Business

Aveng, Sanral at war

2019-04-02 16:00

Another showdown is looming between the SA National Roads Agency Limited (Sanral) and the Aveng-Strabag joint venture (ASJV) – comprising European construction company Strabag and its South African partner in the joint venture, Aveng – over the construction of the R1.6 billion Mtentu megabridge in the Eastern Cape, which forms part of the N2 Wild Coast road.

This comes after the joint venture partners – responsible for building the 1 132m-long bridge, crossing the Mtentu River near Mbizana – terminated their contract with Sanral early this year amid concerns over violent protests.

Read: Mtentu Bridge project faces delays after contractors’ exit

The parties are battling it out in court, with Sanral having won the first round in the Pretoria High Court last Friday.

Oscar Mabuyane, the MEC for economic development, environmental affairs and tourism, responded to the court judgment, which saw an application by the ASJV against Sanral dismissed with costs, by saying work should now go ahead.

Sanral welcomed the judgment, while Aveng stated its intention to appeal the court decision.

This means that progress on the project remains stalled.

Mabuyane urged the ASJV to return to the site and continue its construction work. He assured them that government would create a safe and conducive environment for work to recommence.

“We welcome the court judgment. It helps us as government because we were worried that starting the process afresh would have taken a lot of time and delayed us more in terms of the planned time to deliver.

“But as government, we have a serious task to be in control of the social facilitation in that space, because no contractor will feel safe if he is not protected, even if people want tenders. So, we must create a conducive environment for them to work.

“We need bridges like this one. They are our tourist products. They can open up our province to be easily accessible. They are a catalyst for economic development. So, if the court says the ASJV must go back to work, it must do just that”.

Mabuyane said that at the time the ASJV had decided to terminate the contract, the conditions were “almost better” because government had already intervened.

Interventions were effected by provincial premier Phumulo Masualle and various MECs, who visited the volatile area.

Mabuyane said government must take full responsibility and ensure that it dealt with the instability and threats taking place there.

“But Sanral must understand that if we promise our people local content and local economic development, we must do so. Let us not talk left and walk right,” said Mabuyane.

Sanral spokesperson Vusi Mona said the agency welcomed the ruling by Judge Tintswalo Makhubele at the Pretoria High Court last week as it vindicated Sanral.

Read: ‘Sanral’s false promises’: Protesters block construction of R1.6bn bridge

“The judgment confirms Sanral’s position that the ASJV consortium was wrong to suspend construction on Mtentu Bridge and to attempt to prevent Sanral from exercising its legal options,” said Mona.

He said Aveng-Strabag had launched the urgent interdict to prevent Sanral from exercising its right to access the securities that were contractually provided for this project. And, he said, Aveng-Strabag wanted to restrain Sanral from claiming performance and retention monies, which are standard provisions in large construction and engineering contracts such as this one.

Mona said the Mtentu and Msikaba bridges form the backbone of the greenfields portion of the N2 Wild Coast – a strategic integrated project designed to stimulate economic growth and job creation in the Eastern Cape.

More than R400 million has been allocated to wages for unskilled, semi-skilled and skilled workers employed directly on the project. A further R1.5 billion was destined for local small, medium and micro enterprises comprising local contractors and suppliers of goods and services to the road and bridge construction projects.

He said direct job creation on the project was forecast to total 8 000 jobs over the envisaged construction period of four to five years.

“The ASJV’s action has placed the entire project in jeopardy. We acted in the best interest of the community, the region and the country when we opposed its application, and our position has now been vindicated by the judgment,” said Mona.

However, in a statement released to the Stock Exchange News Service this week, it was clear that Aveng was not backing down, setting the stage for what could be a long, drawn-out legal battle.

Aveng said in its statement that it considered the dismissal of the application to be wrong and that, based on legal advice, was appealing the judgment. “The ASJV considers this matter to be critically important not only to the ASJV, but also to the broader South African construction industry, which is plagued and held ransom by unlawful community actions of the nature experienced by the ASJV.

“The judgment does not change the fact that the Mtentu contract has been terminated or require the ASJV to continue with its work on the project.

“The board and management remain confident in its position and will continue to defend Aveng’s position. Aveng continues to engage with relevant stakeholders but would highlight that it will not, under any circumstances, put its employees or contractors at risk.”

The ASJV insists that it terminated the contract on January 30 as a result of a “force majeure” clause in its contract – defined as unforeseen circumstances that result in a company being unable to fulfil a contractual obligation. It says that in terms of the provisions of the contract, the termination took effect on February 6.

But Sanral, despite itself having suspended the work on site for 83 days for the same reason, said there was no force majeure and that the ASJV’s termination constituted an abandonment of the site and a repudiation of the contract.

In response to this, Aveng’s statement reads: “The ASJV remains confident that its right to terminate arose after being prevented from executing works on the project site by community unrest, protest action and threats of violence against its personnel, related to community demands made against Sanral, and that its entitlement and decision to terminate will be vindicated by the facts when properly ventilated and considered through the dispute resolution provisions of the contract.”


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October 13 2019