Combating cartel behaviour in South Africa: lessons learned and the case for asset forfeiture

The unravelling of the 2010 FIFA Soccer World Cup construction cartel was not a consequence of legal enforcement or a sudden moral realisation among cartel members. Instead, internal conflicts regarding payment distribution led to the collapse of this highly profitable collaboration among South Africa’s largest construction companies (De Wet, 2013). The South African Government’s preparations for the World Cup were seen as a catalyst for economic growth, with substantial investments made in infrastructure, particularly the construction of stadiums [Government Communication and Information System (GCIS), 2008, p. 7]. However, what should have been a significant economic opportunity was marred by a cartel that inflated construction costs by 10% to 30% per stadium (Mail and Guardian, 2015).

Economic cartels, often compared to a cancer that erodes competitive markets, operate in secret to avoid detection, making their illegal activities difficult to uncover (Competition Commission v Pioneer Foods (Pty) Ltd, 2010). In South Africa, the Competition Act 89 of, 1998 allows for fines and criminal prosecution against cartels. However, despite record fines imposed by the Competition Commission of South Africa (CCSA), there has been little to no criminal prosecution, rendering these punitive measures ineffective as deterrents (Corruption Watch, 2013).

One potential strategy to address the persistent challenge of cartel behaviour involves strengthening deterrence by integrating asset forfeiture mechanisms into the enforcement framework under the Prevention of Organised Crime Act, 121 of 1998 (POCA). POCA provides two primary types of asset forfeiture: criminal forfeiture and civil forfeiture. Criminal forfeiture is conviction-based, requiring proof of a crime and a link between the crime and the assets (Prevention of Organised Crime Act, 1998). In contrast, civil forfeiture allows authorities to seize assets without a criminal conviction, provided there is sufficient evidence linking the property to illegal activities. This distinction is crucial for effectively targeting cartel-related assets, as civil forfeiture can be applied even when criminal prosecution is not feasible.

The discussion is grounded in the lessons learned from the 2010 FIFA Soccer World Cup construction cartel and seeks to highlight practical applications of asset forfeiture within the existing legal framework. A more detailed analysis of its operational specifics, potential complexities and case studies will be addressed in a subsequent article. Together, these articles aim to present a comprehensive perspective on enhancing South Africa’s enforcement framework to combat cartel conduct more effectively.

The article is structured to systematically address the issue of cartel behaviour and its impact on public procurement. Section 2 lays the groundwork by defining key terms related to cartel behaviour and enforcement mechanisms. Building on this foundation, Section 3 examines the modus operandi of the 2010 FIFA Soccer World Cup construction cartel, providing insights into the orchestration of collusion and its wider implications. Section 4 analyses the economic and systemic impact of bid rigging, while Section 5 introduces asset forfeiture as a complementary enforcement mechanism, emphasising its potential to disrupt the financial incentives underlying cartel activities. The article concludes by advocating for a comprehensive and multi-faceted strategy to effectively combat cartel behaviour and procurement corruption.

Competition law is designed to prevent market dominance by large companies, ensuring that prices remain competitive (Boshoff, 2013, p. 4). The Competition Act aims to create a legal framework that promotes and safeguards economic competition by restricting practices that undermine a competitive economy (Du Plessis et al., 2011, p. 3).

Economic cartels destabilise markets by allowing companies to collude for financial gain, in direct contravention of competition law (Maphwanya, 2017, p. 49). Section 4(1) of the Competition Act prohibits practices such as price fixing, market allocation and bid rigging, which significantly impede competition (Dunne and Maher, 2020).

Bid rigging, a focus of this study, involves arrangements between competing companies that distort the public procurement process. This practice undermines competitive bidding, often leading to higher prices and lower-quality goods (Bolton, 2007, p. 138; Competition Commission South Africa, 2014a). Bid rigging is particularly destructive to a free-market economy and has severe consequences for the national economy, especially in high-value industries such as construction (Foremny and Dorabialski, 2018, p. 946).

To host the 2010 FIFA Soccer World Cup, the South African Government issued tenders for the construction of stadiums. The cornerstone of public procurement in South Africa is enshrined in Section 217 of the Constitution of the Republic of South Africa, 1996, which requires that all Government contracts for goods and services adhere to the principles of fairness, equitability, transparency, competitiveness and cost-effectiveness. However, the 2010 FIFA Soccer World Cup construction cartel’s bid-rigging practices, such as cover pricing, fixed profit margins and loser’s fees, directly contravened these principles. These practices created a false impression of competition, inflated project costs by up to 30% and undermined the integrity of public procurement processes (Competition Commission v Aveng (Africa) Ltd, 2013).

