Competition settlement: Only two construction firms up to date on payments

Only two of the seven JSE-listed construction companies that are signatories to the Voluntary Rebuilding Programme (VRP) settlement agreement with the government have confirmed that they are up to date with their payments.

The companies agreed in terms of the VRP agreement finalised in 2017 to collectively contribute R1.25 billion over 12 years to a fund to be established for socio-economic development and undertake further transformation initiatives.

Raubex CEO Rudolf Fourie confirmed on Friday the company’s VRP instalment payment for 2020 has been paid and the company is up to date with its payments in terms of the agreement.

WBHO company secretary Shereen Vally-Kara said WBHO’s management confirmed that the group’s VRP payments are up to date.

Those behind with their payments

Stefanutti Stocks CEO Russell Crawford said on Thursday that Covid-19 has introduced a new challenge with respect to this settlement agreement and it is currently engaging with the government “to negotiate a deferment of the current year’s instalment”.

Group Five and Basil Read failed to respond to a request for comment while Murray & Roberts (M&R) group investor and media executive Ed Jardim said: “This isn’t a matter that Murray & Roberts is able to comment on at the moment.”

Aveng CEO Sean Flanagan said the SA Forum of Civil Engineering Contractors (Safcec) had written to Department of Trade, Industry and Competition (dtic) Minister Ebrahim Patel last year, adding “we await his [Patel’s] response”.

However, Safcec CEO Webster Mfebe stressed on Saturday that Safcec has not made any approach to the dtic minister on behalf of any VRP signatory “as each must plead their individual circumstances”.

‘Evidence of distress’

Mfebe added that Safcec will support any company that provides evidence of their distress because the forum is “cognisant of the current poor trading environment that predates the Covid-19 lockdown, which has in fact exacerbated the situation”.

“There are many payment holidays which have been arranged by various players in the economy in recognition of the devastating effect the Covid-19 pandemic and the lockdown has had across all economic sectors.

“So it is not unreasonable to ask for the deferment of payment to protect the livelihoods of people because the construction sector is continuing to lose jobs,” he said.

Mike Wylie, a former chair and CEO of WBHO and now chair of the Tirisano Trust, the socio-economic development fund to which the construction companies must contribute in terms of the VRP agreement, said there is not a blanket request from the industry for a deferment of the VRP instalment payment for 2020.

Attempts to obtain comment from the dtic on the status of the deferment requests was unsuccessful.

Additional transformation initiatives

The seven signatory companies to the VRP also agreed to undertake further transformation initiatives. This include either becoming “fully transformed” with at least 40% of equity in the hands of black South Africans, or committing to significant mentoring initiatives for up to three emerging black-owned contractors. The latter aims to enable the contractors to sustain a cumulative annual revenue equal to at least 25% of the mentor companies’ annual revenue from civil engineering and building works delivered in South Africa by 2024.

M&R sold its southern African infrastructure and building business, which included Concor, to an empowerment consortium led by the Southern Palace Group for R314 million in 2016 and Aveng sold Grinaker-LTA to the black-owned Laula Consortium in December 2019.

The remaining signatory companies to the agreement entered into mentoring agreements with emerging black-owned construction contractors.

Wylie said he believes the emerging black contractors being mentored “are in good shape” and on track to achieve the specified targets.

“It’s nice that they [mentorees] have got some assistance in this very difficult period.

The VRP agreement settled any civil claims and potential claims for damages against the seven companies from government and state-owned entities arising from admissions of collusion and bid-rigging in their settlement agreements with the Competition Commission.

Sector facing challenges

Stefanutti Stocks’s Crawford said the signatories to the agreement are facing several challenges regarding the implementation of their agreements.

He said the parties have requested a supervisory committee meeting with the ministers of rural development and land reform, economic development, public works, and transport to resolve these challenges.

“Numerous requests [were] made in May last year and we have not yet received a response.

“The lack of sincere communication with government is the biggest challenge facing the successful implementation of the settlement agreement objectives,” he said.

Wylie said the supervisory committee comprising the people who put the VRP agreement together should be meeting at least once a year, but has not yet met since the VRP was finalised.

“There have been so many changes of ministers to different portfolios, they haven’t got their act together to have that meeting.

“We are hoping in the new year we will have a meeting with the supervisory committee because that sort of pulls the whole industry together – the companies and the ministers of the Presidential Infrastructure Coordinating Committee (PICC),” said Wylie.

“We are hoping that will come next year, especially with the importance of infrastructure spend in our post-pandemic recovery,” he said.