Aveng regrets taking on Mtentu bridge project

Infrastructure and resources group Aveng says it regrets bidding for work on Africa’s highest bridge, for which it may have to pay a steep price.

The infrastructure and resources group is in dispute with the SA National Road Agency (Sanral) relating to work on the R1.7bn Mtentu River bridge project in the Eastern Cape, which at 220m high was meant to be Africa’s highest bridge.

The Aveng Strabag joint venture — 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.

The consortium has appealed against a North Gauteng High Court ruling delivered on March 22 that Sanral could institute damages claims for the contract.

Speaking after the release of the company’s full-year results on Thursday, Aveng CEO Sean Flanagan said the company should not have taken on the work.

“If we could cast our minds back we would not have (taken) the job. For an engineer, it is a fantastic job. It is a big, complex structure. It is a wonderful job, from an engineering point of view. But there are many issues that are not in the contractor’s control,” Flanagan said.

Complex projects such as Mtentu should be executed on an “alliance” basis, whereby the client, contractor, subcontractors and communities jointly discuss the execution of the project, he said.

The “alliance” model would have allowed the different parties to devise solutions to identified risks before the signing of the project.

“For instance, where is the labour going to come from? Where are we going to buy the materials from? Those issues need to be resolved upfront. Those are the client’s responsibilities. The alliance model would have identified those risks and (the parties) would have found solutions,” Flanagan said.

The Mtentu project would not go through the company’s current risk assessment measures, he said.

The joint venture had provided two bonds as contract securities — a performance guarantee for R245m and a retention money guarantee for about R82m.

Aveng is exiting the weak SA construction sector, as part of a strategy that entails selling a number of the group’s noncore assets.

As at June 30, the company had received a total of R520m for disposal of assets such as Aveng Rail and Aveng Water. The company is negotiating the sale of a number of other assets including precast concrete products manufacturing business Aveng Infraset and Aveng Duraset, a supplier of engineered support solutions to the mining and geotechnical industries.

Aveng executive chair Eric Diack said the company wanted to complete the disposals by March 2020.

“Then it (will be) a question of focusing on the two core businesses (Australian specialist infrastructure contractor McConnell Dowell and surface mining contractor Moolmans),” he said.

But Aveng CFO Adrian Macartney said the “cleanup” of the company’s portfolio after the disposals would take longer.

“It is about concluding a deal, executing on that deal and unscrambling the egg (by) taking that company out. Disentangling a company from the group involved practical considerations. A simple example is unwinding someone from your payroll systems,” Macartney said.

Flanagan said the group had so far carried out the disposals in a controlled way by entering into transitional agreements with the affected companies.

“We want to make sure that they are successful. We cannot unplug and leave them on their own. The licences for IT, for instance, currently sit with us. There is a considerable piece of work that we have to do to assist those companies. The worst that can happen for us is if, six months after we sell them, they fall over,” Flanagan said.

njobenis@businesslive.co.za