Africa's Public Procurement & Entrepreneurship Research Initiative – APPERI



Afrimat chief says public sector is spending and paying

Engineering News

By Irma Venter

May 25th, 2012

As a country, South Africa often has a herd mentality. We have certain themes we believe and we act accordingly,” says Afrimat CEO Andries van Heerden. “We must start questioning some of the fundamental assumptions we make,” he adds.

Some of these assumptions are that infrastructure spending is not happening and that government, in general, is not paying its bills.

Van Heerden says Afrimat has not experienced payment problems. Also, government is indeed spending money on infrastructure, but contracts have become smaller, and work has moved out of the major cities. The Northern Cape, for example, is earmarked for R8-billion in roads spending over the next two to three years.

Where an average road contract was valued at R800-million to R1-billion three or four years ago, it is now R100-million, notes Van Heerden.

“We are seeing a change in our environment and a lot of the big guys find it difficult to adapt.”

Van Heerden says all players within the construction industry often select data that proves their point, adding that Afrimat’s position is that “infrastructure is alive and well and happening out there”.

As proof of this, he says, South Africa’s spend as a percentage of gross domestic product in 2012 remains above 8%, as has been the case since 2008. In 1997, this was just over 4%. Provincial and national roads expenditure has also been sustained at more than R30-billion since 2010, up from just over R10-billion in 2007.

Building plans passed have started to bottom out, adds Van Heerden, with cement sales picking up every month since August last year.

“We are not close to the levels of 2006, but the market has turned. It has bottomed out. There are no fireworks, as in 2006, but that not will happen in my lifetime again, and I’m still very young,” quips the 46-year-old executive.

However, he adds that it is all not good news, as challenges remain, such as the high fuel price, and the uncertainty surrounding the South African National Roads Agency Limited’s future as the hugely unpopular tolling process in Gauteng has started to take scalps, most notably that of CEO Nazir Alli.

Afrimat’s exposure to Sanral is not big, however, notes Van Heerden, with the agency making up only 6% of turnover in the past financial year.

Municipalities’ financial woes also remain a persistent challenge, as does congestion in Africa, pushing margins on the continent ever lower.

“The margins in Northern Mozambique are lower than in Mpumalanga and the risk-reward does not work,” says Van Heerden.

He adds that Africa is filled with Chinese, Indian, European and Brazilian companies hunting for work.

Afrimat had a good 12 months, ended Feb- ruary 29, on home ground, says Van Heerden.

“This is a really pleasing set of results.”

Revenue at R996-million was up 16.6%, compared with the previous financial year, with headline earnings per share up 17% to 62.6c.

Operating profit increased by 18.7% to R130-million, with the operating margin inching up to 13.2% from 12.8% in the 2011 financial year.

The company also had more cash than debt at the close of the year – in a “market that was very volatile”, says Van Heerden.

The new acquisition of Clinker Suppliers and SA Block will add to Afrimat’s 2013 numbers.

Van Heerden says the company will continue to look at possible acquisitions, especially as the strong balance sheet allows such a move.

However, he adds that he is aware that the most dangerous time in a company’s life emerges when everything is going well.

“We must work to keep the ‘fat cat’ syndrome away.”

South Africa: ANC linked to e-tolling companies

Johannesburg – The SA National Roads Agency Limited (Sanral) must disclose the names of all 33 sub-contractors involved in the collection of e-tolls on Gauteng highways, the DA said on Sunday.

“This is after disturbing reports [on Sunday] about African National Congress links to companies that will benefit from the e-tolling,” Democratic Alliance spokesperson Jack Bloom said in a statement.

The DA has asked Public Protector Thuli Madonsela to investigate the controversial Gauteng e-toll collection contracts.

On Sunday, Bloom said he had received acknowledgement of his request.

“It is vital that this investigation goes ahead so that we know the truth about who benefits from these controversial contracts, and whether there was any corruption,” he said.

The Sunday Times has reported that politically-connected companies stand to benefit from e-tolling contracts.


According to the newspaper, these included Tsebo Holdings, South Africa’s largest catering company, which was 15% owned by Nozala Investments and 15% by Lereko.

The Sunday Times reported that Nozala was headed by Salukazi Dakile-Hlongwane, a trustee of the ANC front company Chancellor House, and that Lereko was owned by former environment minister Valli Moosa and Chancellor House trustee Popo Molefe.

Other companies which stood to benefit were Vodacom and GijimaAST, which was 35% owned by billionaire businessman Robert Gumede, which won the two largest sub-contracts.

