CONSTRUCTION COMPANY Aveng’s zero tolerance approach to unethical behaviour is getting some of its senior employees into hot water after South Africa’s competition authorities uncovered collusive behaviour within the group. It was found that Infraset – Aveng’s concrete pipes and culverts manufacturing business – was party to price-fixing and market allocation.
As a result, Aveng has agreed to pay a fine of R46,3m – 8% of Infraset’s turnover in 2008, less the paving products turnover – in three equal annual payments. That’s subject to confirmation by the Competition Tribunal. Aveng also agreed to suspend two executives and place a third on special leave.
One analyst says even though the industry will come increasingly under the spotlight the fine wouldn’t damage Aveng’s reputation if it co-operates. “Action has been taken and it won’t have a major impact on investors.”
Since Aveng’s attributable earnings at its 2008 year-end was R2,3bn the fine is immaterial. But the news still hit its share price, making it underperform the JSE’s industrials index by 5%. However, investors shouldn’t have been surprised by the news following Aveng’s announcement in September 2008 that three businesses – Infraset, Trident Steel and Steeledale – were under investigation. Experts say the market should have already factored risks of penalty payments into Aveng’s share price.