- Sanral has awarded three mega contracts to Chinese firms.
- The contracts were initially cancelled by the board of Sanral in June.
- The Chinese firms had the best prices as well as BEE certificates, says Sanral, but the local construction industry has questions.
- For more stories, go to the News24 Business front page.
The SA National Roads Agency (Sanral) has stunned SA’s embattled construction industry by awarding three of the five tenders it cancelled in June to Chinese firms.
SA’s construction industry is a third of the size it was a decade ago, mostly due to a decline in infrastructure spending by the state. Between 2018/19 and 2020/21, Sanral spent less than half of its government grant, and in 2021/22, it left R8 billion of its R21 billion budget unspent.
In June, the Sanral board cancelled five tenders worth R17.4 billion because management had not adhered to a board resolution that required that in all projects over R1 billion, a different set of consulting engineers evaluate the tenders to those that designed the tender.
The policy caused alarm in industry and government circles as it was an unusual way to oversee infrastructure delivery. Design engineers typically also provide technical evaluation of tender bids and oversee work on the site on behalf of the client.
As a result, the tenders that had been evaluated were re-evaluated, this time by consultants appointed by the Development Bank of Southern Africa (DBSA).
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Among the stalled tenders re-awarded last week was one for the Mtentu Bridge on the Wild Coast, which is to be one of the world’s highest bridges and Africa’s longest bridge once built. The R4 billion contract was awarded to the China Communications Construction Company (CCCC) in a joint venture with a firm called Mecsa. The previous front-runner for the contract was 100% black-owned Concor.
While documents on the Sanral website show that the award went to the lowest bidder, industry bodies have questioned the fairness, given that the CCCC price came close to the previous winning bid.
Chris Campbell, CEO of Consulting Engineers SA (CESA), questioned how the winning bidder came in so close to the lowest bidder in the previous round, particularly as there have been huge price escalations in materials due to supply chain inflation and geopolitical tensions.
“As much as we see ourselves as part of the global village and partnership, it would have been much better had we placed more emphasis on localisation and growing our own local companies,” said Campbell.
The Mtentu contract, like most Sanral contracts, carries a 30% local participation requirement for all bidders. This means contracting with local communities and companies in the municipal area to provide labour and services. While the policy has been good for communities and local SMME’s it has not benefited larger black-owned construction firms, which are unable to obtain sub-contracts if they do not come from the municipality where the project is located.
Webster Mfebe, CEO of the SA Forum of Civil Engineering Contractors (Safcec), said that as long as the tenders awarded to the Chinese firms followed the prescripts of the Constitution and Public Finance Management Act (PFMA) he had no objections to the awards as SA companies also competed in foreign jurisdictions and did not expect to be discriminated against. These values are fairness, equitability, transparency, competitiveness and cost-effectiveness.
“But I have a concern over whether the principles of fairness and competitiveness would have been satisfied as these were projects that had been in the market before and the prices [of the previous round] were known. Given the fact that prices have escalated, the question is whether the pricing of these projects is correct,” he said.
Sanral spokesperson Vusi Mona said that it was not the case that the winning bid in the second round was exactly the same as the price of the lowest bid in the first round as “all bids had come in much higher”.
However, in the case of the Mtentu Bridge, CCCC’s bid was only marginally higher than the best price in the last round, with other bidders showing huge escalations due to changes in steel and concrete prices.
A second re-issued tender for the construction of the EB Cloete Interchange in Durban went to Chinese firms Base Major and CSCEC at R5 billion.
The same firms were also awarded the upgrading of the N3 near Ashburton at a contract price of R5 billion, the second lowest in the bidding.
The fourth of the cancelled tenders to be re-awarded was a R1 billion contract for the rehabilitation of the R56 between Matatiele and the KwaZulu-Natal border, which went to local firm Down Touch Investments.
Mona said that it was not within Sanral’s discretion to decide to whom it awards tenders, especially on the basis of nationality.
He said: “Sanral is compelled by law to award to any entity whose performance in the tender process fulfils the compliance requirements and is the best regarding relevant points and price. Ultimately, it is the quality of a bid that wins a tender and not the discretion of Sanral.”
Mona said that CCCC and CSCEC are registered on the Construction Industry Development Board (CIDB) register and the National Treasury’s central supplier database.
“Both firms also submitted valid BBEEE certificates. At Sanral we don’t issue BBBEE certificates. We only verify these. Both firms, as part of their respective joint ventures with SA-based partner companies, complied with all applicable procurement regulations,” he said.
As with all Sanral contracts, the winning bidders must comply with the mandatory local content requirement, which includes 100% SA steel and cement, as well as compliance with all applicable regulations and legislation, particularly environmental, labour and health and safety requirements.
Main contractors are also required to meet minimum contract goals – usually 30% of the total contract value – for local labour and targeted enterprises.
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In a hearing at Parliament last week on the Treasury proposal to take over Sanral e-toll debt, deputy director-general Duncan Pieterse said that among the conditions of the bail-out would be a review of the board and its procurement policies.
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