JSE-listed Gijima was awarded the contract to design and run the project’s IT system, the Sunday Times reported.

Molefe was reportedly not aware that Tsebo had any e-tolling contract until told of this by the Sunday Times.

“We as Lereko has not been involved in any discussions about e-tolling. We’re not even on Tsebo’s board, so we have no influence,” he told the newspaper.


The 33 sub-contractors were signed up by the electronic toll consortium (ETC), after it was awarded the main R6.6 billion contract by Sanral in 2009. The ETC is responsible for collecting e-tolls.

The Sunday Times reported that the ETC had provided it with the names of only nine of the sub-contractors this week.

In an interview with the Sunday Times, ETC chief executive Salahdin Yacoubi said he would not release the full list of sub-contractors until he had “obtained permission” from them.

He said he had “nothing to hide” and would “collaborate with any investigation” into the beneficiaries of the e-toll contracts.

The Sunday Times also reported that a major beneficiary was the Swedish company Kapsch TrafficCom, which owned 40% of the main contractor.

The company confirmed to the newspaper that, until 2000, it was owned by arms company SAAB, which admitted in June to paying bribes of more than R24m to ensure it was picked to supply Gripen jets to South Africa in the arms deal.

The e-tolling system was halted last Saturday until a full court review could be carried out to determine whether it should be scrapped.


DA asks protector to probe e-tolls ‘link’ to arms deal companies


May 3rd, 2012

Probe demanded into possible connections between companies involved in arms deal and the company that runs the e-tolling system.

THE Democratic Alliance (DA) has asked Public Protector Thuli Madonsela to investigate controversial contracts relating to the collection of e-tolls in Gauteng.

“Suspicion is high that politically connected people may have benefited from the toll companies contracted to the South African National Roads Agency (Sanral),” DA MPL Jack Bloom said in a statement on Thursday.

He added: “Widespread public concern needs to be allayed by a full investigation by the public protector.”

On Wednesday, the Congress of South African Trade Unions demanded an investigation into possible connections between companies involved in South Africa’s arms deal and the company that runs the controversial e-tolling system on the Gauteng Freeway Improvement Project.

While they are not conclusive of wrongdoing, links between the corruption-tainted arms deal and the unpopular e-tolling plan will add to the stiff opposition that the government is facing from business, unions and civil society.

Websites have been buzzing with allegations of links between Swedish companies involved in the arms deal and the Vienna-based Austrian company Kapsch TrafficCom.

Kapsch TrafficCom is the largest shareholder in the Electronic Toll Collection (ETC) joint venture, which won the R1,1bn project from Sanral in 2009, along with Traffic Management Technologies, a local company.

“In giving the background to his interdict against the e-tolls, Judge Bill Prinsloo criticised Sanral for its secrecy on the contract with the ETC consortium,” Mr Bloom said on Thursday. “There are also 35 sub-contracts with ETC, all with confidentiality clauses.”

On Saturday in the North Gauteng High Court, Judge Prinsloo granted an urgent interdict, brought by the Opposition to Urban Tolling Alliance, to stop the e-tolling system so that a full court review could be carried out to determine whether it should be scrapped.

The judge said that while he realised Sanral would suffer huge financial losses, the public would also suffer hardship if the controversial project went ahead.

The ETC consortium will install and operate the toll system on the upgraded highways. When the contract was signed, Kapsch — both its Austrian and Swedish arms — held 65% of the company and TMT owned 35%.

Sanral CEO Nazir Alli said last year the Kapsch consortium had tendered the most competitive bid, which also had the largest South African composition.

However, the next year Kapsch TrafficCom “invested” in TMT, which resulted in the company owning 57% of TMT.

The Swedish and Austrian arms of Kapsch owned most of the ETC consortium, but it appears the Swedish unit owns the lion’s share. Kapsch TrafficCom holds 40% of ETC while Austrian principal Kapsch has the remaining 25%.

The Swedish arm was previously part of Swedish manufacturing company SAAB and later became part of Kapsch AG.

SAAB, which sold 28 Gripen jet fighters to South Africa in the arms deal, sold a subsidiary called Combitech Traffic Systems to Kapsch. That company had already been involved in several toll-road contracts, including Marianhill Plaza in Durban.

One of its partners in these toll contracts was Kobitech, owned by Schabir Shaik, who was jailed for arms deal corruption. Most of Shaik’s business interests were in toll roads and electronic licensing contracts handled by the Department of Transport.


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