Asset forfeiture refers to the legal mechanism for confiscating assets derived from unlawful activities. In the context of cartels, it targets the financial benefits that incentivise collusion, complementing traditional punitive measures like fines and criminal liability. In South Africa, the POCA, provides the legal framework for asset forfeiture, enabling the state to seize assets obtained through criminal activities, including those related to cartel conduct. This approach aims to strengthen deterrence by directly targeting the economic gains that motivate such illegal behaviour. A notable feature of POCA is its provisions in terms of Chapter 6 that allow the state to seize property linked to criminal activity without the need for a criminal conviction.

The construction industry, particularly in the public sector, is notorious for its susceptibility to cartel activities, corruption and organised crime (Reeves-Latour and Morselli, 2016, p. 158). South Africa’s history with construction cartels, exemplified by the 2010 FIFA Soccer World Cup, reveals deep-rooted issues with bid rigging (African Competition Forum, 2019, p. 188). Seven major construction companies, including Murray and Roberts, Basil Read, Group Five, Stefanutti Stocks, Concor, WBHO and Aveng, were involved in this cartel (Thiemann, 2015, p. 7; Nicholson, 2013).

Ratshisusu (2014, p. 595) found that most of the rigged tenders for the 2010 FIFA Soccer World Cup involved the following five collusive practices, which can be interpreted as the modus operandi of the colluding companies:

1. allocation of customers;

2. setting of fixed profit margins;

3. cover pricing;

4. payment of loser’s fees; and

5. winning bidders would appoint the losing bidders as subcontractors as a form of compensation.

It was further found that the modus operandi of bid rigging cartels is often intertwined with the other two main types of restricted cartel conduct. To understand construction cartels better, the modus operandi as identified above will be discussed. Figure 1 aims to simplify the link between the three main types of economic cartel activity and the modus operandi of bid rigging cartels.

Recent reports and studies highlight the ongoing disruption of South Africa’s construction industry by criminal syndicates, commonly referred to as “construction mafias”. These groups invade construction sites to demand portions of contracts or levy “protection fees”, resulting in project delays and increased costs. Nyangiwe et al. (2023) examine the emergence of these syndicates, noting their significant impact on project performance and delivery through persistent, cartel-like activities. Meintjies et al. (2024) found that their activities disrupted over 180 projects worth approximately R63bn since 2019.

The persistence of these disruptions underscores the ongoing challenges within the construction industry, suggesting that cartel-like activities persist. Addressing this issue is crucial for the industry’s stability and economic growth.

One of the core practices of the 2010 FIFA Soccer World Cup construction cartel was the allocation of customers and the fixing of profit margins. Senior employees from competing companies met to allocate stadium construction projects among themselves, ensuring each company’s control over specific regions (Ratshisusu, 2019, pp. 9-10). For instance, the cartel allocated tenders for the Mbombela, Peter Mokaba, Moses Mabhida, Soccer City, Nelson Mandela Bay and Greenpoint stadiums to specific companies (Competition Commission v Aveng (Africa) Ltd, 2013). See Table 1 for the allocation of stadiums per cartel agreement.

To maintain the appearance of competition, the cartel members engaged in the practice of providing one another with cover pricing (Competition Commission v Aveng (Africa) Ltd, 2013). This involved one company submitting a deliberately inflated bid, thereby enabling another company to secure the tender. Such actions misled the Government departments evaluating the tenders, creating a false impression of competitiveness in the tendering process (Isipani Construction (Pty) Ltd v Competition Commission, 2017). For example, G Liviero and Son Building provided Concor with a cover price for the Peter Mokaba Stadium bid, ensuring Concor’s victory (Competition Commission v G Liviero and Son Building (Pty) Ltd, 2013). In return for their cooperation, losing bidders were often compensated through loser’s fees or subcontracting agreements (PwC, 2013, p. 19; African Competition Forum, 2019, p. 11, 188).

A detailed examination of the 2010 FIFA Soccer World Cup construction cartel reveals a carefully orchestrated scheme among major construction firms to manipulate public procurement processes and ensure mutual financial benefit. During the cartels’ deliberations on the construction of the various stadiums, a unanimous agreement was reached to secure a fixed profit margin of 17.5% across all stadium construction projects. Vilakazi and Roberts (2019, p. 370) adds that these construction cartels engaged in price fixing by agreeing on inflated prices allowing companies to maximise their profits This agreement was part of a broader collusion strategy, whereby companies coordinated their bids to eliminate genuine competition and artificially inflate project costs (City of Cape Town v WBHO Construction (Pty) Ltd and Others, 2017).

