The Roads Contractor Company (RCC), the embattled state-owned road contracting enterprise, is fighting for its existence. And the company honchos maintain that government – particularly the treasury and public enterprises ministry – is engaged in discussions that are clearly an attempt at financially choking the parastatal, instead of helping it to remain competitive in the construction industry.
To qualify its stance the RCC, which had a press conference a fortnight ago, points out that its new board ensured that a new business plan was submitted to government in July, and yet there has been no positive response.
Finance minister Calle Schlettwein and public enterprise minister Leon Jooste were this week quoted by the weekly Patriot newspaper as saying there is a probe into the feasibility of RCC.
“We got a mandate from Cabinet to re-evaluate RCC’s mandate and cost efficiency and if it shows that they are expensive, we will take a decision whether they will remain or not,” the Patriot quoted Schlettwein as saying. The newspaper also quoted Jooste as saying the public enterprise ministry is evaluating RCC’s strategic business plan.
However, RCC chief executive officer Tino !Hanabeb is adamant that RCC has always quoted the cheapest prices when bidding for tenders.
“RCC remains competitive in the construction sector. This is noticeable from our tender pricing, which is amongst the lower tenders when total prices are read at official openings,” said !Hanabeb in response to questions from New Era.
RCC’s senior management and board also pointed out that instead of assessing whether or not the parastatal should be allowed to exist, government needs to extend sufficient support to RCC for it to compete fairly with private contractors that continue to receive the large chunk of government’s budget for capital projects.
!Hanabeb and board chairperson Fritz Jacobs have publicly admitted the state-owned corporation is currently not appetising. “Our balance sheet is very challenging and is not the one that any investor or bank would want to say this is my client,” Jacobs told the press a fortnight ago.
RCC projects a negative cash flow position of N$93 million by the end of the current financial year. It has never paid dividends since its formation.
Yet the RCC board remains optimistic that should they get a financial injection that is not less than N$300 million and have its historic tax debts written off by the treasury, it would be able to turn in positive returns within the next five years.
To do this though RCC management wants to corner at least 30 percent of government’s capital projects. !Hanabeb is optimistic that RCC would get the amount of government tenders required for the corporation to achieve its targets.
“Noting the fact that RCC has amongst the most experienced road construction and maintenance teams, we will remain competitive in our tendering. To attest to our competitive pricing, RCC is on the shortlists of tenders which amount to about N$2.6 billion. We therefore believe that RCC stands a good chance of being awarded a significant number of these tenders,” he said.
The reason RCC participation in capital projects, especially road construction, has been dwindling “is due to historic challenges,” says !Hanabeb. He hastened to add that there has since been an improvement.
“RCC has commenced the process of increasing its capacity in order to fulfil its mandate,” he said.
“In the last 12 months RCC has increased its participation in roads and other construction tenders. This is noticeable from the increased participation in new tenders to the value of N$2.6 billion over the last 12 months,” he says.
“Tenders are evaluated on a competitive bidding basis, and may result in some tenders being awarded to RCC or to other bidders,” says !Hanabeb as to the reason why the bulk of construction work goes to private contractors and not to RCC.
Regarding concerns of why RCC wins tenders but then sub-contracts them to independent contractors, the RCC says joint ventures and sub-contracting “are normal business practices in the construction industry depending on strategic tendering needs”.