Construction projects: when the foreign shoe fits, SA should wear it

It is not unusual for major contracts to be awarded to wholly or partially owned foreign bidders

From the Maputo Bay Bridge to Nigeria’s Mambilla hydroelectric power project, African countries have been drawing on the engineering and construction prowess of some of the world’s largest construction companies. This is for good reason as they were the right companies for the job.

Concerns have been raised about SA National Road Agency’s (Sanral’s) awarding of four of the five previously cancelled construction tenders to bidders with a foreign component, particularly Chinese construction firms.

To state the obvious, bidders with a Chinese component that have partnered with local companies cannot be characterised as exclusively Chinese unless, of course, mischief or an antiChinese sentiment is the motive force.

Among those expressing dissatisfaction that SA companies were not awarded more of these tenders are industry associations and spokespersons. While Sanral acknowledges these concerns, we also note that due to the significant size of these projects, it is common practice for SA to award major contracts to wholly or partially owned foreign bidders, provided they meet all the requirements to perform the work.

These requirements typically include transformation, local content and skills and enterprise development obligations. Likewise, SA companies with the requisite expertise are free to bid for and are awarded major projects across the continent and beyond.

The local spin-offs of large infrastructure projects are rightfully a key consideration in the awarding of tenders, given the pressures facing the SA economy in terms of its high unemployment levels and sluggish economic growth. Winning bidders are obliged to comply with all mandatory local content requirements, regulations and legislation, including the use of local labour.

There is, therefore, no doubt that every one of these projects will generate short- and long-term benefits for all South Africans. In addition to creating jobs, they will generate income for small, medium and microenterprises and use local materials, such as steel and cement. On these local requirements, Sanral is on record as saying it will not compromise.

Most importantly, working hand in hand with local construction industry stakeholders, the projects will contribute towards the greater infrastructure development plan, which is critical in helping SA achieve its long-term economic and social goals to transform lives and support business prospects and growth across all industries.

For years, SA construction industry associations and stakeholders have emphasised the need for local construction companies to be competitive against their international rivals. As such, it is common for major construction firms to compete and operate internationally, including SA companies.

The global industry is dominated by a few large companies headquartered in China, France, Spain, Japan, the US and South Korea, whose revenues combined in 2020 accounted for 96% of the $1.5-trillion total global figure.

Topping this list as the largest construction company in the world is China State Construction Engineering Corporation, which has been awarded the EB Cloete Interchange Improvements project in Durban in a joint venture with Base Major, an SA business founded by Chinese businessman and company director Stephen J Lu.

Lying fourth in terms of size is the China Communications Construction Company, another majority state-owned, publicly traded multinational engineering and construction company, which has been awarded Sanral’s Mtentu Bridge project in the Eastern Cape in a joint venture with Mecsa Construction SA.

The Mtentu Bridge was initially awarded to the Aveng Strabag joint venture, with Strabag as the foreign component of the partnership. The venture has since abandoned site. Strangely, there was no outcry back then about foreign participation. But then, nationalism, isolationism and many other-isms have never been logical.

As both the Mtentu Bridge and EB Cloete Interchange projects are extremely technically complex and challenging, requiring mega-bridge construction expertise, it is not surprising that Chinese construction companies have successfully secured participation in these projects, as this is a skill in which the Chinese construction industry is a global leader.

In Africa, the construction prowess of the Chinese shows its face in many high-profile projects. The Maputo Bay Bridge, a single-span gravity-anchored suspension bridge, is the longest suspension bridge in Africa, with a main span of 680m and twin north and south towers 141.2m high. Built by the China Road & Bridge Corporation, it facilitated the expansion of the capital city Maputo’s urban space and sped up the urbanisation of the town of Katembe. Though the bridge was the product of a China-Mozambique collaboration, it also used the technical strengths of industry experts from other countries and served as a model of multilateral co-operation.

Another African construction involving international participation is developing the Mozambique liquefied natural gas (LNG) project. Contractors include a consortium of US-led McDermott, Japanese firm Chiyoda Corporation and Italianbased Saipem, which will be responsible for engineering, procurement and construction of the onshore liquefaction plant and support facilities.

Australian-based engineering company Worley was contracted by Total to provide engineering and consulting services for the delivery of the onshore and subsea facilities. There is no room for isolationism and narrow nationalism on the part of the Mozambicans.

Locally, the design of the Cape Wineland’s Huguenot tunnel is another illustration of established collaboration with foreign experts. Opening in March 1988, it was considered the largest and most costly single construction project undertaken by the then SA Roads Board. The design work was carried out by SA’s VKE in partnership with Swiss Electrowatt, a Zurich consulting engineering company.

With an order book of R16.4bn, one of SA’s leading construction engineering companies, Raubex, has R5.29bn of Sanral projects on the go, as well as a number of international projects, including a R1.2bn Namdeb project in Namibia and a R2.4bn Sequi River Bridge project in Lesotho, in which Raubex is a 21% joint venture partner.

The company’s flagship project and the single biggest contract awarded to date is the R2.5bn engineering, procurement and construction contract for upgrading the Beitbridge border post in Zimbabwe.

The picture is similarly international for Stefanutti Stocks, whose latest results, released in February, revealed an order book of R5.3bn, including R1.7bn from work outside SA’s borders.

The outlook for local construction appears more positive in the short to medium term due to renewed and rising tender activity after two-anda half sluggish years. Instead of seeing international competition as unfair, we believe it is more important to view competition as an opportunity to collaborate and learn new skills.

It is also an opportunity to achieve superior quality, lasting design and sophisticated engineering on infrastructure projects whose successful completion will be critical to the recovery and revival of SA’s economy.