As indicated above, in addition to fixing profit margins, the cartel implemented a system of “loser’s fees”, designed to compensate companies that intentionally submitted non-competitive bids. These fees were typically calculated as 5% of the lowest successful bid and were paid by the winning bidder to the losing firms, ensuring that even unsuccessful participants in the collusion benefitted financially. This practice further exacerbated the inflation of construction costs (Competition Commission v Aveng (Africa) Ltd, 2013).

The combination of these tactics – fixed profit margins, coordinated cover pricing and loser’s fees – guaranteed that all cartel members shared in the financial spoils while placing a significant financial burden on the South African Government and taxpayers. The systematic and sophisticated nature of these practices was later confirmed during Competition Tribunal hearings, which detailed how these mechanisms undermined competitive bidding and transparency in public procurement (Competition Commission of South Africa v Esor Limited and others, 2022).

This carefully planned collusion highlights the detrimental impact of cartel behaviour on public funds and the urgent need for effective deterrent measures.

Subcontracting is a common practice in the South African construction sector, with a large percentage of building projects and civil construction projects being subcontracted (CIBD, 2013:8). According to Ratshisusu (2019, p. 9) subcontracting was a form of compensation for the losing bidders in the 2010 FIFA Soccer World Cup construction cartel. The companies involved in the cartel received guaranteed subcontracting opportunities. The construction cartel members willingly refrained from bidding or intentionally submitted non-competitive bids to be appointed as subcontractors by the winning bidder (Ratshisusu, 2014, p. 597).

The CCSA examined how bid rigging in the 2010 FIFA Soccer World Cup construction cartel had affected price increases. The CCSA found that prices of goods and services increased notably during cartel activity and after cartels were dissolved (Department of Public Works and Infrastructure, 2013). With the high prices paid for goods and services by the South African Government, tenders that involve bid rigging waste the money of South African taxpayers, leading to inflated costs for public projects and services (Department of National School of Government, 2016).

This practice undermines the integrity of the procurement process, distorts market competition and diverts funds that could otherwise be used for essential public services and infrastructure improvements. The Department of National School of Government (2016) emphasises that bid rigging not only erodes public trust but also hampers economic efficiency and development by creating an uneven playing field for businesses. According to Thiemann (2015, p. 7), bid rigging was present in all aspects of the bids issued for the 2010 FIFA Soccer World Cup.

The South African Government, as owners of the soccer stadiums, was projected to cover the initial cost for the construction of the stadiums. However, the government’s predicted total expenditure for 2010 was R39.3bn, a staggering 1709% increase from the first estimate of R2.3bn. The stadium cost increased by 1,008% from the original estimate of R1.5bn to approximately R17.4bn, according to the estimates in 2013 (Cottle et al., 2013, pp. 1-2).

According to the Competition Commission Tribunal (Cottle et al., 2013, pp. 1-2), construction companies are believed to have received approximately R4.7bn in unfair profits from the 2010 FIFA Soccer World Cup. Bowen et al. (2012, p. 521) confirmed that the CCSA investigated 70 projects that were alleged to have been instances of bid rigging in the construction of the stadiums for the 2010 FIFA Soccer World Cup. The investigation resulted in a total value of R29bn rigged stadium construction tenders being discovered.

National Treasury’s briefing on the Public Procurement Bill in 2024 highlighted that public procurement spending amounts to nearly R1 trillion, which is 22% of South Africa’s gross domestic product (NCOP Finance, 2024). With the consolidated Government expenditure expected to reach R2.37tn (National Treasury, 2024b), the country’s reliance on public procurement is substantial. However, this reliance has led to recurring issues of fraud and corruption.

Public procurement is crucial for economic growth, particularly in infrastructure projects. Yet, its scale creates opportunities for fraud and corruption. Effective procurement processes are essential to obtaining high-quality products and services at the best value for taxpayers. Unfortunately, some procurement regulations and tender structures may reduce competition and facilitate bid rigging schemes (OECD, 2023). Pashev et al. (2006, p. 45) noted that law enforcement officials often struggle to prevent or address procurement fraud, with bid rigging being a common issue (Makhadi, 2021, p. 10; Busu and Busu, 2021, p. 1).

