Group Five Construction, the main operating subsidiary of financially distressed JSE-listed construction and engineering group Group Five Limited, is engaging with government and the Tirisano Construction Fund about the repayment of almost R45 million it paid in terms the Voluntary Rebuilding Programme (VRP).
In terms of the VRP agreement, seven companies collectively agreed to contribute R1.5 billion for development projects and committed to promoting transformation and black participation and ownership in the sector. This was to settle outstanding and potential civil claims by government entities related to collusive tendering and bid-rigging on government projects ahead of the 2010 Fifa World Cup.
The Tirisano Trust is the socio-economic development fund to which the seven listed construction companies will collectively contribute the R1.5 billion over 12 years in terms of an agreement reached with the government.
Group Five Limited and Group Five Construction are both in business rescue.
Group Five Construction paid its contribution of almost R45 million to the Tirisano Construction Fund prior to the commencement of business rescue proceedings.
The group’s business rescue practitioners revealed in the business rescue plan for Group Five Construction published on Friday that they had investigated and taken legal advice on this issue.
Transactions ‘likely voidable’
They said they were advised that the conclusion of the settlement agreement in October 2016, as well as all subsequent payments made in accordance with this agreement, were “likely voidable transactions as contemplated in Section 141(2)(c)(i) of the Companies Act”.
The business rescue plan states: “The BRPs [business rescue practitioners] are presently engaging with the government and the Tirisano Construction Fund to procure repayment of the aforementioned amount, or such part thereof as may prove recoverable, coupled to a suitable release of Group Five Limited and the Company of any residual obligations under the settlement agreement.”
The BRPs also revealed that they had engaged with the Competition Commission in the hope of achieving “an amicable all-inclusive resolution” of the various pending proceedings the commission had against Group Five Construction but “have had no success in this regard”.
These proceedings are currently pending before the Competition Tribunal and relate to the company’s alleged involvement in collusive practices flowing from the construction of the World Cup stadia and the so-called Senekal road construction project.
Charges of collusion
In regard to the road project, the commission has alleged that there was collusive tendering between Group Five, Wilson Bayly Holmes-Ovcon (WBHO) Construction and Concor, a subsidiary of Murray & Roberts, on a tender for the rehabilitation of National Route 5, section 4 between Senekal and Vaalpenspruit in the Free State.
The business rescue practitioners added that coupled to these tribunal proceedings, Group Five Construction was waiting for judgment on the outcome of a high court review application it brought related to the commission’s investigation.
“The outcome of the review is anticipated to have a profound effect on the proceedings currently pending before the Competition Tribunal,” they said.
The business rescue plan states that, based on independent legal advice regarding the company’s prospects in the various proceedings, the BRPs believe the company has good prospects of success in the outcome of the review proceedings.
“However, should the review be unsuccessful, the company will persist in its defence of the proceedings before the Competition Tribunal, unless suitable settlement terms can be agreed with the Competition Commission.”