The major infrastructure investments planned by government and State Owned Enterprises have been budgeted at R415.8 billion over the next three years. This investment programme has been designed to, inter alia, increase electricity production levels to keep pace with demand, improve transport and logistics systems, improve telecommunication infrastructure, as well as boost water security by developing new water schemes. Since these sectors are vital to South Africa’s competitiveness and the effective working of the economy it is important that prices of inputs to the infrastructure programme are not inflated by anti-competitive behaviour and practices. Anti-competitive behaviour and practices in this area have potentially huge costs for government and State Owned Enterprises and for the economy more broadly. As private investment picks up, addressing competition problems in these areas will have beneficial implications for the costs of private fixed investment.

The impact of the infrastructure programme will be especially pronounced in demand for:

Construction and engineering services;

• Input materials such as cement, steel, bricks and aggregates.
• Capital goods including power generation equipment, railway rolling stock and locomotives.

The markets for inputs into the construction sector are generally highly concentrated and prices have in most instances risen at rates substantially in excess of producer and consumer inflation. The flat steel products’ market has two players while long products have three other players. Prior to 1996 the cement industry in South Africa was an acknowledged cartel where the three major participants agreed upon pricing and marketing strategies. While deregulation of the industry saw a number of new entrants this had no apparent effect on cement prices. Firms operating in these two industries have further both been the subject of suspected and proven (in the case of the steel industry) anti-competitive practices, including cartel activity and abuse of dominance.  While the markets for construction and engineering services are less concentrated it is apparent from international investigations that bid-rigging is frequently rife in these areas.