Bid rigging has been a persistent issue within South Africa’s public procurement system, as evidenced by the 2010 FIFA Soccer World Cup construction cartel. National Treasury Practice Note (2010) Practice note (issued on 21 July 2010) on bid rigging or collusive bidding sought to address this issue by introducing additional measures to address such practices. However, recent cases indicate that collusion remains prevalent. In 2022, the Competition Tribunal of South Africa adjudicated a case involving Esorfranki Limited and other construction firms accused of collusive practices, including price-fixing, market allocation and bid-rigging through cover pricing. The Tribunal found Esorfranki guilty and imposed an administrative penalty of R15.7m (Competition Commission of South Africa v Esor Limited and others, 2022). The fixed profit margins, cover pricing and loser’s fees employed by cartels stand in direct conflict with the principles of Section 217 of the Constitution:

• Fairness and transparency: Rigged tenders eliminate genuine competition and obscure the true cost of projects.

• Equitability and cost-effectiveness: Practices such as loser’s fees inflate costs, depriving taxpayers of value for money.

• Competitiveness: Collusive arrangements ensure that cartel members profit at the expense of market competition.

The Public Procurement Act was enacted on 24 July 2024 and introduces several provisions aimed at addressing the long-standing challenges within South Africa’s public procurement system. It aims to enhance integrity, transparency and accountability within South Africa’s public procurement system. The Act’s provisions address systemic weaknesses in procurement practices by mandating public disclosure of tender information, establishing codes of conduct for participants and introducing measures to prevent the abuse of procurement processes (Public Procurement Act, 2024 s. 26). However, the Act does not explicitly address cartel behaviour or bid rigging, two significant threats to fair competition and procurement integrity. While its focus on transparency and debarment indirectly deters collusion, it is submitted that the absence of targeted provisions may leave a gap in combating sophisticated cartel operations.

Furthermore, the Act does not incorporate asset forfeiture as a tool to dismantle the financial incentives driving procurement-related crimes. The exclusion of this measure in the Public Procurement Act highlights the need for complementary legal frameworks to comprehensively address procurement fraud and economic crimes.

While the enactment of the Public Procurement Act represents a significant step towards streamlining and enhancing the integrity of South Africa’s procurement processes, its success is contingent upon effective implementation and enforcement. As noted by the Director-General of National Treasury, Dr Duncan Pieterse, during the launch of the South African Methodology for Assessing Procurement Systems Report on 25 November 2024, in which he stated, “the Act on its own is insufficient to resolve procurement challenges”. He emphasised that, despite the establishment of a unified regulatory framework, additional measures are necessary to address existing gaps and ensure the Act’s objectives are fully realised (National Treasury, 2024b).

This perspective underscores the importance of not only having robust legislation but also ensuring that the mechanisms for its enforcement are adequately developed and resourced. Without consistent and rigorous application, the intended reforms may fall short of achieving their goals, leaving systemic issues within public procurement unaddressed.

The persistence of cartel conduct and bid rigging since the 2010 FIFA Soccer World Cup underscores the limitations of current deterrent methods. Studies by Nkosi and Boshoff (2022) highlight that despite increased enforcement efforts, collusive practices remain prevalent, with over 390 cases referred to the Competition Tribunal since 2005. Additionally, industries such as construction continue to exhibit patterns of bid rigging, as evidenced by ongoing investigations and settlements (African Competition Forum, 2019).

Proactive detection and punishment of collusion are critical for maintaining competition. The potential for detection and prosecution can deter companies from participating in cartels and encourage them to apply for leniency programs (Kawai et al., 2023, p. 376).

Effective deterrence of cartel conduct requires a multi-dimensional enforcement framework that addresses both the legal and economic incentives driving collusion. In South Africa, the Competition Commission has traditionally relied on fines and personal criminal liability as its primary punitive measures. Fines, capped at 10% of annual turnover for initial offences and 25% for repeat offenders, aim to penalise corporate offenders, while criminal liability, introduced in 2009 and implemented in 2016, targets individuals participating in cartel activities (Competition Commission South Africa, 2020).

In addition to these measures, civil remedies under Section 65 of the Competition Amendment Act 18 of (2018) allow injured parties to seek compensation for damages caused by cartel behaviour. However, despite these mechanisms, questions remain about their effectiveness in fully addressing the financial underpinnings of cartel conduct. While fines and civil damages provide accountability and restitution, their deterrent impact may be limited if they fail to disrupt the economic incentives that drive cartels.

