Saice wants answers on awarding Chinese joint venture bids

The South African School of Civil Engineering (Saice) has written an open letter to President Cyril Ramaphosa questioning the South African National Roads Agency (Sanral) awarding a tender for a joint venture led by a foreign company, claiming that thousands of local Jobs don’t come to fruition.

This comes after four tenders were awarded last week by the Development Bank for Southern Africa (DBSA), which acts as Sanral’s agent to adjudicate on tenders cancelled in May due to irregularities.

Saice chair Professor Marianne Vanderschuren said in the letter that the agency was disappointed with the recent award of up to R6.65 billion worth of Sanral tenders to foreign contractors.

Van der Schulen demands:

  • Details about the tender review process and the criteria used to award these tenders to foreign companies;
  • Clearly manage the procurement process for these infrastructure projects, which is key to South Africa’s economic development; and
  • Learn more about how to manage these procurement governance processes to ensure compliance.

Focus on developing the South African economy…

Saice referred to Ramaphosa’s State of the Union address in February this year, particularly his comments stressing the importance of developing South Africa’s economy, reducing unemployment and eradicating poverty and inequality.

It quoted Ramaphosa as saying: “We gave ourselves 100 days to hammer out a comprehensive social contract to grow our economy, create jobs and end hunger.”

Seth said Ramaphosa went further on July 25: “With the support of all economic stakeholders, the work of developing the economy and creating jobs is moving forward.”

Given the comments, Vanderschuren said Saice was trying to understand how the Sanral tender, worth up to R6.65 billion, was awarded to foreign contractors.

“We understand that tenders in South Africa typically stipulate the use of local materials and labour, requiring 30% of the contract to be used for local work, so we assume that these foreign companies will receive another 70% of the contract value, up to the quoted price of R6.65 billion. .

“Furthermore, our members expressed their deep concern about sourcing local labor and materials for these projects,” she said.

“Can the government guarantee that based on the experience of foreign companies operating in Africa, this requirement will be enforced and complied with, which doesn’t mean it does?”

multiplier effect

As a businessman, Ramaphosa will understand the impact of the multiplier effect and refer to academic literature and South African Reserve Bank data on the subject, Vanderschuren said.

The literature cites a multiplier of between 0.5 and 1.3 for the construction industry, she said, adding that the R6.65 billion awarded to foreign joint ventures could therefore cost South Africa between R9.9 billion and R15.3 billion.

“The potential negative impact on job creation and lack of social uplift is enormous,” she said.

Vanderschuren added that in 2021 the Reserve Bank said that for every R1 million spent in the construction industry, between 1.7 and two formal jobs would be created.

“When applying these figures to Sanral’s winning bids, 11,300 to 13,300 jobs may not be realized based on the current winning bids.

“Employment is also critical to raising households across South Africa,” she added.

“Given this, with an average household size of 5.18 people (2018), the lives of at least 58,500 to 68,800 people may not improve and may be further worsened by potential job losses.”

Also read: Raubex disappointed in losing Sanral contract to Chinese JV

the answer sought

Seth further questioned:

  • If no South African company can lead and become part of these joint ventures;
  • The impact of appointing foreign companies to lead these joint ventures on the economic and engineering communities;
  • Potential negative impacts on the employment, job creation and skills development of South Africans;
  • Compliance with local procurement regulations to support local content and the use of locally sourced materials for these projects; and
  • Who will provide government oversight to ensure compliance with local procurement targets?

Vincent Magwenya, a spokesman for Ramaphosa, said Saice had to resolve the matter with Sanral as the president would not be involved in tenders or tender disputes.

The project awards that the competition focuses on are:

  • R3,428m Mtentu Bridge contract awarded to China Communications Construction Corporation (CCCC) Mota-Engil Construction South Africa (MECSA) Joint Venture (JV);
  • R4.302 billion EB Cloete interchange improvement contract awarded to Base Major China Construction Engineering Corporation (CSCEC) JV, which was founded by Chinese businessman Stephen J Lu;
  • The R1.814 billion Ashburton Interchange project, which was also awarded to the Base Major CSCEC JV; and
  • The R1.057 billion R56 Matatiele rehabilitation project awarded to Down Touch Investments, little is known about the company.

The fifth cancelled tender, related to the Open Road Pricing tender for the Gauteng Expressway Improvement Project (GFIP) electronic toll for the transaction clearinghouse operator, has not yet been awarded.

Webster Mfebe, chief executive of the South African Forum of Civil Engineering Contractors (Safcec), said last week that South African contractors participate in and win bids globally under the applicable legislation governing procurement in these countries – as long as no one of them can question that these Sanral awards are based on based on the constitutional principles of fairness, equity, transparency, competitiveness and cost-effectiveness.

Gregory Mofokeng, chief executive of the Black Business Council in the Built Environment (BBCBE), said the council was pleased the projects were finally awarded, but was concerned that tender awards had been dominated by international firms, while stressing the need for local firms to be competitive.

Mofokeng is also concerned that these winning Chinese bidders may import all or most of the materials used in these projects from China, as well as import technology for these projects.

This article originally appeared on Moneyweb and is republished with permission.
Read the original article here.

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