Sanral delays awarding tenders worth at least R16bn

At least R16 billion in SA National Roads Agency (Sanral) tenders have been adjudicated but not awarded – some for about a year – and none of South Africa’s major road contractors know why.

An analyst estimates that the total value of delayed Sanral contracts could be as high as R25 billion.

Further evidence has also been provided by JSE-listed South African construction companies about the slow rollout of infrastructure projects.

These delays, and the slow rollout of projects, are occurring despite President Cyril Ramaphosa’s repeated assurances – the last in his State of the Nation Address (Sona) in February – that infrastructure is central to the government’s economic reconstruction and recovery.

WBHO Group CEO Wolfgang Neff confirmed on Wednesday that the group’s road and earthworks division is the lowest-priced competent contractor on over R10 billion worth of roadworks projects.

But Neff said the slow rollout of infrastructure in South Africa remains concerning – particularly in the case of Sanral, which keeps on extending the validity of tenders.

Neff said this R10 billion worth of work is spread over about 10 different projects.

Raubex CEO Rudolf Fourie confirmed that it is also being affected by Sanral tender adjudication and tender award delays. The company has had several potential Sanral contracts worth a total of about R6.5 billion affected by these delays.

Fourie said Raubex does not understand the reason for these delays, adding that some of the tender awards have been delayed by more than a year.

Sanral informed the company that the awards would be finally made in December 2021, and then in January 2022.

He said Raubex has asked Sanral what is causing the tender award delays but was merely told “they are in the process”.

“We are uncertain for the reason for it [the delay],” he said.

Analysis paralysis?

Neff believes a combination of factors is delaying the award of these projects, including the possibility that Sanral’s board may not have the correct experience to determine whether a bid is competitive or not and whether the contractor will be able to complete the work.

“I think it’s the experience of the board making that decision, so I think its analysis paralysis.

“In my opinion they should review the whole procurement process to rather rely on reputable consulting engineers in South Africa that have the necessary skill set to determine whether a contractor can deliver a project, has the capacity to do so, and whether the contractor’s bid is competitive or not,” he said.

Neff said one of the first questions WBHO asks when there is a delay in the awarding of a tender is if the money is available for the project.

“We have been assured on numerous occasions that Sanral has the money,” he said.

Almost-immediate employment isn’t happening

Peregrine Capital executive chair David Fraser said on Thursday the total value of Sanral tenders delayed could be between R20 billion and R25 billion.

Fraser stressed that road contracts create almost-immediate employment and have an immediate multiplier effect because the contractors need to procure material and services, mobilise camps, and order food.

“There is a massive multiplier effect on these road projects and they do deploy relatively quickly and can create jobs relatively quickly as well,” he said.

Fraser said it is a huge frustration that at the last stage of the tender approval process, and for some unknown reason, none of these tenders are being awarded despite the fact the funds have been budgeted, allocated and approved and the tenders have been adjudicated.

“It’s like a dead end. All we want to do is get this country working again,” he said.

Fraser questioned how contractors who have submitted bids for these delayed tenders can manage their businesses.

He said contractors have holding costs because of people who are not working on projects, and cannot tender on new projects because the delayed contracts “could be awarded tomorrow” and they could be required “to be on site in two or three months”.

A list of questions was emailed to Sanral but it has not yet responded. This article will be update once a response is received.

Not just roads

Neff also took a sideswipe at the slow rollout of the government’s infrastructure development programme.

“All of you will recall government’s 55 shovel-ready projects announced in July 2020 to counteract the effects of Covid-19 and to act as a flywheel for the construction industry,” said Neff during a presentation of WHBO’s financial results for the six months to end-December on Wednesday.

“We follow 26 of them where the work suited what we do. Unfortunately only two of the 26 projects have been awarded.

“A further depressing statistic is that of all the work we have priced for the various SOEs [state-owned enterprises] in South Africa, which is R70 billion worth, only 14% has been awarded in terms of value.

“It is quite clear that government’s infrastructure development rollout is frustratingly slow,” he said.

The government in July 2020 unveiled 50 strategic integrated projects (SIPs) and 12 special projects involving an investment of R340 billion as the first tranche of the Sustainable Infrastructure Development Symposium South Africa (Sidssa) project pipeline.

In October 2021 it unveiled the second tranche of the Sidssa project pipeline comprising 55 new catalytic infrastructure projects from various sectors valued at about R595 billion, which it indicated were anticipated to create an estimated 538 500 employment opportunities.

There was a funding gap of about R441 billion for the 55 new projects presented to the market in the second tranche, but the first tranche projects were supposedly fully funded.

In his Sona earlier this year, Ramaphosa said the government has prioritised infrastructure projects to support economic growth and better livelihoods, especially in energy, roads and water management.

Ramaphosa said the Infrastructure Fund is at the centre of this effort, with a R100 billion allocation from the fiscus over 10 years.

He said the Infrastructure Fund is now working with state entities to prepare a pipeline of projects with an investment value of about R96 billion in student accommodation, social housing, telecommunications, water and sanitation and transport.

“Several catalytic projects to the value of R21 billion are expected to start construction this year,” he said.

“Of this, R2.6 billion is contributed by government and the balance from the private sector and developmental finance institutions.

“Government will make an initial investment of R1.8 billion in bulk infrastructure, which will unlock seven private sector projects to the value of R133 billion.”