Supplier of main ingredient in RDP bricks charged for abuse of dominance

A supplier of a main ingredient in clinker bricks – largely used in the construction of RDP houses – has been referred to the Competition Tribunal for abusing its dominance by charging excessive prices.

The Competition Commission‚ which has referred the case to the Tribunal‚ said that 
Afrimat‚ through its wholly owned subsidiary Clinker Supplies‚ has exclusive rights from Eskom to source waste ash from dumps at three disused coal-fired power stations in Gauteng (Klip and Vaal) and the Free State (Vuurfontein).

The company also has royalty and indefinite land rental agreements with Eskom until the ash dumps are exhausted‚ making it the only supplier of clinker ash within a 100km radius of each respective ash dump site.

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“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‚” the commission said.

An investigation was initiated by the Competition Commissioner in March 2015 against Afrimat and its two subsidiaries‚ Clinker and SA Block and Concrete.

“Afrimat acquired Clinker in 2002 and following the acquisition‚ Afrimat escalated the pricing of clinker ash aggregate significantly. The investigation found that the prices exceeded its economic value dramatically‚” the commission said.

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The commission found that Afrimat abused its dominant position from 2012 until at least 2016 – which conduct might be ongoing - 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.

“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 (administrative penalty) allowable by law which amounts to 10% of its annual turnover in South Africa as well as its exports from the country.”