Compliance issues emerge in Sanral contracts awarded to Chinese JVs

The compliance of two of the successful joint venture (JV) partners with the tender requirements for the recent mega contract awards made by the South African National Roads Agency (Sanral) has been thrown into doubt.

It has also emerged that the four contract awards are between 16.4% and 34.6% higher than bids received from the preferred bidders in May this year for virtually the identical projects.

Read: Saice wants answers from Ramaphosa about tenders awarded to Chinese JVs

A Sanral media statement released last week indicated that the value of the tender awards was identical to the bids previously submitted before these tenders were cancelled for non-compliance with a Sanral board directive.

However, Sanral has corrected that media statement on its website, without circulating it to Moneyweb and possibly other media houses.

The correction means the four contract awards are for a total of R12.75 billion, which is over 20% more expensive than the R10.6 billion bids received for these contracts six months ago.

Compliance issues have emerged with China State Construction Engineering Corporation (CSCEC) and Mota Engil Construction South Africa (MECSA).

The CSCEC Base Major JV was awarded the R5.02 billion contract to overhaul Durban’s N2/N3 EB Cloete interchange as well as the R2.44 billion N3 Ashburton contract, also in KwaZulu-Natal.

The China Communications Construction Company Ltd (CCCC) MECSA JV was awarded the R4.05 billion N2 Mtentu Bridge contract in the Eastern Cape’s Wild Coast.

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The tenders advertised by Sanral specifically stated that only tenderers who are registered on the National Treasury Central Supplier Database are eligible to tender.

Sanral estimated that bidders should have a Construction Industry Development Board (CIDB) contractor grading designation of 9CE or higher.

The CIDB specifically states that it is mandatory for all contractors, whether local or foreign, to apply and register with the CIDB before performing any work subject to CIDB Act 520.

It adds that joint ventures do not need to register but all JV partners must be individually registered.

The CIDB’s Register of Contractors reveals that:

  • CSCEC’s registration expired on 7 May 2021 and the company only has a 1CE (Level 1 civil engineering) CIDB grading, which limits it to contracts with a value of R1-million or less; and
  • MECSA has an approved grade of 9CE but under enterprise status it is listed as “Deregistered”.

Sanral last week clarified its position on the recent award of tenders adjudicated by the Development Bank of Southern Africa (DBSA) following what it termed the emergence of a negative narrative with regard to Chinese investment into South Africa.

Among other things, Sanral said both CCCC and CSCEC are registered on the CIDB register and the National Treasury’s Central Supplier Database.

Sanral pointed out that both firms also submitted valid broad-based black economic empowerment (B-BBEE) certificates and, as part of their respective JVs with SA-based partner companies, both companies complied with all applicable procurement regulations.

Moneyweb on Monday sent Sanral general manager for marketing and communications Vusi Mona copies of the registration and grading status of the CSCEC and MECSA that were taken off the CIDB’s Register of Contractors.

Mona said on Monday that according to documents at Sanral’s disposal, the expiry date of CSCEC’s CIDB registration is 21 February 2021.

That expiry date is more than two months earlier than the 7 May 2021 expiry date reflected on the CIDB register, with the registration expiring in both instances before the tenders were readvertised.

“Documents at our disposal also affirm that the CSCEC’s grading is 9CE, which is one of the requirements needed for companies to bid for a contract of this magnitude,” added Mona.

He claimed the expiry date of MECSA’s CIDB registration is 11 March 2024 and said that MECSA’s grading is 9CE, reiterating that this is also one of the requirements needed for companies to bid for a contract of this magnitude.

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Attempts on Monday to obtain comment from both CSCEC and MECSA on their CIDB registration and grading status were unsuccessful.

SA Institution of Civil Engineering (Saice) president Professor Marianne Vanderschuren said on Monday she does not know if the CIDB’s Register of Contractors is accurate.

Vanderschuren referred to the increase in the cost of the tender awards for these four projects and indicated that she believes “this is important”.

She referred to the value of the initial contract for the Mtentu Bridge project. It was awarded to the Aveng-Stabag Joint Venture (ASJV) in 2017, with the initial contract value at about R1.6 billion.

Aveng claimed in 2019 the ASJV had lawfully terminated the contract in 2019 – following a force majeure event after civil unrest, commotion, protests and threats of harm resulted in the joint venture being denied access to the site and the ability to safely continue the execution of the project – while Sanral claimed the ASJV abandoned the contract.

Construction mafia

Vanderschuren said foreign companies are coming into South Africa to do work because it is “almost impossible” for South African contractors to work in the country because of construction mafia issues.

She believes the activities of the construction mafia have been driven by the extremely slow rate at which tenders are issued.

“Even though the construction industry is picking up slightly, the industry is so slow that there are too many competitors for a site and that provides the opportunity for criminal elements to come in as well,” she said.

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Vanderschuren wrote an open letter to President Cyril Ramaphosa last week on behalf of Saice questioning Sanral’s awarding of tenders to JVs led by foreign companies and claiming that between 11 300 and 13 300 local jobs will not materialise because of these awards.

“For me, the letter was more importantly saying ‘Mr President this is what you are promising. This is not materialising. What are you doing?’,” she told Moneyweb.

“It’s not even about Sanral. Sanral is just one example. It’s about national government that filters through to the provinces and some municipalities that are not doing what they are promising. That is a huge risk for this country. With expected population growth, if we don’t get the infrastructure right now, we will leave huge future populations with a failed state,” she added

“I really hope that this government can put their money where its mouth is and make sure that that is not the future for our children,” said Vanderschuren.

Listen to Vusi Mona’s recent interview on SAfm Market Update with Moneyweb (or read the transcript):