The punitive measures available to the CCSA, specifically fines and criminalisation, present distinct challenges regarding their enforcement and overall effectiveness under the amended legislation. In practice, these measures, including fines and criminal prosecutions, often fail to serve as adequate deterrents to the formation and persistence of economic cartels (Kelly, 2010, p. 333).

Ginsburg and Wright (2010, p. 12) argue that the effectiveness of increasing fines as a deterrent against cartels remains uncertain. Their research suggests that if higher fines were truly effective in discouraging cartel conduct, such as bid rigging, there would be evidence of a decline in cartel cases as fines increased. However, no such correlation has been observed. Furthermore, they caution that raising fines may inadvertently harm consumers, as companies could offset these costs by passing higher monitoring and compliance expenses onto their customers, potentially negating any deterrent effect.

Corruption Watch (2013) highlights that the fines imposed by the CCSA on companies involved in the 2010 FIFA Soccer World Cup construction cartels were not punitive enough to effectively deter future bid-rigging behaviours. For fines to act as a true deterrent, they must impose consequences severe enough to outweigh the anticipated benefits of cartel participation. While significant fines have been levied against cartel members, evidence suggests these measures have not achieved the desired deterrent effect. Werden (2009, pp. 28-29) further had also noted that fines, even when substantial, often fall short of dissuading collusion, indicating a gap in their efficacy as a standalone enforcement tool.

Table 2 below sets out the fines that each company received that was part of the 2010 FIFA Soccer World Cup construction cartel:

One challenge with fines as a punitive measure is their inconsistency in reaching the maximum allowable threshold of 10% of a company’s annual turnover for first-time offenders. Research indicates that fines often fall significantly below this cap, averaging less than 5% in many cases (Nkosi and Boshoff, 2022, p. 327). This trend was highlighted in the 2024 price-fixing case involving Hard Hat Equipment Hire, where the CCSA settled on a fine of R480,000. The settlement explicitly noted that the imposed penalty was less than 10% of the company’s revenue for the relevant period from 2023 to March 2024 (Gernetzky, 2024). Such outcomes raise questions about the adequacy of fines as a deterrent, particularly when they fail to impose a meaningful financial impact on offenders.

Furthermore, these outcomes create an expectation among cartel members involved in bid rigging that the fine imposed will not materially affect the company’s bottom line (Nkosi and Boshoff, 2022, p. 348). Construction companies’ part of the 2010 FIFA Soccer World Cup, whether directly or indirectly, admitted to the bid rigging of 298 tenders worth R111.9bn. The fines of the settlement between the CCSA and the individual companies resulted in a total of R1.46bn being issued. This fine is a record in South Africa (Thiemann, 2015, p. 7; Department of Public Works and Infrastructure, 2013; Competition Commission South Africa, 2014b).

At this point, it is significant to note that the fine was equal to 1.3% of the value of the rigged tenders based on the sum of R1.46 bn divided by R111.9bn. Furthermore, the fines levied were below the agreed fixed profit margin of 17.5% made by the companies for the construction of each stadium.

While fines are an essential punitive measure, evidence from the 2010 FIFA World Cup cartel case shows that their deterrent impact is often limited. The fines imposed on companies represented only a fraction of the inflated project costs, failing to significantly disrupt the economic incentives of collusion.

Asset forfeiture may provide an opportunity to address this gap by directly targeting the financial gains derived from cartel behaviour. Unlike fines, which are pre-determined and capped, asset forfeiture allows authorities to confiscate the proceeds of collusion (corporate entities and individuals), ensuring that offenders are deprived of their illicit profits. This mechanism not only neutralises the economic incentives driving cartel conduct but also strengthens public confidence in enforcement by visibly recovering misappropriated funds. By integrating asset forfeiture with existing financial penalties, South Africa could create a more robust deterrence framework.

The second avenue of punitive proceedings is that of personal criminal liability for individuals involved in cartel conduct. Amendments to the Competition Act came into effect on 1 May 2016, although they had already been signed into law in 2008 (Steyn, 2018; Norton Rose Fulbright, 2016, p. 27). The delay has eroded trust in the new amendment to be effective. “It has yet to been seen whether the new Competition Amendment Act will create enough deterrence to stop such anti-competitive activities” (Afrika and Bachmann, 2011, p. 991).

