Struggling RCC plunged into N$100m hole

AN arbitration award of close to N$100 million given against the Roads Contractor Company (RCC) and a former joint venture partner of the state-owned company has worsened the plight of the already struggling parastatal.

This is after a South African construction group, Teichmann South Africa, and a joint venture including the RCC went through an arbitration process after the venture allegedly failed to pay Teichmann for work it had done on a road construction project in the Zambezi region between 2012 and 2014.

In the arbitration award, which was given by senior counsel Andrew Corbett in February this year, the RCC and its joint venture partner, the Chinese-owned company MCC Communication Engineering Technology Co (MCC), were directed to pay N$52,3 million and interest totalling about N$42 million on the amount of N$52,3 million to Teichmann South Africa, which was previously known as Teichmann Plant Hire.

The RCC and MCC were further directed to pay interest calculated from the start of November 2020 on amounts of nearly N$46,5 million and N$47,8 million, respectively to, Teichmann South Africa.

A source close to the RCC executive management confirmed the award.

He said last week that the parastatal could face liquidation, and charged it was the fault of its board of directors “for keeping the Minister of Public Enterprises in the dark”.

He further claimed that RCC debts are estimated to be at more than N$600 million, and said the minister of public enterprises should appoint experts from the Ministry of Public Enterprises, the Office of the Attorney General and the Ministry of Works and Transport on an interim basis to work with the RCC’c management to assess the viability of the company and whether it should be liquidated or placed under judicial management.

“The RCC doesn’t have money to acquire external experts, wasting money as the shareholder subsidises RCC salaries at the moment,” he said.

Public enterprises minister Leon Jooste confirmed that he was not aware of the award and the arbitration process.

The RCC and MCC were in a joint venture which was contracted to upgrade the MR125 road over a length of about 186 kilometres between Kongola and Katima Mulilo, via Linyanti, in the Zambezi region.

The project was to be carried out in two phases, with the first phase set to cost N$439 million and the second phase N$389 million.

Corbett remarked in his arbitration ruling that the project was beset by problems from the start, “relating to a lack of expertise on the part of particularly MCC . . .”.

During the second phase of the project, Teichmann was contracted by the joint venture to manage the construction of a part of the road, while the company also rented plant and equipment to the joint venture.

Teichmann filed a claim against the joint venture in the High Court in March 2015.

In response to the claim, the RCC disputed that it owed the South African company an amount of N$55 million, which was initially claimed.

According to the RCC, its joint venture with MCC owed Teichmann N$32 million, while MCC’s stance was that the joint venture owed Teichmann only N$9 million, Corbett noted in his arbitration ruling.

The joint venture also claimed that Teichmann did not carry out all of the work it had been contracted to do and had been overpaid for the work it carried out.

Based on that, the joint venture counterclaimed about N$52 million from Teichmann.

Corbett noted that, according to the joint venture’s version, Teichmann was to be paid around N$90 million for the construction of 71 km of the road – for which the Roads Authority was to pay the joint venture N$389 million.

Corbett found that, contrary to the joint venture’s version, Teichmann was contracted to manage the construction of 71 km of the road under the second phase of the project, and not to carry out the construction itself.