R11BN COEGA INVESTMENT IN JEOPARDY
The completion deadline for South Africa’s largest motor investment in 40 years will most likely be missed following disagreements between small local businesses and the main contractor over the allocation of work.
This adds to the note of gloom following the announcement by General Motors SA last month that it would exit the country before the end of the year, resulting in the loss of more than 500 jobs.
The R11 billion car plant at the Coega industrial development zone in Port Elizabeth, a joint initiative between China’s Beijing Automotive International Corporation (BAIC), which is the majority shareholder with a 65% stake, and the Industrial Development Corporation (IDC) is a product of 26 bilateral agreements signed between China and South Africa in 2015.
It was launched in August last year with construction earmarked to start in December the same year. The plant was meant to be fully operational during the first quarter of 2018.
The hold-up is a dispute between BAIC SA and small, medium and micro enterprises (SMMEs) affiliated to the National African Federated Chamber of Commerce and Industry (Nafcoc) in Nelson Mandela Bay.
About 2 500 jobs are expected during the construction phase of the plant that will produce trucks and sport utility vehicles.
The 47-hectare site earmarked for the project remains untouched with no sign of construction machinery.
The IDC this week could not give a forecast for when the project would start.
“It will start as soon as all requirements are met,” IDC spokesperson Mandla Mpangase told City Press without explaining further.
At a recent stakeholders’ briefing held at a Port Elizabeth hotel and hosted by the IDC, Nafcoc threatened to stop construction if its affiliated SMMEs were not reasonably involved in the project.
Nafcoc Nelson Mandela Bay has 10 affiliates that are women- and youth-owned businesses and represents small businesses which are mainly black-owned.
A source close to the discussions told City Press that Nafcoc secretary-general Mandla Msizi had been asked to desist from making “harsh” statements as the matter was “sensitive” and would likely jeopardise the investment.
“We will not comment on the project as we are currently in discussions with BAIC SA,” said Msizi when approached for comment.
Hinting that there were problems with the deal, the IDC’s Mpangase told City Press negotiations with Nafcoc were ongoing.
“The project owners have included a significant role that SMMEs will play in the project. All work packages – paint shop, body shop and external works – include a significant portion allocated to SMMEs.”
The Nelson Mandela Bay Business Chamber said it was also talking to BAIC SA regarding the involvement of its members.
“We have been engaging with the IDC and the majority shareholder over the past couple of months in terms of getting local member companies of the business chamber registered on the BAIC SA database for the purposes of local procurement of goods and services,” the chamber said.
Nafcoc’s main gripe seems to be the stringent conditions stipulated by the main contractor – Beijing Industrial Designing and Researching Institute (BIDR) – for SMMEs to qualify.
Some of these requirements are that SMMEs must register on the company database before being invited to submit bids for work; work will only be given to SMMEs with tender prices that are competitive and market-related; tender offers will first be evaluated for functionality and those that meet the requirements will then be scored using a point system and a broad-based black economic empowerment scorecard.
The BIDR has also classified the SMMEs according to the ratings of the Construction Industry Development Board, which keeps a national register of contractors, and will allocate work based on these ratings.
“The BIDR has divided the construction of the project into six main contracts. The development agreement that the BIDR has signed with BAIC SA determines that a minimum of 35% of the overall construction cost must be awarded to local SMMEs,” BAIC SA said.