City concerned about liquidations and cash flow problems in construction industry
Transport for Cape Town (TCT) is concerned about the financial difficulties experienced by some construction companies that have been contracted to deliver on the City's capital projects for the 2013/14 financial year. Read more below.
Seven capital projects in excess of R300 million have been hampered due to the liquidation of two well-established contracting companies earlier this year, as well as the liquidation of four other companies last year. This has caused delays of up to four months to current construction projects which have had a knock-on effect in the ensuing months.
The six recently liquidated construction contractors are Darson Construction, Jansen Tarmac, Requad Civils, Vusela Construction, Toleni Construction and the subcontractor Winlite; furthermore another four contractors to the City are also experiencing serious cash-flow problems. Among the projects affected by these liquidations are the rehabilitation of Weltevreden Parkway and roads in Kraaifontein; the third phase of the rehabilitation of Main Road between Muizenberg and Clovelly; the reconstruction of the concrete roads in Gugulethu and Manenberg; and a number of non-motorised transport projects in various suburbs of Mitchells Plain and Kuils River.
The contracts held by the liquidated companies cannot be terminated and replaced overnight due to the complexities inherent in legally terminating contracts, the requirements of the Liquidation Act, and the time constraints associated with the procurement processes involved in the appointment of a replacement contractor.
In order to do so, the City is obliged to follow due process in terms of the Supply Chain Management Regulations and the legislative requirements as set out in the Municipal Finance Management Act (MFMA). Thus it takes months to complete the drafting of tender documents, tender advertising, tender adjudications and the subsequent awarding of tenders.