‘Old guard’ sabotaged BEE deal, tribunal is informed

ALLEGATIONS have surfaced at a Competition Tribunal hearing that the “old style management” of a power cable manufacturer was undermining attempts by the new owners to turn the company into a leading black economic empowerment (BEE) company.

The tribunal yesterday heard an application for the confirmation of a consent agreement reached between the Competition Commission and Malesela Taihan Electric Cable (M-Tec).

Johannes Mdungandaba, the chairman of M-Tec and chief executive of Community Investment Holdings (CIH), said these were typical challenges faced by BEE companies. He said CIH was a 100 percent black-owned company and acquired M-Tec from Old Mutual in 1994, which in essence was a closed business, because there were only four cable manufacturers operating in the market and M-Tec was the only BEE business.

“The entire management was lilly white. The first challenge we experienced was that the then chief executive called me and said: ‘You realise we are in Vereeniging, the entire management is white and is not happy to work for a black person. Therefore you have got to pay us danger pay or else we are going to resign.

“‘Secondly, we don’t want transformation. If you do, all the engineers are going to leave.’ He gave me a whole list of conditions, but I had already paid the price and the seller was long gone,” he said.

Mdungandaba said the business had four main customers in Eskom, Telkom, Transnet and municipalities, who fortunately had a bias towards BEE in terms of allocating a portion of tenders to BEE companies.

But the then M-Tec chief executive resigned to join their opposition and “took all the trade secrets of the business with him” and the business started losing all its senior people to the opposition.

After previously getting the major portion of tenders, this dropped to the point where the company was making a loss, he said.

Tenders discussed

Andre Landman, the counsel for M-Tec, said a spreadsheet was discovered showing that a former manager, Louis van Wyk, had drafted people from three competitor firms into the company’s boardroom to discuss the tenders and pricing.

Landman said the senior management, shareholders and owners of M-Tec were unaware of the existence of this spreadsheet until they received a summons from the commission containing the allegations of collusive tendering. By the time the summons was issued, Van Wyk had left the employ of M-Tec for African Cables.

“We are not attempting to excuse the behaviour of M-Tec, but simply to place it in a particular context,” he said.

Fhatuwani Mudimeli, appearing for the commission, said an investigation found that from 1994 to at least 2010 M-Tec, African Cables, Aberdare and Alcon Marepha agreed to tender collusively in respect of tenders issued by Eskom by allocating specific product lines and agreeing on the price to be charged per product line.

In addition, members of the Association of Electric Cable Manufacturers of South Africa, including M-Tec, had used a formula to escalate prices when bidding for short- and long-term tenders to supply electric cabling products, he said. In terms of the draft settlement, M-Tec has agreed to pay a fine of R20.2 million, which amounts to 2.5 percent of its turnover in its 2010 financial year.

The tribunal last year confirmed a settlement with African Cable in terms of which it would pay a penalty of R80.7m. Alcon Marepha had not yet reached a settlement with the commission.

Andreas Wessels, the chairman of the tribunal panel hearing the case, said they would advise the parties in due course about their decision.