Tirisano Construction Fund to institute legal action against Aveng

The Tirisano Construction Fund (TCF) board of trustees has appointed legal representatives to institute legal proceedings against JSE-listed construction and engineering group Aveng after it defaulted for three consecutive years on its annual contribution to the fund.

This is revealed in the latest TCF annual report, which also stated that only two of the seven companies – WBHO and Raubex – are up to date with their annual payments to the fund.

Read: Construction companies that didn’t sign VRP settlement agreement are off the hook

The report said the board of trustees has also appointed legal representatives to ensure the fund is acknowledged as a creditor of Group Five, which is in business rescue, and to negotiate a settlement.

The TCF stressed that efforts to ensure that the construction companies honour their commitments fall outside the trust administration mandate and are being made by the board of trustees in collaboration with the government.

Mahomed Vawda, new TCF chair and chief director of investment and development at the Department of Trade, Industry and Competition (dtic), told Moneyweb late last year prior to the release of the TCF’s annual report that negotiations were taking place with the companies about their payments.

“We have reached some consensus with most of them but I can’t go into the details on that. We are dealing with it and working on that. We are conscious of the challenges that they are having as a consequence of Covid-19 and so on, so those have been addressed,” he said.

Vawda said he was unable to talk about whether there were any plans to defer payments because this involves “negotiations between the parties”.

Group Five Construction, the main operating subsidiary Group Five Limited, reported in September 2019 that it was engaging with the government and the TCF about the repayment of almost R45 million it paid in terms of the Voluntary Rebuilding Programme (VRP).

The TCF report acknowledged that the construction industry continues to be in distress.

“As a result, the company contributions have not been in accordance with the settlement agreement.”

The TCF was established in terms of the VRP agreement signed between seven JSE-listed construction companies and the government in October 2016.

Collusion and bid rigging

The VRP settled outstanding and pending civil damages claims from state entities stemming from the admissions by these companies about collusion and bid-rigging to the Competition Commission during the commission’s fast-track settlement programme.

In terms of the VRP, the companies agreed to pay R1.5 billion over 12 years to the TCF to transform, strengthen and rebuild the construction industry and to support the government in its efforts to address poverty, inequality and unemployment.

The contributions by these companies to the TCF are in addition to R1.4 billion in fines paid to the Competition Commission.

The TFC annual report said that as of July 2021, Aveng had paid R63.8 million but defaulted on its July 2019, 2020 and 2021 contributions.

No comment

Aveng spokesperson Itumeleng Lepere told Moneyweb last year in response to a query about the status of the group’s VRP payments: “I have unfortunately been advised to not say anything further regarding your query.”

The TCF said the current payment reality is that:

• WBHO and Raubex are up to date with their contributions and WBHO has paid R127.5 million and Raubex R90 million.

• Stefanutti Stocks has paid R58.7 million and has requested that its contributions be rescheduled. A shortfall of R11.25 million from the Stefanutti Stocks July 2019 contribution will be paid by July 2024 and the July 2020 contribution has been deferred to July 2029.

• Murray & Roberts (M&R) has paid R85 million and has requested that its contributions be rescheduled due to pressures on cash flow. The July 2020 and July 2021 contributions are in arrears and M&R has requested a deferment to July 2022, with negotiations on this ongoing.

•  Basil Read was placed under business rescue in June 2018 and last contributed to the TCF in July 2018. It has paid R4.4 million in total.

• Group Five was placed under business rescue in March 2019 and last contributed to the TCF in July 2018. It has paid R45 million in total.

Source: Tirisano Construction Fund 2022 Annual Report

A representative from Stefanutti Stocks’s communications company said in response to a query about the status of the group’s VRP payments that: “Stefanutti Stocks does not engage with the media.”

M&R group investor and media executive Ed Jardim said the group is aware of its obligations under the VRP.

“Due to various reasons, we are in the process of finalising a revised contribution schedule with the dtic in order for the required payments to be made,” added Jardim.

The TCF said that of the R469.4 million received in contributions from the seven companies, the board of trustees has committed funds amounting to R445.5 million to projects or programmes.

However, outgoing TCF chair Mike Wylie highlighted some oversight issues in the fund’s latest annual report.

He said the ministerial supervisory committee, established to oversee the implementation of the objectives of the VRP “has not been functional for the past five years”.

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Wylie confirmed he and TCF CEO Anita Loots attended a meeting with Public Works and Infrastructure Minister Patricia de Lille and Agriculture, Land Reform and Rural Development Minister Thoko Didiza on 18 March 2022.

“Hopefully, this ‘partial supervisory committee’ meeting is a sign of things to come.

“I am not, however, hopeful because to get the ministers of the four portfolios – public works and infrastructure; agriculture, land reform and rural development; trade, industry and competition; and transport – around the table together is unlikely to happen, even though it is their legal obligation.

“I sincerely hope that, in my retirement, I am proved wrong,” he said.