling in six separate service areas mapped out by the city. Two separate private companies were selected to manage four of these areas and the city will manage the remaining two.
  • Charlotte officials have implemented a program titled North Carolina’s Managed Competition Program. The program covers a broad spectrum of services including fleet and street maintenance, water services, wastewater utility services and solid waste collections.

This is definitely a trend to watch!

© 2012 – all rights reserved.

Ethiopian Public Procurement Law applicable only to the private sector

Ethiopian Legal Brief

By Abrham Yohannes

February 16th, 2012

In developing countries like Ethiopia, the provision of services to the citizen is one of the central functions of government. To fully realize it’s in providing services which meet the standard of the best quality, but at the same time with the minimum cost, the government in Ethiopia, uses the best mechanisms available, which may generally be categorized in to two. First, in areas where the private sector is considered to be at an infant stage, the government directly involves itself in the management and operation of the provision of services. The provision of electricity, telecommunication and water for instance, is under the exclusive control of government. Second, in areas which do not require direct involvement of the government, the provision of public services will be realized by involving the private sector for carrying out works and providing goods and services. Even in the second case, the government is not totally out of the picture. Public enterprises and other government business organizations equally participate in this process. Similarly, the direct provision of services by the government, to some extent allows the participation of the private sector. To a certain degree, the private sector plays a role in carrying out public works and providing goods and services in areas under the exclusive control of the government.

Irrespective of the role played and the level of participation of the government or the private sector, the provision of the best quality of services with a minimum cost, requires an efficient and effective system of public procurement. “Public procurement is a central instrument to ensure an efficient management of public resources. Promoting good governance in public acquisition system aims at providing best value to its citizens through processes that are transparent and results-oriented.”

Irrespective of variations in the existing political, economic and legal environment peculiar to a specific country, an efficient and effective system of public procurement is ultimately built upon four basic pillars: procurement laws and regulations, procurement workforce, procurement process and methods, and procurement organizational structure. Ideally, procurement laws and regulations should be clear, consistent, comprehensive, and flexible. (Khi V. Thai, procurement: concepts and practices, in International handbook of public procurement ed. Khi V. Thai p6-9).

Generally speaking, the regulatory framework of public procurement as tool in the formulation and implementation of an effective and efficient system of public procurement should be guide by some internationally accepted basic principles. These principles are: transparency, accountability, objectivity, fairness and non-discrimination.

The principle of transparency helps to attract a greater number of participation, thereby encouraging competitiveness. It also makes the whole procurement process open and fair, thus avoiding the possibility of favoritism and discrimination. Transparency also makes it easy for procuring entities and officials to be accountable. Most importantly, it is an effective tool to curb corruption.

The Ethiopian procurement law is still at an infant stage. In recent years, the Federal government has taken measures to revise the existing law, so as to make it responsive to the growth and expansion of the quantity and quality of provision of public services. Each year, a significant portion of public money is allocated as a result of  award of contracts for the construction of public works, supply of goods and provision of services…Read more.

Kenya: Proposed law promises to hasten pace of economic growth

September 12, 2011 (The Nation/All Africa Global Media via COMTEX) — The Public Procurement and Disposal Act (Public Private Partnership) Bill 2011 is ready for tabling before Parliament for debate.

If enacted, the law would put in place procurement and management structures to promote public private partnership (PPP) projects in that are expected to significantly boost the country’s economic growth.

Mr Stanley Kamau, the PPP director at the Ministry of Finance, said the private sector is better placed to promote efficiency and competitiveness in national development, hence the need for the partnership.

Huge potential

Mr Kamau identified some of the high-potential sectors for the partnership as information and communications, tourism, land reclamation, sports facilities and business process outsourcing (BPO).

He said national legislation is also attractive to investors, arguing that the Water Act and Energy Act provide a strong regulatory framework to protect investor interests.

Dose of competition

Mr Kamau said bringing the private sector into the country’s development structure would inject a dose of competition and efficiency.

The approach, he added, would improve the debt-gross domestic product ratio and the circulation of money in the local economy.

The government honours contracts, thus providing a favourable investment climate for the private sector to thrive in,” he said.

He explained that Kenya requires about Sh5.6 trillion ($60 billion) in the next eight years to develop infrastructure.

“The government can provide about Sh1.8 trillion ($20 billion), and the funding gap has to be filled by the private sector,” he said.

Independent Power Production (IPP) is a key area where the arrangement is expected to produce get enough energy to improve economic growth and industrialisation.

Concession of the Kenya Uganda railway to capital funds Citadel and TransCentury is another area.

The line is to be improved to open up economic opportunities in the East African region by easing the cost of transport.

The Konza ICT Park, for example, requires more than Sh1 trillion to realise its potential, and this can only be achievable through a public private partnership.


“In development terms, the private sector is neither a good thing nor a bad thing; it is a necessary thing”

“The question is not whether the private sector is relevant to development, but how better to harness the dynamism of companies and the market. At present, the private sector has significant developmental impacts but these are poorly understood and largely ignored by the donor community. (…) The donor community needs to understand how best to leverage what the corporate sector will do as a natural part of its business, and focus its attention on fixing those things that the market cannot or will not reach. Companies need support in understanding the implications of development issues for their profitability and shareholder value, and in managing those issues as part of their business practice.” Peter Davis, Overseas Development InstituteRead more.

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