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Construction firms agree to R1.25bn development fund

The deal with government will help to boost investment and settle legal claims against them.

Six South African construction companies including Group Five and Aveng agreed to a government deal to pay a combined R1.25 billion ($84 million) over 12 years into a development fund to boost investment and help address legal claims against them.

The building firms will also have to choose between mentoring as many as three black-owned businesses to develop skills or selling at least 40% of their South African civil engineering and construction units to black-controlled enterprises, they said in separate statements to the stock exchange on Tuesday. The condition is part of a government initiative to help compensate those discriminated against during apartheid.

“The objective of the fund will be the development, enhancement and transformation of the construction industry, as well as the promotion of social infrastructure for all South Africans,” Johannesburg-based Group Five said.

The other four companies to agree to the deal are Basil Read Holdings, Wilson Bayly Holmes-Ovcon, Raubex Group and Stefanutti Stocks Holdings. A seventh company, Murray & Roberts Holdings, has asked for more time to present the settlement to its board, Economic Development Minister Ebrahim Patel told reporters in Johannesburg.

Aveng shares pared earlier gains and traded 1.7% higher at R7.12 as of 1:49pm in Johannesburg. Group Five rose 0.2%, Stefanutti increased 0.7%, Raubex advanced 0.7%, WBHO fell 1.7% and Basil Read was little changed.

The agreement is a framework for the settlement of claims against the companies by the industry regulator, the Construction Industry Development Board, and civil claims by public entities arising from investigations by the Competition Commission for a period up to 2010.

© 2016 Bloomberg 

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