Nine years later — completion cost for ‘six-month’ Eastern Cape road project shoots up to R20m a kilometre

The incomplete 15km access road from Indwe to Elitheni Coal Mine which has caused an outcry from Indwe residents. (Photo: Hoseya Jubase)

By Estelle Ellis and Hoseya Jubase

17 Mar 2022

Delays and two companies going into business rescue have driven up the construction cost of a 15km stretch of road from the small Eastern Cape town of Indwe to the Elitheni Coal Mine so much that it is likely to cost R20-million a kilometre once completed. The road’s six-month construction timeframe has now stretched to nine years.

In 2013, residents from Indwe were promised a tar road to the Elitheni Coal Mine within six months.

Seven years later they have a road littered with abandoned construction material, full of small, sharp stones that are very hard on tyres, with unsuitable bridges, and now projected to cost R20-million a kilometre due to the mishandling of a tender that was issued nine years ago.

The contract for the road was originally awarded in 2013 to Tau Pele Construction — a company that was awarded the contract despite being in business rescue at the time. The Eastern Cape Department of Transport indicated then that it was expecting to pay about R10-million a kilometre for the road.

According to a judgment in the drawn-out legal battle that followed between Tau Pele Construction and Umso Construction, a pre-check evaluation analysis had excluded Umso from bidding, but this was later changed to allow the company to bid.

indwe eastern cape elitheni coal mine access road The abandoned upgrade to the access road from Indwe to the Elitheni Coal Mine, Eastern Cape. (Photo: Hoseya Jubase)

However, the evaluation committee concluded that the bid did not qualify because it did not comply with the experience criteria. This included that the contractor should have experience in handling a project of no less than R100-million.

Umso had provided proof that, as part of a joint venture, it had been involved in the Gauteng Freeway Project valued at R1.5-billion in total, which involved the construction of a 36.8km road and included two stages. Its contribution, in value terms, came to R60-million and R49.6-million respectively, and in total to R109.6-million, excluding value-added tax. Umso’s lawyers at the time argued that this constituted a single project that began in November 2010 and had continued for 18 months.

Umso took Tau Pele and the Eastern Cape Department of Transport to court to have the awarding of the Indwe contract overturned, arguing that Tau Pele had been placed under business rescue while the evaluation process was still in progress.

The department had queried why it was not told that Tau Pele was in business rescue and, according to court papers, “did not receive a satisfactory answer”.

Lawyers for Tau Pele argued that the business rescue plan was implemented after the tender process had closed, and terminated before the tender contract was signed on 26 July 2013.

According to the tender data before court, it was a requirement that contractors should prove that they had the necessary financial resources to undertake and complete the work.

The court set aside the awarding of the contract, but did not stipulate it should be awarded to Umso, as it is empowered to in exceptional circumstances.

The matter then went to the Supreme Court of Appeal where judges, to ensure that the project was quickly finalised, awarded the contract to Umso Construction.

Construction of the road began in August 2017. By then, the six-month timeframe was a thing of the past and a new completion date was set for September 2019.

The original price for the contract was R200,567,052.

Five years later, about two thirds of the road have been completed.

Eastern Cape MEC for Transport Weziwe Tikana-Gxotiwe confirmed that 68% of the project had been completed. The contract with Umso Construction had been terminated.

indwe eastern cape elitheni coal mine access road The incomplete 15km access road from Indwe to Elitheni Coal Mine has caused an outcry from Indwe residents. (Photo: Hoseya Jubase)

“Umso Construction [Pty] Ltd went into business rescue and could not finish the project,” she said in a response to a question asked in the Eastern Cape Legislature by the Democratic Alliance’s Retief Odendaal.

The amount paid to Umso Construction was R173,254,877.25.

Tikana said the department was in the process of finalising the contract with another company, but said the appointment of the new contractor would happen only at the end of the 2022/2023 financial year “depending on funding availability” for completion the following year.

“The anticipated cost to finalise the project is R135-million,” she said.

She said the road would cost R110-million more than initially planned.

“It must be taken into account that the escalation on the current project was an amount of R40-million due to the tender process taking place in 2012/2013 and implementation only took place in the 2017/2018 financial year.”

Tikana said the department’s legal section was dealing with the issue and had submitted a claim of R2.4-million against Umso Construction.

But, the DA’s Odendaal said, the project had been flagged by the Auditor-General for an overpayment of R37-million to Umso Construction.

Residents from Indwe said they were better off with the old road. The half-constructed road was just bringing them trouble and had become dangerous to road users.

Nkosiyakhe Helebhe, a resident of Vukani, said what angered them most was that Umso Construction had destroyed the previous gravel road that had been far better than the present one.

“At the time of this construction, we had hoped things would change for the better. We had a hope that they were going to complete the road immediately, but it seems things did not go according to plan,” he said. “We are repairing our cars’ tyres often, this road is not right at all.”

Helebhe said each new tyre cost R2,500. Residents complained that crushed stones on the road were dangerous.

Helebhe said he did not understand why the construction had not been completed.

“We were hoping that by this time we’ll be using a tar road.”

A taxi owner from Indwe, who asked not to be named, said they were not making any profit, but were instead running up debts because of the road.

Taxi owners were excited when the construction began and they heard the road would be tarred.

“When it is raining it is difficult to drive on this road; we are running at a loss, we are repairing our vehicles every time, there is no profit here, we were told that this is supposed to be a tar road.”

“The construction company which was doing this road just disappeared in 2019 and we do not know what exactly happened.”

The taxi owner said some of the drivers are paid by the kilometre.

“Imagine if you are making R10,000 a month as an owner then you use R6,000 for petrol, then you are left with R4,000 and you will need to repair tyres and pay a driver, meaning you are running at a loss, there is no profit for you as owner.”

He said the construction company had also demolished the community’s previous bridges, replacing them with smaller bridges. This made their lives difficult in rainy conditions

Odendaal said: “The fact that the contractor was overpaid indicates gross negligence on the part of the department in relation to project management. The Democratic Alliance has long been advocating for tighter controls when it comes to the appointment of contractors for large civil works.

“Often, contractors are unable to complete these intricate projects which lead to huge financial losses by the government.”

In his speech, provincial MEC for Finance Mlungisi Mvoko said it was imperative to ensure that infrastructure projects were delivered on time and within budget. DM/MC

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