Cement cartel to face civil damage charge

Economists working for an unnamed litigant are trying to quantify the damage caused by South Africa’s cement cartel so they can sue producers Pretoria Portland Cement, Lafarge, AfriSam and Natal Portland Cement.

Their estimates of the “overcharge” on cement resulting from the cartel, which operated illegally from 1998 to at least 2009, range from 8.6% to 25% – depending which econometric assumptions are used.

Albertus van Niekerk and Willem Boshoff, both economists at the University of Stellenbosch in the Western Cape – and members of consultancy Econex – presented their models on the cement cartel at the 10th Annual Competition Law, Economics and Policy Conference in Cape Town last week.

The higher estimate is likely to translate into millions of rands in civil claims, but the diverse outcomes also demonstrate the near impossibility of indisputably determining how cartels influence prices. This was a dominant theme at the conference.

Economists from the Competition Commission had earlier estimated the overcharge by the cement cartel as being up to 9.7%.

Van Niekerk told City Press that Econex was also calculating cartel damages for the City of Cape Town. This is being done in a bid to claim damages against the construction cartel, which inflated the costs of building 2010 World Cup soccer stadiums. He would not divulge the name of the litigant Econex was representing.

“The problem with civil damage claims is the quantification of damage,” Van Niekerk said.

“The data is always hard to work with,” he said in response to a question from an audience member about the wildly divergent estimates of what the cartel did to cement prices.

His colleague, Boshoff, added: “You will always have to select a subset of variables for these models.

“Obviously, all of us can come to a different model.”

Despite soaring rates of cartel prosecution by competition authorities, the ability of those who are prejudiced to get redress is still untested, with Comair currently in a court battle against SAA. It is suing the national carrier for damages related to its contravention of the Competition Act a decade ago.

The cement cartel operated legally from 1940 to 1996. It reconstituted itself illegally from 1998 onwards – until the Competition Commission launched an investigation in 2009.

Only five years later did South Africa see the first new cement producer enter the country in the form of Dangote subsidiary Sephaku Cement.