Pretoria - Government indecision and political interference
has caused the construction industry to lose its appetite for public-private
partnerships (PPPs).
At least one chief executive has strong suspicions about
corruption and has instituted legal steps to have the awarding of a PPP
reviewed.
According to the PPP model, the private sector's balance
sheet is used to fund infrastructure and expedite delivery to communities.
But this requires very specialised expertise and the
companies complain that it takes millions to prepare a bid.
Awarding drags on for years - if it indeed ever takes place.
Basil Read Holdings [JSE:BSR] chief executive Marius Heyns says the big problem
lies in the area of PPPs for serviced accommodation.
The National Roads Agency’s toll road PPPs work well from
the industry's viewpoint.
Over the past three years Basil Read has pumped
R50m into tenders for PPPs, but has nothing to show for it.
The group will in future rather focus on partnerships with
private enterprises, such as the one for building a new coal mine in
Mozambique, which is already under way.
The PPP proposal for building four private prisons, which
was submitted as far back as May 2009, has still not been awarded.
About a year ago, just before the tenders lapsed, the four
tendering consortiums were asked to adjust their tenders.
Heyns says that things have since been dead quiet. The
tenderers have not been advised that the PPPs have been cancelled, nor has
there been any confirmation that the modified tenders have even been opened.
All the consortiums have at least one foreign partner.
"International investments are being lost because no one knows what
government is planning."
For two years the industry has been hearing that the PPP for
upgrading the Chris Hani Baragwanath Hospital at a cost of R4.5bn is coming to
the market, but it has not happened, said Heyns.
Basil Read lost out in the awarding of the PPPs for
rebuilding Munitoria, the head office of the Tshwane Metro Council, as well as
that for building of a new head office for the Department of Rural Development
& Land Reform.
In terms of the Access to Information Act, the company
established that in both cases it had scored the highest points in the
adjudication of the tenders.
These points, according to Heyns, had been adjusted by the
adjudication of "value for money". Heyns considers this to have been
a subjective process.
In pursuance of an earlier court order, Basil Read will
request a review of the process. But it has decided not to continue contesting
the Munitoria PPP.
"I can't spend all day in court," said Heyns.
Group Five [JSE:GBF] chief executive Mike Upton said
improved efficiency of the PPP process would greatly benefit the country.
Client departments often lack the expertise to set out the
requirements clearly from the beginning.
He said these are often changed during the bidding process
and even at the time of awarding.
The PPPs are generally large projects attracting great
attention, which sometimes leads to political interference.
"There is some degree of exhaustion within the
industry, especially with regard to PPPs for serviced accommodation."
Upton said the further course of the process of financial
finalisation at Munitoria and Rural Development, where the company is the
preferential bidder, will over the next two months determine Group Five's
continued participation in similar PPPs.
Bidding costs millions and the industry cannot afford the
non-awarding of a project such as that for the prison PPPs.
"It's an embarrassment for South Africa," said
Upton.
"You have to balance what you put in against what you
get out," he said.
Group Five is involved in PPPs in Eastern Europe - mainly
toll roads - where it says the process is far more efficient.
Louwtjie Nel, chief executive of Wilson Bayly Holmes - Ovcon
[JSE:WBO] (WBHO), on the recent announcement of the group's annual results said
that WBHO would also scale down its participation in new PPPs in South Africa
because awarding is so protracted.
According to him, WBHO has more or less written off the
prison PPPs.
He said that even should a company's tender be successful,
PPP awards are increasingly being interrogated in court.
All parties find this unpleasant.
Mike Wylie, chairperson of WBHO and the head of its
Australian operations, on the same occasion announced that the group had
recently won a PPP in Australia.
In Australia it takes four to six weeks to finalise a PPP,
said Wylie.
- Sake24
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