The Competition Amendment Act introduced personal criminal liability for individuals involved in economic cartels, with penalties of up to R500,000 or 10 years’ imprisonment. However, there have been no prosecutions to date (Steyn, 2018). Furthermore, as of November 2024, there have been no recorded criminal prosecutions under the Competition Amendment Act. Effective deterrence requires both fines and criminal prosecutions. The Canadian Competition Bureau’s approach to combatting cartel conduct emphasises criminal enforcement, including the threat of imprisonment for individuals involved in anti-competitive practices such as price-fixing, market allocation and bid rigging. This approach could serve as a model for South Africa (Zigelski, 2020, p. 6).

Enforcing anti-cartel laws is the pillar of competition law, and punitive proceedings are viewed as a crucial tool for punishing cartel members, disrupting collusion and, most importantly, deterring the creation of new cartels (Nkosi and Boshoff, 2022, p. 347). According to Klaaren et al. (2017, p. 49) and Agisilaou (2013), the main objective of the CCSA should not only be the prosecution of bid rigging cartels, but the CCSA should also create a deterrent to prevent bid rigging cartels from forming in the future. The OECD (2002) indicates that the main goal of these punitive proceedings must be to discourage criminal behaviour.

From research conducted by Budhram and Geldenhuys (2018, p. 27) it appears that there is a trend towards dealing with these abuses through fines, rather than by prosecuting cartel members. Simply levying fines on offending companies is unlikely to deter other companies from engaging in similar corrupt bid rigging behaviour. When combined with fines or civil action, criminal prosecution is even more potent than either one alone. The approach of the Canadian Competition Bureau to bid rigging deterrence offers lessons that can be applied in the South African context in terms of personal criminal liability. The Canadian Competition Bureau has held firm that, to create effective deterrence for cartel conduct, cartel members must be faced with a very real possibility of imprisonment (Zigelski, 2020, p. 6).

Despite the introduction of personal criminal liability under the Competition Amendment Act, the absence of prosecutions highlights the challenges of proving individual intent in complex cartel cases.

Cartel operations are, by nature, highly secretive, with participants often taking deliberate steps to avoid detection. These include avoiding written records, using intermediaries and communicating indirectly or in coded terms, all of which make it challenging to trace collusive conduct back to specific individuals.

Additionally, within corporate structures, decision-making is frequently decentralised or obscured by layers of hierarchy and collective processes, making it difficult to attribute culpability to a single person. Criminal liability, unlike civil penalties, demands a higher standard of proof, requiring evidence beyond a reasonable doubt, not only of participation but of knowing and intentional involvement. This legal threshold is difficult to meet, particularly when direct evidence is scarce, and insider cooperation is limited. Without reliable whistleblowers or concrete documentation, establishing a clear line between individual actions and cartel conduct becomes exceedingly difficult. As a result, despite the presence of legislative tools enabling criminal prosecution, enforcement remains constrained and the intended deterrent effect of personal liability is undermined.

Asset forfeiture under POCA emerges as a key enforcement mechanism aimed at disrupting the financial incentives behind cartel behaviour. It targets the proceeds of unlawful activities, thereby diminishing the economic benefits that sustain collusion. However, it is essential to distinguish between the two primary types of asset forfeiture under POCA: criminal forfeiture and civil forfeiture, as they differ significantly in their application and legal basis.

Criminal forfeiture is conviction-based, requiring proof of a crime and a link between the crime and the assets (Prevention of Organised Crime Act, 1998). In contrast, civil forfeiture allows authorities to seize assets without a criminal conviction, provided there is sufficient evidence linking the property to illegal activities (Competition Commission v Pioneer Foods (Pty) Ltd, 2010). This distinction is crucial for effectively targeting cartel-related assets, as civil forfeiture can be applied even when criminal prosecution is not feasible.

Criminal forfeiture under POCA is inherently conviction-based. It can only be applied after a criminal conviction has been secured. According to Section 18 of POCA, once a person has been convicted of a criminal offence, the court must determine whether the offender has benefitted from the criminal conduct. If so, the court may issue a confiscation order to seize assets derived from or linked to the crime (Prevention of Organised Crime Act, 1998).

In the context of cartel behaviour, this means that if a company or individual is found guilty of participating in collusive activities – such as bid rigging or price fixing – the court can confiscate the financial gains resulting from such conduct. The burden of proof in criminal forfeiture is beyond a reasonable doubt, consistent with criminal trial standards.

Unlike criminal forfeiture, civil forfeiture does not require a criminal conviction to take effect. It allows authorities to seize assets without a criminal conviction, provided there is sufficient evidence linking the property to illegal activities (Competition Commission v Pioneer Foods (Pty) Ltd, 2010). Therefore, POCA targets the assets directly rather than the person who owns them, meaning the legal action is directed at the property suspected of being linked to criminal activities, rather than at an individual.

