The Liviero Group, which describes itself as “South Africa’s largest privately black-owned multidisciplinary construction group”, has been placed under voluntary business rescue.
This follows shortly after JSE-listed Basil Read Holdings also placed its construction business in voluntary business rescue. Trading in the shares of Basil Read Holdings on the JSE has subsequently been suspended.
It is well known that Basil Read’s peers Group Five and Aveng are also in very difficult financial positions.
Contractors are complaining bitterly that government tenders have all but dried up and don’t see any prospect of improved conditions in the near future.
Liviero has an annual turnover of about R3 billion and employs 2 600 people, according to information on the group’s website. It has several subsidiaries, namely Liviero Building, Liviero Civils, Liviero Mining, Liviero Plant and Liviero Energy.
The business rescue practitioners Liebenberg van der Merwe and Johannes Klopper of BDO have invited creditors and affected persons to attend meetings scheduled from July 18 in Midrand, Middelburg (Mpumalanga) and Durban.
Liviero is 51% held by the Masimong Group, an investment group under the leadership of Mike Teke. Teke is the deputy chairperson of Seriti Mines in which Masimong holds a stake and is a former president of the Chamber of Mines. Masimong also holds 4.8% of the Anchor Group of asset managers and investments in other financial services companies, mining, energy, consulting services and technology, to name but a few.
The Liviero family, which started the Liviero Group, holds 49%.
In a sworn statement made on July 4 to commence the business rescue process for the group, Luca Liviero says government clients owe Liviero Civils R81 million in overdue debt. This has had an impact of R24 million on the group’s ability to recover plant hire and other costs.
Despite legal proceedings the amounts are still unpaid, Liviero states.
Work stoppages due to strikes, community unrest and as a result of safety issues that was no fault of its own, cost Liviero Mining R45 million in revenue, the group states.
“With a shortfall in revenue and on a fixed cost base, Liviero Group in turn has not received its full quantum of overhead recovery and fixed monthly cost to cover the asset based finance. The Liviero Group has currently not honoured its financial obligations to its instalment sales and finds itself in breach of the respective instalment sale agreements,” he states.
In a similar statement in support of the business rescue application for Liviero Mining, Liviero says due to external factors like late payments by debtors, community unrest and safety-related stoppages imposed on its clients “we are not in a position to create enough revenue to maintain a profitable position”.
He states that Liviero Mining last year got a R130 million loan from the Industrial Development Corporation (IDC) to pay overdue debt to its creditors and maintain its plant fleet. “Due to a delay in the payment of this loan, we were not in a position to apply the earmarked funds to equipment mid-life maintenance, but instead had to apply these funds to the shortfall created by the rainy season, as well as the December break.”
He describes how Liviero Plant, due to its own problems, is unable to maintain the fleet for the mining subsidiary, which negatively impacts productivity and eventually revenue.
This is a downward spiral unless the fleet is restored to a good condition, Liviero says.
According to an industry source, Liviero’s contract for the upgrade of the road from Koedoeskop to Northam to Dwaalboom in Limpopo could be part of its problems.
Allegedly this contract is partly funded by a mining client and partly by the Roads Agency Limpopo (RAL). The RAL is known as a problematic client in terms of paying its contractors and might be responsible for some of Liviero’s outstanding debtors, the source told Moneyweb.
Liviero in both affidavits states that the board of directors believes that the companies can be rescued. “Business rescue will, it is hoped, allow the company to reorganise its affairs so that the company can innovate and grow,” he states.