Ashortage of new road construction contracts is forcing companies to tender at very low profit margins and take on high-risk projects, asserts JSE-listed construction group Basil Read roads division MD Dave Bennett.
He explains that the multiple challenges facing the road construction industry are hindering the progress of tender processes, as well as the various construction phases.
Bennett notes that the South African National Roads Agency Limited (Sanral) is slowing down its tender processes owing to the concerns surrounding the tolling system, which has come under fire for lack of clarity over costs.
Transport Minister Sibusiso Ndebele has placed a moratorium on all future toll road projects.
Last month, the Automobile Association of South Africa also advised Gauteng road users to wait before acquiring e-tags for the Gauteng Freeway Improvement Project (GFIP), saying that the debate about toll roads was far from over.
Another significant challenge facing the road construction sector is the bitumen shortage in the local asphalt industry, which has resulted in the delay of many projects.
South Africa was recently faced with severe shortages of bitumen and liquefied petroleum gas as a result of planned and emergency shutdowns at four of the country’s six refineries.
Despite the uncertainties facing the roads industry, Basil Read reports it has been awarded a R160-million contract to widen the N12 Golden highway. The project is scheduled to begin in February 2012, and is expected to be completed over a nine-month period.
Further, the company continues its work on the N12 Tom Jones upgrade project, which was awarded in 2009 as part of the GFIP. The project was scheduled for completion in December this year, but completion has been postponed to March 2012.
This date is subject to change, however, owing to the bitumen shortage, as well as a shortage of mesh wire, which is used with the ultrathin concrete.
Basil Read relies on one Cape Town-based supplier for its mesh wire requirements. However, the steel used in the manufacture of this product is supplied by ArcelorMittal South Africa’s Newcastle plant, which recently underwent maintenance and repair work to a damaged blast furnace. This impacted on steel production.
Further, Basil Read, along with construction firm Dip Civils, is continuing work on a R343-million contract to upgrade a section of the N17 highway between Trichardtsfontein and Bethal, in Mpumalanga.
There has been a slight delay in the project, owing to the relaying of municipal water pipes. The project is scheduled for completion by the end of November.