The KwaZulu-Natal transport department is concerned about a growing number of service providers failing to complete road maintenance and rehabilitation projects despite meeting the requirements on paper.
MEC Siboniso Duma highlighted the trend to the provincial finance portfolio committee at the KZN legislature during his department’s medium-term expenditure framework budget hearing on Tuesday. He said companies were not finishing up projects.
CFO Thabani Nkosi said the department had noticed that lower grade companies, between grades 1 and 6, were failing to complete projects awarded to them over the past six years.
The department responded by giving those projects to contractors in the higher grades, between 7 and 9, assuming they would have the capacity to deal with them.
“We started a programme in terms of our panels where we would advertise grade 7 to 9 for the maintenance and upgrade of roads as well as road rehabilitation. We were hoping that projects would be finished on time,” said Nkosi.
“Unfortunately, it looks like the bigger grades we were hoping would perform are now also failing us. You have big companies sitting at grade 9 and receive a tender of R500m and yet they fail to establish.”
Among the trends they noticed was that a contractor would take months to get to the site after being awarded a contract or it would approach another, often bigger company to help them complete the work and failing that, the project would be terminated.
Nkosi said the ongoing failures meant the department had to dip into budgets for future programmes and had to sometimes fork out almost double the amount initially budgeted for because contractors failed after two or three years.
The Construction Industry Development Board (CIDB) is responsible for the grading of companies based on their track record of completed projects and the company's available capital which are used to determine its grade.
The department specifies which grades it requires, then the CIDB provides the companies falling within that grade.
However, Nkosi said they were not ruling out the possibility of a problem with CIDB assessments as the department was looking at possible root causes for this.
“We get the documents, do the supply chain management process and they will all be fine, but when it’s time for implementation one of them can’t get to site and they complain of financial difficulties, which means somewhere along the line there is a problem that we have in terms of the assessment of these grades, how they move from grade 1 to 9 but not have the financial muscle to just establish, which causes problems within the department.
“We’re taking steps to improve and maybe get the answers because you can name on one hand the number of contractors that are performing, but when you have a group of 137 but only 10 are performing then there’s a serious problem that we will be facing in terms of implementing our projects,” he said.
You might get a contract to build a bridge using the latest technology. If you have not participated practically and gained the lived experience, you won’t get that technical experience
— Siboniso Duma, KZN transport and human settlements MEC
He said they put together a list of about 10 companies that had failed to either set up or do the work after setting up, and they were following a termination process for those companies. “But it may not be a solution to just terminate without finding the root cause so we are trying to find a balancing act between being strict on non-performing contractors but also trying to find solutions with them.”
MK Party chief whip in the legislature Mervyn Dirks said most of the companies that fell in these grading categories were black-owned and historically disadvantaged.
“I do not think that we should solely put the blame on them when they fail to complete the projects, perhaps we should ask ourselves if we have not failed them along the way as the department or as government and what can we do to assist them,” he said.
“I would not like to see a situation where we are reversing the gains made under our previous leaders, especially Sbu Ndebele, who made great strides in empowering African businesspeople in this country.”
Duma confirmed the department was issuing the majority of its contracts to historically disadvantaged companies, but those same companies approached the established big companies to rescue them.
“We are not just quick in blacklisting them: we nurture them, monitor them and now we will invite the professional body that deals with them to do a proper and thorough analysis.”
He said they would meet the CIDB to address the issue.
Duma added companies might have found a way of presenting fraudulent actualisation and even “grow” inorganically.
One way is the appointed contractor “selling” a project to another company, which results in the selling contractor getting credit and a bigger grade but still not getting the necessary technical experience.
“You might get a contract to build a bridge using the latest technology. If you have not participated practically and gained the lived experience, you won’t get that technical experience.”
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