R400m contracts drama hits W CapeComment on this story
Cape Town -
Government projects in the Western Cape to the value of almost R400 million have either been cancelled, halted or left in jeopardy after a controversial contracting company was forced to file for business rescue.
Filcon Projects made headlines in recent weeks after two major projects - a multimillion-rand contract to refurbish council homes in Manenberg and a R67m project to extend two primary schools in Atlantis - ran into difficulties and were terminated by the City of Cape Town and the provincial government.
Other projects handled by Filcon and labelled as “ongoing” or “current” on its website include:
- A R150m new engineering building at UCT.
- A R178m chemical science building at UWC.
- A R75m construction of the seven-storey luxury Vana Hotel in Buitenkant Street in the CBD.
- A R105m construction of two luxury apartment blocks, the Orangerie, in Gardens.
- A R210m 12-storey office block for a multinational telecoms company on Roggebaai Square on the Foreshore.
- A R78m luxury office block for a media company.
- A R40m development of 30 homes in Stonehurst Close near Steenberg.
- A R110m development of 93 apartments at Canal Quays near the V&A Waterfront.
- A R12m three-storey house in Camps Bay.
The chairman of Filcon is South African Saul Loggenberg, who was barred in the UK from being a company director until 2024 by the British Insolvency Service.
When contacted for comment, Loggenberg said Filcon had been forced to apply for business rescue after a slew of negative reports, complaints from sub-contractors and pending legal cases.
“We just don’t have the capital to carry on… now we’re trying to find a solution with the business rescue application,” Loggenberg said.
Questions have been raised about how Filcon could have secured multiple government contracts in the Western Cape when there is such a cloud over the business.
Cameron Dugmore, special adviser in the Presidency under the Minister for National Planning, called for a forensic audit and a Special Investigating Unit (SIU) probe.
Loggenberg said the UK ban was because of “inaccurate record keeping” which was argued in court.
“This doesn’t effect me being able to invest… or have any involvement in companies. I have invested over R31m into Filcon… and I continue to invest in other companies… I don’t run these businesses,” he added.
He said he was confident the company would win any case brought against them by contractors who alleged they had not been paid, declaring these allegations to be “false and inaccurate” and claiming he had proof of payment.
“No one in Atlantis has not been paid… there is no one who is due payment that has not been paid.”
The provincial Department of Transport and Public Works earlier this month cancelled the Atlantis project due to alleged shoddy work.
In February, construction at the Manenberg site was halted after sub-contractors and labourers staged a protest amid claims they were owed more than R3m.
The City of Cape Town, meanwhile, has confirmed that the Manenberg, Hanover Park and Harmony Village contracts with Filcon have all been terminated and discussions are under way to agree on appointing a new contractor.
Manenberg residents, who had been housed in containers while the work was being done, this week spoke of their frustration.
Rugaya Gabriels, who lives with a family of four in a small container, said: “I don’t know what is happening… we were told last week another contractor was coming to take over, but nothing has happened so far… We just want to go back home.”
She said residents had been moved into the containers in January and were told it would take about six weeks, but now they faced an uncertain future.
She told how families of 12 were forced to sleep on the floor and feared the winter rains as some of the containers were leaking.
The Department of Transport and Public Works paid Filcon R35.2million for work at the Atlantis site, but the delay in appointing a new contractor will see an increase in costs and the schools hamstrung with overcrowded classrooms.
MEC for Transport and Public Works Robin Carlisle said the development would be set back by two to six weeks and 10 percent more would have to be spent.
“This is the first time we’ve had a contractor come here from another country who has been blacklisted…”
He explained that along with a grading within the Construction Industry Development Board, a delivery track record and six important checks were required for a company to get the contract.
But Carlisle said there were limits to finding out background information.
“We can’t check every single employee. He (Loggenberg) must have joined the company or bought shares in it,” Carlisle said. “But he is definitely not the reason why (Filcon) got this contract.”
Carlisle also made it clear that when receiving a contract, the company would receive payment for work in stages to guarantee work was done timeously and met set standards.
“Checking the progress of these projects is very important. They will be paid on the basis of reports signed off by quantity surveyors. These surveyors check the work done against prescriptions and follow through,” he said.
Senior manager of Education Facilities, Liam Thiel, confirmed that site visits would be conducted twice a week where inspections and approvals took place before progress payments were made.
With regard to their current projects being affected by the business rescue application, Loggenberg said the company was committed to completing these projects, but added that they would not be working with the public sector in future after issues surrounding a contract he claimed the city had not paid for.
Adding that he had been painted in a “vastly unfair” light, Loggenberg said this was simply untrue. “I am completely transparent… we conduct ourselves impeccably… but we’ve been grossly misrepresented by vindictive people.”
Councillor Tandeka Gqada, mayoral committee member for human settlements, said: “In terms of Business Rescue, all processes including payments are stayed until the process is completed.”
The city’s implementing agents, who appointed Filcon, were following contractually-required procedures to address contracts that are in distress, Gqada added.
Thiel said the payment of sub-contractors was the responsibility of the main contractor.
Dugmore, who is number three on the ANC’s list of nominations to the Western Cape legislature, said he had originally been approached by the main sub-contractor at the Manenberg development and made aware of allegations against Filcon.
Dugmore said the standstill at the Manenberg project was “much more than an inconvenience. It’s criminal that the poor are suffering in a situation that appears to be incompetently handled.”
“What is needed is both a forensic audit of Filcon and and an SIU investigation.”
The business rescue application was postponed to June 9.