Pretoria - The Black Business Council in the Built Environment (BBCBE) has attacked the planned transformation transactions of some of the seven listed construction companies that were party to the settlement agreement reached with the government.
Gregory Mofokeng, secretary-general of the BBCBE, said on Friday that the BBCBE wanted to realise permanent radical economic transformation using the voluntary rebuilding programme (VRP) and “must define and be co-implementers of our own transformation journey”.
Mofokeng said the BBCBE had worked closely with WBHO and Raubex to select black consortia that would benefit from the allocation of work packages, but noted with interest that Stefanutti Stocks had identified two emerging companies with which to partner.
“Should Stefanutti Stocks not open discussions with us on the regularisation of these companies and their willingness to partner with other black companies and buy into our broad based beneficiary model we will not support their partnership,” he said.
Attempts to obtain comment from Stefanutti Stocks were unsuccessful.
Mofokeng said Murray & Roberts (M&R), Aveng and Group Five had decided to embark on the equity transaction route and the BBCBE’s position was that consortia that were bought into these companies must be led and majority owned by contractors and the primary beneficiaries must not only be black investors with the financial muscle.
Exit
M&R decided to exit the South African civil engineering and building market sector and has sold 100 percent of this business to the Southern Palace Group, while Aveng has sold 51 percent of the company to Kutana Construction.
Mofokeng said the BBCBE was extremely disappointed with “the opportunistic manner” in which the M&R and Southern Palace transaction was concluded.
He said M&R group chief executive Henry Laas was involved in the VRP discussions from the onset and acknowledged during these discussions that traditional black economic empowerment (BEE) transactions did not bring about the desired transformation outcomes for the industry and future transactions must be led by contractors who had vested interests in the industry.
“The structure of this deal is irrefutable proof that Mr Laas was disingenuous in his engagement with industry stakeholders and he has since cowardly avoided having a meeting with black business to discuss this transaction.
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“We have since written a letter to Southern Palace requesting a meeting with them. This letter remains unacknowledged nor responded to,” he said.
Mofokeng said they subsequently wrote another letter spelling out two options for this transaction to enjoy the BBCBE’s support.
The first was for M&R to allow a contractor consortium to own an effective 51 percent equity in M&R and the second was to make available 25 percent of their annual turnover to black contractors.
Laas said M&R started a process more than two years ago to identify potential buyers for its infrastructure and building businesses, the Southern Palace Group was identified as the preferred new owner/shareholder and transaction funding was provided by the Public Investment Corporation.
Meaningful value
“M&R believes this transformational transaction will create meaningful value for the new owners as well as black business partners.
“If the BBCBE has objections regarding the VRP, it is best that these objections are raised directly with the South African government, who are the representatives of all stakeholder,” he said.
Mofokeng said discussions were ongoing about Kutana Construction’s transaction with Aveng and were encouraged by the willingness of the principals at Kutana to acknowledge the position of black business about the consortium/SPV being majority contractor owned and led.
“This message must be sent to the Aveng shareholders. They must understand that black business will accept nothing less,” he said.
Aveng said that as part of its commitment to the construction industry, its subsidiary Aveng Africa continued to engage with black-owned CIDB (Construction Industry Development Board) registered contractors about sustainable and appropriate manner in which to incorporate them in a transaction structure that would comply with the requirements of the settlement agreement. Mofokeng said Basil Read remained “unco-operative and recalcitrant”.
He said the BBCBE had written letters to Basil Read chief executive Neville Nicolau, but he had not even bothered to acknowledge receipt of the letters. “Basil Read must know that we will oppose any transaction that will not meet our demands.
“If they don’t, they will be compelled by circumstances to review the transaction and this will be very uncomfortable for the executives involved including Mr Nicolau,” he said.
Basil Read failed to respond to a request for comment.