Builders strike deal with state

THE government yesterday released details of its agreement with construction companies to promote transformation in the sector, saying black-owned firms and equity owners could see turnover totalling between R21 billion and R27bn annually over the next seven years.

The agreement, which was entered into following the companies being fined R1.4bn for collusion, would see the companies pay an additional R1.5bn over the next 12 years towards development projects in the industry.

“The companies have paid their first tranche of R117 million to the national revenue fund. The next tranche is due in July,” said Economic Development Minister Ebrahim Patel.

The companies, Murray and Roberts, Aveng, WBHO, Stefanutti Stocks, Raubex, Group 5 and Basil Read, have also committed to increasing black ownership and participation in the industry.

Murray and Roberts sold 100% of its construction and infrastructure company to the Southern Palace Group, a black-owned consortium.

“Murray and Roberts will remain in other infrastructure sectors such as oil and gas, metals and minerals and power and water sectors,” said Patel.

Partners

Aveng has also opted to sell equity. The company is selling 51% equity in Aveng GrinakerLTA to black investors and black-owned construction companies.

WBHO have identified three partners to reach 25% of its turnover in construction and civil engineering in seven years.

The companies are Fikile Construction, Motheo Construction, a black womenowned company and Edwin Construction.

In a similar deal, Stefanutti Stocks will partner with two companies – TN Molefe Construction and Axsys Projects – and will also aim for these entities to reach 25% of its turnover in seven years.

Raubex is still talking to emerging black-owned companies and would announce its partners soon, while Group 5 and Basil Read have asked for a few months to decide on whether they will sell equity or partner with emerging companies.

“Based on current turnover and profit levels in the sector, it is projected that by the end of the seven years, black firms and equity owners… would have a combined turnover of between R21bn and R27bn and over the seven years as a whole through the phased-in arrangements, have a cumulative turnover estimated to range between R104bn and R123bn,” said Patel.

Annual profits are estimated between R600m and R770m yearly, and cumulatively at between R3bn and R3.6bn.