Afrimat referred to Tribunal for prosecution

The Competition Commission on Monday referred Afrimat, through its wholly owned subsidiary Clinker Supplies, to the Competition Tribunal for prosecution for allegedly abusing its dominance by charging excessive prices.

Through the subsidiary, Afrimat is a supplier of a main ingredient in clinker bricks, largely used in the construction of government housing programmes. It has exclusive rights from Eskom to source waste ash from dumps at three disused coal-fired power stations in Gauteng and the Free State. Afrimat also has royalty and indefinite land rental agreements with Eskom until the ash dumps are exhausted. 

The company is, therefore, the only supplier of clinker ash within a 100 km radius of each respective ash dump site. This means it is dominant in the relevant geographic markets for the production and supply of the clinker ash aggregate. Clinker brick manufacturers in these areas, who use the clinker ash aggregate, are dependent on Afrimat.

An investigation against Afrimat and two subsidiaries, Clinker Supplies and SA Block and Concrete, was initiated by the Competition Commission in March 2015.

Afrimat acquired Clinker in 2002 and, following the acquisition, it escalated the pricing of clinker ash aggregate significantly. The investigation found that the prices exceeded its economic value dramatically.

Clinker ash aggregate is used as a main ingredient to produce clinker bricks, generally used for State-funded low-cost housing which provides shelter for the poor.

The commission found that Afrimat had abused its dominant position from 2012 until at least 2016, by charging clinker bricks manufacturers excessive prices to the detriment of consumers. In addition, the commission found that the prices bear no relation to the economic value of the product.

It added that the conduct may be ongoing.

The commission is seeking an order from the tribunal declaring that Afrimat has contravened the Competition Act and that it must pay the maximum fine allowable by law which amounts to 10% of its yearly turnover in South Africa, as well as its exports from the country.

Afrimat on Monday said it had been cooperating with the commission since the start of the commission's investigation. "After taking legal advice and considering the complaint, we believe there is no merit to the complaint and will, therefore, vigorously defend ourself before the tribunal," it added.