HARARE – Diversified South African construction company, Group Five filed for bankruptcy protection after lenders pulled funding, threatening the collapse of one of the biggest names in local (South Africa) construction industry and more than 8,000 jobs, Sharenet reported.
Group Five was responsible for the construction of the Plumtree-Mutare Highway which started in 2012 and was completed using a US$206 million loan from the Development Bank of Southern Africa (DBSA).
The project was marred with controversies, where in 2014 Group Five pulled out after the Government defaulted on loan repayments to the DBSA. The default was reported to have affected sub-contractors who also withdraw after debts swelled, leaving them in cash flow problems.
The Group together with ZINARA, which it partnered to construct the Plumtree-Mutare highway through Infralink (ZINARA controls 70% shareholding and Group 5 controls 30%) have come under spotlight after an inquiry was opened last year into the construction of the highway.
The Parliamentary Portfolio Committee on Transport and Infrastructure Development opened the inquiry following indications that the road is already in need of rehabilitation.
Commenting on the issue at the time, Transport and Infrastructure Development Committee chair, Dexter Nduna said Parliament was scrutinising the workmanship and due diligence issues pertaining to the project.
“A lot of sections of that road are now unravelling or they are becoming dilapidated before the commissioning of the road,” he said.
‘‘The shelf life of a road is supposed to be a minimum of 10 years but the road was started in 2012, and now it’s six years down the line. We have a lot of flaws emanating from the construction and the integrity of the road leaves a lot to be desired.”
Group Five has reportedly been struggling to make money for years as infrastructure spending by government (SA) and private sector slowed.
According to Sharenet report, its cash flow problems were exacerbated late last year when Ghana’s Cenpower Generation Company claimed a total of $62.7 million over a building delay to a power plant in the West African country. The project has since been terminated.
“It appears to be reasonably unlikely that the company will be able to pay all of its debts as they fall due and payable within the immediately ensuing six months,” Group Five said.
“As a result, the board of directors of Group Five and G5 Construction have resolved to place each of these companies into business rescue,” it said in a statement.
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