Group Five Lists Infrastructure Delay Reasons

August 18 2014 at 08:00am
By Roy Cokayne

GOVERNMENT distrust caused by the collusion uncovered by the Competition Commission in the construction sector is only one of several reasons for the delay in the roll-out of the government’s R827 billion infrastructure expenditure programme.

Mike Upton, the chief executive of listed construction and engineering firm Group Five, said he believed there were four or five factors causing the delay in the government putting projects into the market, and distrust because of the collusion was not the only one.

Other factors included the fiscus and how it would pay for this infrastructure, the ability of the government to implement large projects, the general election and the fact the plans for the various infrastructure projects were possibly not yet fully developed.

“There are no indications of the government’s infrastructure expansion plan yet,” Upton said last week.

The Competition Commission launched in 2011 a fast-track settlement process on favourable terms for firms involved in collusive conduct. This resulted in 15 firms concluding consent agreements in terms of which they agreed to pay penalties totalling R1.46bn.

Group Five disclosed 25 rigged projects during the fast-track settlement process and was granted conditional leniency for them all. But it was implicated in four alleged infringements it had not disclosed, which are the subject of ongoing engagements with the commission.

“We know what needs to happen but it’s the ‘how’, and who is going to do it. That really is the major issue, and how are we going to pay for it? That goes to the type of contracting model that might be more inclusive and might emerge through a conversation with government.”

Upton said Group Five saw great opportunities for a much more inclusive involvement with the public sector, with the private sector being co-investors in infrastructure, which was part of the group’s strategy.

“In the big picture, there are five or six things which are all interconnected which will unlock this infrastructure theme going forward,” he said.

The government has criticised the private sector in recent years for not investing in the economy, with an estimated more than R1 trillion available in funds sitting idle.

But Upton said public-private partnerships (PPPs) were a problem, adding there had been two or three that had been in progress for some years.

These included PPPs for the new City of Tshwane head office, and a new headquarters building for the Rural Development and Land Reform Department, each of which had a total project value of R1bn and for which Group Five had been named the preferred bidder.

Group Five last week reported a solid financial performance in the year to June, with fully diluted headline earnings a share growing by 26 percent to R4 from R3.18.

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