Business

Under-fire SA company Khato Civils expands into rest of Africa

2019-08-06 10:00

Under-fire South African company Khato Civils is aggressively expanding into the rest of the continent where it has scored multimillion-dollar contracts in Zimbabwe, Ghana, Botswana and Malawi.

This move follows the negative publicity the company received last year when it abandoned site at the R3.3 billion Giyani Water Project last October following nine months of non-payment by Lepelle Northern Water, which falls under the water and sanitation department.

The company could not pay its 500 employees and was forced to retrench them.

Khato Civils CEO Mongezi Mnyani said the company had decided to diversify its business and look for opportunities elsewhere on the continent.

African countries had “no money” and were pressed to spend whatever they had on social projects, such as education and health, he said.

“As Khato, we have decided to go to the market to source funding to implement government projects,” Mnyani said.

Lepelle Northern Water appointed LTE Consulting for the project in 2014 to supply water to 55 rural villages in Giyani, Limpopo. In turn, LTE appointed Khato Civils as a subcontractor to lay bulk water supply pipes and South Zambezi Engineering Services to design the project.

Immediately after Khato’s withdrawal from Giyani, the Special Investigating Unit (SIU) issued summons in the Limpopo High Court in Polokwane to claim back R2.2 billion that had been paid to LTE, Khato Civils and South Zambezi because it claimed that the tender was illegally awarded to LTE.

Khato Civils has filed papers disputing the SIU’s allegations and is demanding an outstanding R45 million in the construction work that it says it did on the project.

The company argues that it can show the SIU that the work it was contracted to do was 95% complete and that the R2.2 billion went to local contractors, VAT, labour, professional designs and project management, materials and diesel.

Mnyani said that Khato Civils had, therefore, been partnering with investors from Europe, China and the US to deliver projects and they had shown an appetite to invest their money.

Mnyani said that Khato Civils had won tenders to:

. Construct a three-lane stretch of a 900km user-pay system (toll) road from Beitbridge to Victoria Falls in Zimbabwe.

The road holds international importance in the network serving South Africa, Zimbabwe, Botswana, Zambia, Namibia, Angola and the Democratic Republic of Congo.

The Zimbabwean government and the joint venture are sourcing feasibility study funds valued at $3.8 million from funders and construction work will cost about $2 billion.

Khato Civils will then sign a 35-year concession. This upgrade is expected to increase tourism and commercial traffic volumes.

. Construct and upgrade a six-lane stretch of a 246km road from Ghana’s capital, Accra, to Kumasi, which is notorious for fatalities.

The joint venture will sign a 35-year concession with the Ghana Highways Authority and a feasibility study worth $15.6 million is being done.

The estimated cost of the construction is $2.9 billion. The road carries 34 000 vehicles a day and links Ghana to Tema Harbour, and its land-locked neighbours Burkina Faso, Mali and Niger.

. Upgrade two pump stations in Selebi-Phikwe, Botswana, and construct a 100km water pipeline valued at 195.2 million Botswana pula (about R262 million).

. Construct a 125km pipeline to carry water from Lake Malawi to the country’s capital city, Lilongwe.

This project is worth $500 million. The Malawian government is sourcing money for the project as a loan and the project is expected to generate R1.6 billion by 2040.

“Most governments are taking the route of raising money from the market to deliver projects. It is a win-win situation because government gets a percentage and can use the money to deliver projects. On the other hand, citizens are happy to pay for a good service,” Mnyani said.

“Investors are careful and need government guarantees to undertake such projects to be sure that the loans will be repaid. As Khato we are careful where we go and do business … There must be political stability,” he said.

The company’s policy is that 30% of the work is given to local contractors and that it invests in building offices where it works. The company is building offices in Botswana, and will do so in Zimbabwe and Ghana.

Khato Civils’ chairperson, Simbi Phiri, said that the company had stood up to unfair criticism in South Africa, Botswana and Malawi.

In Botswana and Malawi, the company has won its court challenges.

“In Giyani we pulled out because of a lack of consistent payment and we had done 95% of the work. As long as the value of a project is higher than R200 million, certain people start innuendos that have no basis at all and believe that the whole budget goes to the contractor,” Phiri said.

“As contractors, money transits through us to other people, such as local contractors. The economy of Giyani picked up and we did our corporate social investment projects there,” he said.

Khato Civils has also been involved in various projects locally, such as the M1 Double Decker Bridge rehabilitation and upgrade in Johannesburg.

This project was worth R170.5 million.

The company has been involved in the Saldanha Bay new bulk electrical supply infrastructure and the construction of outfall sewer pipelines in Polokwane.

The Saldanha project was worth R493.2 million and the Polokwane job was valued at R81.3 million.

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August 18 2019