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

Financial Mail - Investors Monthly - - Special Report Infrastruc­ture -

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) in­creas- in­gly 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.

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