THE THICK END OF THE WEDGE

THE bombast of the left is almost as bad as the bombast of the right. The other day the Minister for Economic Development (we’ll call him the Minister of Economic Development when he causes any to occur) Ebrahim Patel, swaggeringly warned the heads of SA’s biggest construction companies that he was going to start holding them personally liable for any proven instances of price collusion on big tenders.

Seeing as it is, however, impossible to stop price collusion in the construction industry (remember how this was conceded in cement, which used to operate as a cartel?), this means the bosses of Murray & Roberts, Aveng, WBHO and the like had better pack it in now. Most of them don’t need to work another day anyway.

Surely the idea in some industries and in some circumstances would be to see the value in price collusion and to regulate it. Take the 2010 Soccer World Cup. If one company had won the bids to build all the stadiums, it’d still be building stadiums. The only way to get things done, and done shipshape, was to allow the big firms basically to divide up the work among themselves. Now Patel wants to police collusion in the state’s big infrastructure programme. He’s going to get the CEOs of the big firms to sign an integrity pledge every time they get a contract, which pledge, it seems, will cater for jail time should the CEO’s firm be found at any level of its tender to have colluded on prices with another.

Behold and praise the man who crushed capitalism! SA’s construction companies are among the best in the world. The engineers, surveyors, project managers and foremen they employ could work anywhere.

And when work in SA dries up for the firms, they are able to tender competitively for work (and keep South African jobs going) abroad.

But if we start to police them as if they were criminals out on some sort of probation we will start to lose them. I am not arguing for a wholesale cartel here. Competition between them is good. But when the state, their biggest South African customer, is in a hurry to get things done, I would advise the very opposite of what Patel proposes. Let the firms divvy up the work, keep their good people here, keep the skills here. WBHO, for instance, has never made a loss. That means it has always paid its taxes and has always been able to employ handsome numbers of citizens.

Perhaps even have a government official (preferably from the National Treasury) present when they do it. That way you’d be better able to hold them to strict performance targets and, as the client (and it is often the clients who create cost overruns), at least be able to have a more complete oversight of what is happening.

Without these giant companies, SA would be home to a string of small fry.

When the roof of a spanking new convention centre in, say, Nkandla, collapses onto a thousand dignitaries gathered to celebrate the opening of the nearby JG Zuma International Airport, it will have been because some inexperienced and unaccountable construction firm CEO had ordered cheap cement from Venezuela and rebar off a shipment stranded on the high seas by a legal dispute in Port Harcourt.

Patel’s dream is to recreate the South African economy but, to an extent, you have to work with what you’ve got and with whatever works. Throwing construction company bosses into jail for collusion would be, to put it mildly, a step backwards. Jacob Zuma’s administration needs people in it, in the Cabinet too, who understand how to make profits, why they’re important and what they do for the country. All it has now is one group of ministers who think business is a dirty word and that money is somehow just there , and another who genuinely believe they could run a large, complex and listed company and make ridiculous rules about how companies should behave.