Chinese companies won the bulk of Sanral’s cancelled tenders

Concerns have been expressed about foreign companies – specifically Chinese firms – this week being awarded the lion’s share of four contracts valued at R17.4 billion that the SA National Roads Agency (Sanral) cancelled earlier this year.

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The SA Forum of Civil Engineering Contractors (Safcec) has also expressed concern that the principles of fairness and competitiveness were not met in awarding these contracts.

However, construction industry associations and stakeholders have stressed the need for South Africa construction companies to be competitive against international rivals.

On Thursday Sanral announced that it had this week awarded four of the five previously cancelled tenders following an evaluation process by the Development Bank of Southern Africa (DBSA).

The following project awards have been made:

•  Mtentu Bridge: R3.428 billion to CCCC MECSA Joint Venture (JV).
•  R56 Matatiele rehabilitation: R1.057 billion to Down Touch Investments.
•  Ashburton Interchange: R1.814 billion to Base Major/CSCEC JV.
•  EB Cloete Interchange Improvements: R4.302 billion to Base Major/CSCEC JV.

The value of each project award is identical to the lowest tender price received before these tenders were cancelled.

Sanral has not yet responded to a Moneyweb request for further details about the joint venture partners and tenderers.

However, it appears that:

• CCCC is the China Communications Construction Company Ltd – a majority state-owned, publicly traded, multinational engineering and construction company.
• CSCEC is the China State Construction Engineering Corporation, which is regarded as the largest construction company in the world.
• Base Major was registered in South Africa in 2007 and founded by Chinese businessman and company director Stephen J Lu.
• MECSA is Mota-Engil Construction South Africa: wholly-owned and controlled by 100% black-owned diversified company CN Holdings Company (Pty) Ltd.

Safcec CEO Webster Mfebe said South African contractors participate and win bids across the globe on the basis of the applicable legislation that governs procurement in those countries.

Mfebe said nobody could have any qualms about these Sanral awards as long as the successful bidders met the requirements of the Constitution, which requires that when a organ of state contracts for goods and services, it must do so in accordance with the principles of fairness, equitability, transparency, competitiveness and cost effectiveness.

He said these same requirements are repeated in Section 61 of the Public Finance Management Act (PFMA). If any of those five procurement pillars in the Constitution are not met, the awards stand to be challenged by whomever has been affected by it, he added.

Mfebe said it took less than three months for contractors to prepare their bids for the cancelled projects after they were re-advertised for only one month.

The principle of competitiveness and fairness cannot on this basis be viewed as having been met because new players would have had only one month to prepare good quality bids, he said.

Mfebe said the re-advertisement of the tenders would also unfairly disadvantage bidders who had previously submitted bids because their prices for these projects would be known, which would affect the competitiveness of the tenders.

“Those issues have contaminated the five pillars that are enshrined in the Constitution,” he said.

Meanwhile, Black Business Council in the Built Environment (BBCBE) CEO Gregory Mofokeng said it is a concern that the tender awards have been dominated by international companies, but stressed that the council needs to closely study the bids to determine how many local companies tendered for these opportunities and the pricing of their bids relative to the Chinese companies.

He also stressed the importance of bids from local companies being competitive.

Mofokeng said the awards will not only have a positive impact on employment in South Africa but also support the country’s material manufacturers and suppliers and localisation strategy.

He said the BBCBE would be communicating with Sanral to ensure these Chinese companies did not import all or the bulk of their material for these projects from China.

“It will definitely also be a no-no for them to import labour. We are going to restrict the Chinese to importing those skills that the country has already decided are scarce skills.

“From a black business perspective we are also looking forward to seeing what targets apply to these projects and looking closely at to what extent the black players will be supported, because we still have a developmental agenda [in South Africa] whether it’s a local or international player,” he said.

E-toll confusion

The fifth cancelled tender – relating to the Open Road Tolling tender for the Transaction Clearing House operator for e-tolls on the Gauteng Freeway Improvement Project (GFIP) – has not yet been awarded.

Sanral said: “In light of the recent announcement by the Minister of Finance ‘to scrap e-tolls’, a decision on the Open Road Tolling tender (TCH Operator) has been put on hold pending clarity on key issues.”

Read:
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Government passes the e-toll ‘hot potato’ to Gauteng government

Record time

Sanral has been applauded for adjudicating and awarding the tenders in record time.

Sanral had however indicated in June 2022 that the anticipation was that the tender awards for the five cancelled projects would be made by September 2022. Construction industry associations and stakeholders had expressed serious doubts that this deadline would be met.

Read:
Former Sanral boss doubts cancelled tenders will be re-awarded in four months
Sanral under pressure to award R17.4bn in cancelled tenders by end-September

The failure of Sanral to meet this deadline was attributed to requests by the bidders for an extension of time to submit bids.

However, Mfebe believes it is “an unprecedented miracle” that tenders for multi-million rand infrastructure in South Africa have been adjudicated and awarded within a month.

“This is a standard that has not even been achieved in ordering school books in this country. South Africa needs to be placed in the Guinness Book of Records [for achieving this],” he said.

Mofokeng added that the BBCBE too is happy the projects have finally been awarded.

Sanral board chairperson Themba Mhambi expressed his sincere thanks to the DBSA for undertaking the evaluation of the previously cancelled tenders and their adjudication, as well for the speedy manner in which the process was resolved.

Mhambi said Sanral is also deeply grateful to the industry for their patience in re-submitting tenders for these contracts and waiting for the adjudication process to be concluded.

He said there was understandably a concern by the executive when the tenders were cancelled, about the impact it would have on South Africa’s  infrastructure development agenda.

Listen: Safcec’s Webster Mfebe on the impact of Sanral’s tender saga on the construction industry

 “We accordingly undertook to both President Cyril Ramaphosa and Transport Minister Fikile Mbalula that we would do everything possible to ensure that we mitigate the impact on the construction industry and the economy.

“And that meant re-advertising, evaluating and awarding the tenders within four months after they were cancelled.

“We are happy that we have lived up to that commitment and in the process learnt valuable lessons about how to handle tenders with speed to keep the country’s economic development on the boil,” he said.

Mhambi said Sanral will continue to prioritise infrastructure development in driving South Africa’s economic recovery.

He said that while this process has delayed the implementation of critical infrastructure upgrades, it has to be balanced against healthy governance and the need to ensure compliance with all relevant procurement and legal prescripts when Sanral awards any and all tenders going forward.

“Our congratulations go out to the successful bidders, and we look forward to seeing the true impact of these projects in the lives of the road users and communities we serve,” he added.

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