Under Chapter 6 of POCA, civil forfeiture allows authorities to confiscate assets if there is sufficient evidence to suggest that they are the proceeds of unlawful activities, even if the owner has not been convicted of a crime. Civil forfeiture thus addresses situations where prosecution is impractical while ensuring that tainted assets are removed from the control of cartel members.

POCA provides several mechanisms to facilitate asset forfeiture, each serving a distinct function within the framework of disrupting cartel behaviour. The primary mechanisms include confiscation orders, restraint orders and forfeiture orders. Understanding how these mechanisms apply to cartel-related activities is essential for effectively targeting the financial incentives behind collusion:

• Confiscation orders: targeting criminal proceeds post-conviction.

A confiscation order is a judicial directive issued after a person has been convicted of a criminal offence. Under Section 18 of POCA, once a court determines that the convicted person has benefitted from criminal conduct, it can order the confiscation of assets equivalent to the value of the proceeds derived from that crime.

In the context of cartel behaviour, a confiscation order would typically follow a successful prosecution for offences such as bid rigging or price fixing. For instance, if a construction company director is convicted of participating in a collusive tendering scheme, the court may issue a confiscation order to seize the profits obtained through inflated contracts. The aim is to deprive the offender of the economic benefits gained from illegal activities:

• Restraint orders: freezing assets pending outcome.

A restraint order serves as a preventive measure that is issued prior to the finalisation of criminal proceedings. Its purpose is to preserve assets that may be subject to confiscation in the event of a conviction. The court may grant a restraint order when there are reasonable grounds to believe that the accused has benefitted from criminal conduct and that a confiscation order may subsequently be made.

In the context of cartel enforcement, a restraint order could be sought as soon as an investigation identifies assets linked to collusion, such as bank accounts or real estate suspected of being funded by bid-rigging profits. This order ensures that the assets remain unavailable for disposal by the accused during the criminal trial, thereby preventing the dissipation of wealth that may ultimately be forfeited:

• Forfeiture orders: direct seizure of tainted property.

A forfeiture order, applicable under civil forfeiture proceedings in terms of Chapter 6 of POCA, allows for the direct seizure of assets deemed to be the proceeds of unlawful activities. Unlike confiscation orders, forfeiture orders do not require a criminal conviction and are based on a balance of probabilities rather than proof beyond a reasonable doubt. They are particularly useful when the property itself is linked to illegal conduct, even if the individuals involved are not prosecuted. In cases involving cartel behaviour, authorities may obtain a forfeiture order to seize funds or assets directly connected to collusive agreements, such as money paid through rigged contracts or profits retained by a company found to have engaged in price fixing:

• Application in cartel cases.

The combination of these three mechanisms enhances the enforcement capability against cartels by addressing both conviction-based and non-conviction-based asset recovery. For example:

1. During investigation: A restraint order can be used to freeze the assets of a company or individual under investigation for cartel conduct, preventing their dissipation.

2. Post-conviction: Upon proving guilt, a confiscation order can be issued to permanently seize the financial gains obtained through cartel activities.

3. When prosecution is not feasible: If the assets are clearly linked to cartel conduct but the perpetrators are not convicted, a forfeiture order can be pursued to confiscate the tainted property directly.

By integrating confiscation orders, restraint orders and forfeiture orders, authorities can more effectively target both the individual and corporate gains from cartel operations. This more holistic approach ensures that the financial incentives for collusion are neutralised, thereby reinforcing the deterrence framework within South Africa’s competition law enforcement.

The Zondo Commission, formally known as the Judicial Commission of Inquiry into Allegations of State Capture, Corruption and Fraud in the Public Sector, was established in 2018 to investigate systemic corruption and malfeasance within South Africa’s public institutions and state-owned enterprises. Chaired by then Deputy Chief Justice Raymond Zondo, the Commission’s mandate was to uncover the mechanisms of state capture, identify those responsible and recommend measures to prevent a recurrence. Among its findings, the Commission extensively examined issues of public procurement corruption, including bid rigging, and proposed strategies to dismantle the financial incentives underpinning such practices.

