Aveng joint venture to appeal against court ruling on Mtentu bridge dispute

There is no end in sight to the dispute over the incomplete R1.7bn Mtentu River bridge after Aveng said on Thursday it would appeal against a court ruling allowing the SA National Roads Agency (Sanral) to claim damages.

The Aveng Strabag joint venture (ASJV) — an entity owned by Aveng and Austria’s Strabag International — terminated the contract to build the 1.1km bridge on the N2 Wild Coast after threats of violence from community members who wanted to be part of the project. At 220m high, the bridge is Africa’s highest. 

The dispute between Sanral and the contractor shines the spotlight on alleged incidents of violence which have halted work at construction sites in the country. The SA Forum of Civil Engineering Contractors, an industry body representing JSE listed, nonlisted and emerging contractors, last week wrote to President Cyril Ramaphosa, asking for his intervention.  

In the letter, the forum said construction projects worth at least R25bn were violently disrupted in the country. It cited the Mtentu and a R2.4bn oil-storage investment project at Saldanha in the Western Cape among projects that had been affected.

Aveng Strabag said the SA construction industry had been plagued and held to ransom by unlawful community actions. It terminated the contract for force majeure, with effect from February 6.

Force majeure is a clause in construction contracts that exempts the contracting parties from fulfilling their contractual obligations for reasons that are beyond their control.

The North Gauteng High Court last week said Sanral could claim damages for the contract.

However, Aveng said “the Aveng Strabag joint venture considers the dismissal of the application to be wrong and, based on legal advice, is appealing the judgment” .

“Sanral, despite itself having suspended the works on site for 83 days for the same reasons, took the approach that there was no force majeure and that the (joint venture’s) termination constituted a repudiation of the contract,” the company said.

It said ASJV “ remains confident that its right to terminate arose after being prevented from executing works on the project site by community unrest, protest action and threats of violence against its personnel, related to community demands made against Sanral”.

However, Sanral disputed this, saying the joint venture terminated the contract because of Aveng’s “publicly known” financial problems.

ASJV has provided two contract securities in relation to the bridge: a R245m performance security and retention money guarantee of R82m. The guarantees are meant to ensure proper performance and to rectify defects on the works executed.

Sanral spokesman Vusi Mona on Thursday said the agency had noted the joint venture’s intention to appeal against the high court decision.

“Sanral will continue to protect its interest in this regard. Sanral is preparing to enter a dispute-adjudication process with the contractor in relation to their abandonment of the project site and the consequent termination of the contract by the Sanral board as a result of this breach,” he said. 

The agency’s next course of action would depend on the outcome of the appeal and the dispute adjudication process, he said.

njobenis@businesslive.co.za