Building firms can’t pay
CONSTRUCTION COLLUSION AGREEMENT: FIRMS NEGOTIATE FOR DELAY Adverse market conditions leading to operating losses force companies to seek putting off current instalment.
The Voluntary Rebuilding Programme ( VRP) settlement agreement reached between the government and seven listed construction companies related to their collusive and bid-rigging activities is in trouble.
Stefanutti Stocks chief executive Russell Crawford confirmed on Thursday that Covid-19 has introduced a new challenge with respect to this settlement agreement. “We are currently engaging with government to negotiate a deferment of the current year’s instalment,” he said.
Seven listed construction companies agreed in 2017 to collectively contribute R1.25 billion over 12 years to a fund to be established for socio-economic development and undertake further transformation initiatives in terms of the VRP settlement agreement.
Further transformation initiatives included either becoming “fully transformed” with at least 40% of equity in the hands of black South Africans, or committing to significant mentoring initiatives for up to three emerging black-owned enterprises.
In addition to Stefanutti Stocks, the signatories to the VRP agreement were WBHO, Aveng, Group Five, Basil Read, Raubex and Murray & Roberts (M&R).
The VRP agreement settled any civil claims and potential claims for damages against these companies from government and stateowned entities.
These claims and potential claims had their origin in collusion and bid-rigging admissions made by these companies to the Competition Commission.
In settlement agreements with it in terms of the construction fast-track settlement process, these companies collectively agreed to pay R1.4 billion in fines to the commission.
Other signatories also facing challenges
Crawford added that Stefanutti Stocks and the other signatories to the agreement are facing several challenges regarding the implementation of their agreements.
He said the parties have requested a supervisory committee meeting with the ministers of rural development and land reform, economic development, public
works and transport to resolve these challenges.
“Numerous requests [were] made in May last year and we have not yet received a response to our request,” said Crawford.
“The lack of sincere communication with government is the biggest challenge facing the successful implementation of the settlement agreement objectives.”
Stefanu i Stocks under pressure
Stefanutti Stocks on Thursday reported that the continued adverse market conditions and substantial impact of Covid-19 reduced contract revenue from continuing operations to R1.7 billion for the six months to August, from the restated R2.9 billion in the prior period.
The operating loss narrowed to R101 million from the restated R865 million in the prior period.
The company made an afterloss for the period from continuing operations of R169 million compared with the restated R909 million in August last year.
It reported a headline loss per share of 128.42 cents, compared with the 607.72 cents loss in the previous corresponding period.
No dividend was declared.
The group’s order book for continuing operations is currently R7.4 billion, of which R3.1 billion arises from work beyond South Africa’s borders.
In line with the group’s restructuring plan, lenders have provided the group with total funding of R1.25 billion, the majority of which is anticipated to be repaid by the end of February 2022.
The purpose of the restructuring plan is to put in place an optimal capital structure and access to liquidity to position the group for long-term growth in the current uncertain environment.