JSE-listed construction and engineering group Aveng has surrendered to the government over the group’s failure for three consecutive years to pay its annual contribution to the Tirisano Construction Fund (TCF).
TCF then litigated Aveng to enforce compliance.
But Aveng said last week that he was defending the matter.
The TFC board said in response to Moneyweb’s inquiry that after an investigation by the Competition Commission into collusion in the construction industry, some construction companies concluded an agreement with the government – a settlement agreement Voluntary Rebuilding Program (VRP) – to contribute to the transformation of the construction industry.
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The board said that the fund was created to facilitate and implement this agreement and has taken several steps to achieve this goal.
“Aveng has not complied with the terms of the agreement and litigation has been initiated against Aveng to enforce compliance. The court documents are public records,” TCF added.
“At this stage of the court it is not appropriate to comment further on the legal process or the merits of the dispute. We expect the matter to be heard,” he said.
Aveng said on Thursday that the ongoing trial was conducted as normal and it was not appropriate to discuss the complexity of the dispute and related litigation in the media.
The latest TFC annual report states that in July 2021, Aveng had paid R63.8 million but failed to pay in July 2019, 2020 and 2021.
Aveng agreed to pay R21.25 million to TCF for the duration of the agreement.
However, Aveng CEO Sean Flanagan told Moneyweb last month before TCF launched litigation against the group that there was correspondence from the government in this regard, but “I will be careful if we refuse payment or fail to pay”.
“There is a dispute over whether the government actually fulfilled the contract and that will ultimately have to be dismantled regardless of the dispute mechanism the parties decide on.
“We will definitely reject the government’s claims in this regard,” he said.
Consistent workflow
Asked to expand on what he meant by the government’s failure to fulfill its obligations under the terms of the agreement, Flanagan said that before 2010, the government promised that the construction industry would invest in new capacity and deliver the World Cup, it would be there. there is a consistent flow of work.
“You, like the citizens of South Africa, know that the government has failed to make real and significant investments in any infrastructure in the country. [the World Cup],” Flanagan said.
“I think the last important investment is Medupi and Kusile [power stations]which was in 2007,” he noted, adding that the government has also promised to ensure that contractors are paid.
“This is all part of the agreement, which we are doing [Aveng] they joined when we still had Grinaker LTA, and many of our competitors felt especially suffering because of this,” he said.
This is in reference to the sale of Aveng in 2019 from the former South African construction and engineering business Grinaker-LTA to the black-owned and controlled Laula Consortium.
Aveng said on Thursday, this transaction is in line with Aveng’s transformation goals and gives effect to the provisions and objectives of the VRP.
Construction mafia
“At the time, the transaction was hailed as one of the most significant transformational transactions in the building and construction industry in South Africa. Unsavory policies, practices and market conditions, including features such as the construction mafia, led to the rapid destruction of the building and construction sector in Africa South.
“This is the destruction of a once developing sector that has drawn matters to the head,” said Aveng.
Seven then JSE-listed construction companies signed a VRP settlement agreement with the government in 2017 as part of an agreement to jointly contribute R1.25 billion over 12 years to support TCF for socio-economic development and to carry out further transformation initiatives.
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The VRP agreement settles civil compensation claims by the government against seven companies stemming from the company’s admission in a settlement agreement with the Competition Commission for bid-rigging and collusion in projects in the build-up to the 2010 FIFA World Cup.
Some of these companies have not paid their annual payments and/or have renegotiated payment dates, while others, such as Group Five and Basil Read, have entered into a business rescue process.
WBHO and Raubex are the only companies to sign new VRP settlement agreements with annual payments to TCF.
Construction industry organizations have also criticized the way the TCF has been managed and its programs implemented.
The Black Business Council for the Built Environment (BBCBE) last year demanded re-engagement in the VRP because of the Council’s extreme unhappiness about how the VRP settlement agreement had been implemented.
The BBCBE claims black-owned construction companies do not benefit from the VRP.
Master Builders South Africa (MBSA) and the SA Forum of Civil Engineering Contractors (Safcec) are both critical of the way industry contributions to the TCF are being used, particularly the limited benefits that flow from the fund to emerging contractors.
The criticism resulted in the allocation to the enterprise development program targeting black contractors being only 23.8% of the total funds spent by the TCF from its inception to March 2021 and 51.36% or just over R148 million of the total R288.25 million spent in the period this. allocated to social infrastructure programs.
However, the commitment to the enterprise development program by the TCF increased to R142.5 million from the beginning to the end of March 2022, while the commitment to social infrastructure in the same period amounted to R134.4 million.
This article originally appeared on Moneyweb and is republished with permission.
Read the original article here.
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