Lloyd Gedye & Niren Tolsi
By apparently accepting an invitation into a gang of white-owned construction companies that had for decades colluded on tender deals, Stefanutti Stocks’ John Jackson and his fellow directors helped turn the family-run KwaZulu-Natal business, which made large chunks of its money from the apartheid government, into a powerful member of a mafia-style “family” for the construction industry.
In 1998, and operating as Stefanutti & Bressan, the company was still a regional player in the construction sector – the majority of its work done for the apartheid-era Natal provincial department – until its growth meant it started vying for construction contracts outside of the province.
Stefanutti & Bressan was duly invited into the cabal – made up of South Africa’s mega construction companies such as WBHO, Murray & Roberts, Aveng, Basil Read and Group Five – in 1998, according to its directors’ affidavits to the National Prosecuting Authority (NPA). It duly accepted.
So began years of meeting to divvy up construction tenders between companies and ensuring that even the losers benefitted through a system that saw winners dishing out “losers’ fees”.
Since the Competition Commission began its investigation into the construction sector in 2009, it has uncovered 300 rigged projects worth a total of R47 billion: R28 billion for public infrastructure projects and R19 billion for private infrastructure.
When the commission announced its fast-track settlement process in February 2011, Stefanutti Stocks made a dash for the NPA, seeking indemnity for its directors in exchange for full disclosure.
The directors feared that although a settlement would ensure the company was not prosecuted, they could, personally, still face criminal charges. So they dished the dirt.
Stefanutti director Schalk Ackerman described in an affidavit how said cartel meetings were convened in a formal manner at various contractors’ premises with one or two managing directors from each company present.
Ackerman said that projects were allocated according to the construction firms’ market share, and a “co-ordinator” was appointed to make sure that this was done correctly.
The arrangement, according to Ackerman, included an agreement “that the ‘allocated contractor’ for a project would add a 12.5% mark-up on the tender … This mark-up was intended to cover company overheads (about 6%) and profit (about 6.5%),” he said.
Ackerman said one tenderer would be appointed to “police” the winning bid to make sure the agreement was upheld. The other tenderers would then be given cover tender prices they should submit, which would ensure the chosen bidder won. He said this was “standard practice”, and had been in place for a “very long time”.
The practice of tender winners paying “losers’ fees” to the unsuccessful bidder was also common, said Ackerman, who added these could range from R100 000 to R5 million depending on the size of the tender. The companies disguised these payments from auditors by using invoices with generic terms such as “plant hire”.
“I acknowledge that the clients were not informed that they were paying for even unsuccessful tenders,” said Ackerman. “I fully accept that there were misrepresentations made to the clients that they had received the best price, while … the contract awarded could have been less had it not been for the inclusion of the tender fees.”
According to Stefanutti directors’ affidavits and a list of rigged KwaZulu-Natal tenders submitted to the prosecuting authority by the company, Jackson’s hand appeared in much of the rigging.
Headhunted by company patriarch Gino Stefanutti in 1989, Jackson joined the then-Stefanutti & Bressan Civils division in KwaZulu-Natal as a director and shareholder in 1989, and quickly became an essential part of the company’s rise during the 90s. He had previously worked at Grinaker Construction for 20 years, the last six of those as a director.
In 2002, Jackson was appointed as a director of Stefanutti & Bressan. A year later, Clive Reucassel, who had worked under Jackson, was appointed as the director of Stefanutti & Bressan KwaZulu-Natal Civils. He joined the company in August 1987 as a contracts director.
It was Jackson who would become the central player in the rigging of several construction projects in the province between 2004 and 2008, with Reucassel, answering to Jackson, implementing many of the collusive agreements.
Main Pic: Construction at Greenpoint Stadium by David Harrison
This work was assisted by a Taco Kuiper Grant from the Valley Trust, administered by Wits Journalism.