Waiting for taps to open again

Industry is suffering from government’s reluctance to invest in large infrastructure projects after the 2010 soccer World Cup

SA’S big construction companies are mostly still swimming in a sea of red ink, as government starves them of significant infrastructure projects. Many have shifted operations across the border into the rest of Africa. Some have gone global in their search for profits.

Large Jse-listed construction companies such as Aveng, Murray & Roberts and Wilson Bayly Holmes-ovcon (WBHO) increasingly garner profits abroad. Group Five, meanwhile, has been kept afloat in recent years by its investments and concessions business.

The latter develops and operates toll roads, including in SA, Zimbabwe, Hungary, Poland and Ireland.

Most recently, the company’s Intertoll Europe underlying publicprivate-partnership project investment portfolio has sold a 49.99% interest to globally managed Aberdeen Infrastructure Funds for about €43m in cash, to invest in toll roads in Europe, Turkey and North America.

This comes after the group suddenly announced in late February in its interim results to December 2016 that CEO Eric Vemer would “be leaving . . . in the next few weeks”. It has recently appointed long-serving executive Themba Mosai as CEO. He had been acting CEO for three months subsequent to Vemer’s departure.

Vemer was followed to the exit by the group’s engineering head Willie Zeelie, concessions head Jon Hillary, and human resources head Jesse Doorasamy. Nonexecutive directors Mark Thompson and Babalwa Ngonyama also quit.

Market talk is that the catalyst for the exodus seems to have been that certain Group Five directors wanted to buy the valuable international concessions business for themselves — then sell it for a large profit. Vemer and others did not like this — and they left, or were pushed.

This led fund manager Allan Gray, whose clients hold 25% of the company, to call for an extraordinary general meeting, to reconstitute the board of directors of Group Five.

Allan Gray director Andrew Lapping says it became concerned because a lot of people have suddenly left the company — executives and directors. “We have lost faith in the board and think the company needs a fresh start — with a reconstituted board,” he says.