The Commission highlighted bid rigging as a critical issue undermining public procurement processes. Collusive practices, such as pre-arranged bids and manipulated tender processes, eroded fair competition and inflated costs, often resulting in sub-standard service delivery. According to the final report of the Zondo Commission, weak oversight mechanisms and poorly structured tender procedures facilitated these schemes. This not only defrauded taxpayers but also compromised the integrity and effectiveness of public procurement systems (Commission of Inquiry on State Capture, 2022).

The final report further emphasised the importance of removing the financial benefits associated with corruption, including bid rigging. It identified the need for enforcement strategies that directly target the proceeds of crime. By seizing the profits obtained through unlawful activities, authorities can dismantle the economic incentives that drive such conduct. The Commission recommended utilising mechanisms to recover assets linked to corrupt practices, a measure that goes beyond punitive fines (Commission of Inquiry on State Capture, 2022).

The Zondo Commission’s findings underscore the need for enforcement mechanisms that disrupt the financial incentives driving corruption. Its recommendations for recovering misappropriated assets through civil mechanisms align with the principles of asset forfeiture under POCA. By complementing traditional enforcement tools, asset forfeiture could help address systemic procurement corruption, as evidenced by the Commission’s call for stronger, multi-faceted anti-corruption strategies.

While South Africans had great anticipation for the 2010 FIFA Soccer World Cup to be hosted on home soil, the construction cartel rigged tenders for the construction of the stadiums and overcharged the South African Government by 1,709%. Colluding companies received approximately R4.7bn in unfair profits relating to the 2010 FIFA Soccer World Cup construction of stadiums.

South African courts have described economic cartels as cancers in the economy. They erode the principles of competitive bidding, often leading to inflated prices and substandard outcomes. Practices such as price fixing, market allocation and bid rigging – common within the construction industry – disrupt fair competition. Investigations by the CCSA reveal a consistent modus operandi among construction cartels, including customer allocation, fixed profit margins, cover pricing, loser fees and subcontracting agreements. These practices disproportionately involve major players in public sector projects, amplifying their impact on the economy.

The tenders for the World Cup stadiums were governed by Section 217 of the South African Constitution, which mandates that public procurement processes be fair, equitable, transparent, cost-effective and competitive. However, the construction cartel’s bid rigging violated all five principles, undermining the very foundation of the procurement system. Existing deterrence measures – primarily fines and the threat of criminal liability – have proven insufficient. The fines imposed amounted to just 1.3% of the total tender value, far below the fixed profit margin of 17.5% agreed upon by the cartel. Even after paying fines, companies retained profits of approximately 16.2%. Moreover, no individual has been criminally prosecuted for involvement in bid rigging, further diminishing the deterrent effect of current measures.

In combating cartel behaviour in South Africa, asset forfeiture emerges as a possible mechanism for disrupting the financial incentives that underpin collusion. The current reliance on fines and criminal liability has proven insufficient to deter cartel formation, as companies often absorb fines as a business cost, while criminal prosecutions remain rare and challenging to secure. Asset forfeiture, particularly when integrated as a complementary tool alongside existing punitive measures, addresses the critical gap by directly targeting the economic benefits derived from unlawful activities.

The distinction between criminal forfeiture and civil forfeiture under POCA is fundamental to understanding how asset forfeiture can be effectively used. Criminal forfeiture, which requires a conviction, directly penalises offenders by confiscating assets linked to proven criminal conduct. In contrast, civil forfeiture operates independently of criminal convictions, allowing the state to seize tainted assets when prosecution is not feasible. This dual approach enhances enforcement capacity by addressing both situations where criminal liability is established and cases where asset seizure is justified despite the absence of a conviction.

Furthermore, the specific mechanisms of confiscation orders, restraint orders and forfeiture orders provide a structured approach to asset recovery. Confiscation orders are instrumental in seizing proceeds following a conviction, while restraint orders ensure that assets remain preserved during ongoing investigations. Forfeiture orders, particularly in civil contexts, enable the state to confiscate assets shown to be linked to cartel activities, even in the absence of a criminal conviction.

Targeting the financial core of cartel operations not only acts as a deterrent but also reinforces public confidence in the integrity of the competition law framework. As the South Africa continues to grapple with the challenges of bid rigging and other collusive practices, the strategic use of asset forfeiture can play a vital role in restoring competitiveness and fairness in the market. Future research and policy discussions ought to consider investigating how asset forfeiture could complement existing measures, ensuring a more robust response to cartel activity.

The authors would like to thank the Workwell Research Unit at the North-West University for its support in this project, which was completed under the sub-programme ReTORIC (Research and Teaching in Organised and Integrity Crimes).