The Competition Commission has given three major construction firms the green light to enter into economic alliances with black-owned firms recommending that the deals be approved by the Competition Tribunal.

Large construction firm Raubex is looking to partner with two small to medium sized firms, Umso Construction and Enza Construction while Stefanutti Stocks is looking to form an alliance with TN Molefe Construction and Axsys Group. WBHO Construction intends to merge with Fikile Construction, Edwin Construction and Motheo Construction Group.

Creating entrepreneurial opportunities in the construction industry

The alliances are the result of a settlement agreement concluded between construction companies and the South African government following the Commission’s investigation into cartel conduct in the construction industry between 2009 and 2013.

In terms of the agreement, the construction companies could either elect to sell a portion of their equity to historically disadvantaged persons or commit to mentoring and developing up to three companies owned, managed and controlled by historically disadvantaged persons.

Raubex, Stefanutti Stocks and WBHO Construction all elected to enter into alliances with emerging contractors, thereby agreeing to participate in transformative initiatives aimed at improving competitiveness, innovation and entrepreneurial opportunities in the construction industry.

According to the Commission the alliances will be active for a period of between 7 and 10 years during which the firms will have to meet certain targets.

Addressing alliance concerns

The commission says that it is concerned that the alliances, which are temporary in nature, may facilitate conditions for future collusive conduct between the larger firms and the emerging contractors after the termination date.

To address these concerns the Commission says it has imposed conditions that will serve to regulate the effectiveness of the termination of the alliances.