World News

Tuesday 29 July 2014

World Cup cities 'were cheated'

Published 11/07/2013|16:33

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The Nelson Mandela Bay Stadium in Port Elizabeth, one of the World Cup venues

At least five of South Africa's host cities for the 2010 World Cup want hundreds of millions of dollars back from construction companies because they allegedly colluded and inflated prices when building stadiums and other infrastructure.

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The South African Local Government Association said Johannesburg, Cape Town, Durban, Port Elizabeth and Polokwane were overcharged on World Cup projects and could collectively seek as much as 3.9 billion rand (£260m) in total in damages. "They want their money back," said SALGA chief of operations Lance Joel. "That's a lot of money."

The potential claims follow a larger investigation by the Competition Commission, where 15 companies agreed to pay a total of 147 million dollars (£97m) in fines in a fast track settlement to avoid prosecution for "rigged" projects in South Africa between 2006 and 2011, which include World Cup work.

One of the construction companies fined, WBHO, said the only way to guarantee to local World Cup organisers in 2006 that the stadiums could be built on time was for "the larger construction companies to meet."

But SALGA estimated in documents that collusion led to Cape Town being overcharged by up to 220 million dollars (£145m) for the picturesque ocean-side stadium - which cost close to 730 million dollars (£483m) - and Johannesburg by as much as 61 million dollars (£40m ) for work on and around the showpiece Soccer City, which hosted the World Cup final.

South Africa's central government spent more than three billion dollars (£2bn) on the first World Cup in Africa. In Brazil, similar spending on the 2014 World Cup and 2016 Olympics led to mass demonstrations in the country during the Confederations Cup last month.

SALGA's Joel provided examples of what his organisation called "bid rigging" for World Cup stadiums which "impacted" host cities. SALGA said "the cartel" of companies overcharged by between 10 and 30%. For Cape Town's stadium, which hosted a World Cup semi-final, agreements also were reached between companies that whoever lost out in the bidding for the 729-million dollar project would still get money from the others, Joel said. In Johannesburg, another "loser's fee" was agreed for Soccer City work, he said, and companies allegedly got together and settled on a 17.5 % "mark-up" for work on Port Elizabeth's Nelson Mandela Bay Stadium, which had a quarter-final and the third-place match.

WBHO, which displays panoramic images on its website of Cape Town Stadium, Durban's Moses Mabhida Stadium and Polokwane's Peter Mokaba Stadium as some of its projects, said on Thursday that construction companies got together only to ensure stadiums were finished in time. "WBHO is firmly of the opinion that the purpose of the industry initiative was not to allocate stadia between the various construction companies, or to inflate the tender prices relating to the stadia," the company said.

WBHO declared 21 rigged projects overall in the industry and was fined the highest amount, around 31 million dollars (£20m) , by the Competition Commission because it had the biggest turnover. The fine represented only 3.9% of its turnover, WBHO said. It said only one of its projects involved in the settlement related to the World Cup, and "that issue did not result in inflated prices."

Liviero, involved in the bidding for the stadium in Polokwane said it "voluntarily came forward and disclosed information to the Competition Commission relating to anti-competitive practices that occurred in the past," according to Joel. However, Liviero group chief executive Neil Cloete said that no South African city "was prejudiced by our actions."

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