‘Mafia’ guns for Sanral
THREATENED: ROAD CONSTRUCTION PROJECTS STRUGGLING TO CONTINUE
Gangsters ‘arrive at construction sites in a bakkie, fire shots in the air, and demand their share’.
Thugs ‘arrive in a bakkie, fire shots in the air, and demand their share’.
Road construction in South Africa has taken a serious knock due to the so-called “construction mafia” violently demanding subcontracts on the basis of a new treasury regulation aimed at ensuring that principal contractors outsource 30% of the work to local subcontractors.
South African National Road Agency (Sanral) engineering executive Louw Kannemeyer told Moneyweb that many of its existing projects have been disrupted, some for months, and the roll-out of new projects was stopped in August last year due to the high risk to staff and property.
As a norm, Sanral has 500 – 600 projects at different stages of development and 200 – 250 live projects at any given time. Sanral’s consistent roll-out of work has been a lifeline to consulting engineers, contractors and suppliers for many years and the current contract drought has driven many to the brink of bankruptcy.
This is being exacerbated by uncertainty about other new treasury regulations that has brought awards for road design to a standstill more than a year ago.
According to Consulting Engineers SA (CESA) CEO Chris Campbell it has a “massive impact” on the consulting industry and only compounds the general lack of infrastructure spending. He says multinational companies keep their skilled staff busy with work outside of South Africa, but smaller companies simply lose not only road design skills, but also those of structural specialists.
Rudolph Fourie, CEO of the county’s largest road builder Raubex, says the group’s volume of work from Sanral dropped by 50%. This has a devastating effect on contractors and suppliers and retrenchments are increasing.
According to Kannemeyer, local communities believe that the new treasury regulation entitles them to 30% of the project. So-called business forums are now demanding control over the total amount that can be millions. The typical contract for road rehabilitation, strengthening and upgrading is worth upward of R300 million.
Kannemeyer said these groupings didn’t want to participate in any formal tendering process.
He added: “They arrive (at a road building site) in a bakkie, fire shots in the air, and demand their share. They burn equipment and push workers in front of moving traffic.”
A recent incident in Polokwane left three people injured, two of them in the ICU, after the Radical Economic Transformation Forum (RETF) disrupted a meeting between Sanral representatives and contractors relating to the multimillion-rand construction of the city’s eastern bypass road.
In one instance, the thugs dug a trench around a prefabricated office with Sanral staff, filled it with fuel and threatened to set it alight unless their demands were met.
The risk to staff and property is becoming unacceptable and some contractors stopped work as a result, Kannemeyer said. Work on the Hammersdale intersection in KwaZulu-Natal has just resumed after the Delangokubona Business Forum disrupted it since late last year.
At first the activities of this construction mafia was limited to KwaZulu-Natal, but it has now spread to Limpopo, North West and the Northern Cape. It takes up a lot of management time and attention with Kannemeyer and Sanral CEO Skhumbuzo Macozoma travelling from one site to the other to address “business forums” that insist on speaking to the top officials.
Sanral is engaging National Treasury as well as the Construction Industry Development Board (CIDB) in an effort to get the real intention of the regulation explained to communities on the ground, Kannemeyer said. It will in fact meet with treasury Director General Dondo Mogajane this week.
The roads agency has also developed a 14-point plan to deal with the new dynamic on site through project liaison committees.
Sanral has resumed awarding design contracts after treasury eventually gave clarity in February on the inclusion or not of “provisional sums” in the price for bid evaluation purposes. Kannemeyer said Sanral had since awarded more than ten contracts and another 15 to 17 will be awarded if the Sanral board approves the awards next week.
He says with regard to Sanral’s toll portfolio the major construction of new roads will only proceed once there is certainty about the way forward with Gauteng’s e-tolls. This is currently on President Cyril Ramaphosa’s desk.
Sanral has not been able to raise money on the market for more than a year and is nearing the debt ceiling of about R48 billion.
According to Industry Insight:
Sanral’s contribution to the value of road projects awarded has shrunk from 53% in 2012 to 19.4% in 2017 and 12% in the first four months of 2018;
The value of Sanral contract awards dropped by 71% over the last 12 months at the end of April. Total value of roads contracts awarded in the same period dropped by 8%.