Firm facing liquidation claims city owes it R117m

A 100% black-owned Port Elizabeth construction company faces liquidation, with the resultant loss of 300 jobs, following claims that the Nelson Mandela Bay Municipality owes it R117-million.

The Port Elizabeth High Court has provisionally wound up Masakeni Construction (Pty) Ltd, ordering a commission of inquiry in terms of the Companies Act.

Masakeni director Khwezi Blose made the application on behalf of his company after business rescue proceedings were terminated.

In an affidavit before court, Blose said it was imperative that a liquidator be appointed to investigate the municipality’s reluctance to settle its alleged debts.

“The failure by the municipality to effect payment has caused Masakeni to suffer severe cashflow constraints,” he said.

“Masakeni is not in a position to continue with its business operations without the outstanding indebtedness being settled.”

He claimed the business of Masakeni had been “hijacked”.

Blose said mayor Athol Trollip, municipal manager Johann Mettler, infrastructure and engineering head Walter Shaidi, as well as previous Masakeni director Ravi Naidoo and the engineers appointed to work on the contracts should be questioned in this regard.

Mettler said yesterday he could not comment at this stage, save to say that the municipality would abide by the court process.

Masakeni, based in Markman, was established in 2004.

It specialised in construction services for townships and general civil engineering in the greater Port Elizabeth area.

Some of its better-known projects included the Bulk Earthworks for the Nelson Mandela Bay Stadium and the tarring of gravel roads in the metro.

The company was placed under business rescue on December 1 2015, with an official business rescue plan adopted on March 25 last year.

In terms of the plan, Mazotrix (Pty) Ltd, trading as Faku Family Enterprises (FFE), acquired Masakeni’s shares.

It originally provided debt funding in the form of a shareholder’s advance of R10-million, but the amount subsequently increased to R44-million.

The initial funding was used to pay Masakeni’s creditors.

At that stage, Masakeni was in the process of completing several projects for the municipality.

They included, among others, the installation of civil services in Rosedale, Missionvale and Motherwell, and the construction of sewer works in Chatty and Despatch.

“Since April [last year], the municipality was obliged in terms of the contracts to compensate Masakeni for all work done in respect of the contracts, as well as remedial work arising from damages caused by the previous owners of Masakeni,” Blose said.

He said FFE had since indicated that it could not provide further funding, especially in light of the municipality’s failure to pay up.

Blose said that during the company’s shutdown period in December last year, FFE had an opportunity to conduct an internal audit of Masakeni. The audit found that: ý The engineers appointed on the contracts refused to certify payments;

The engineers incorrectly imposed penalties on Masakeni prior to the termination of the business rescue proceedings;

The engineers certified overpayments to Masakeni’s previous owners, in advance, for work to be attended to by other subcontractors;

Masakeni was forced to rectify the substandard work done by engineers prior to FFE becoming sole shareholder; and

Advance payments were made by the municipality to Masakeni prior to the commencement of business rescue proceedings in respect of work certified by engineers, but which was not completed.

“Since the termination of the business rescue proceedings, Masakeni has attended to work in terms of the contracts and is entitled to payment from the municipality,” Blose said.

“Since February, Masakeni has continuously engaged with the municipality in an attempt to receive payment for work done.

“The municipality was specifically informed of the findings of the audit.”

He said the municipality refused to pay up, alleging that payments were previously, “albeit erroneously”, made in terms of the contracts.

“An amount of R117.738-million is due and owing by the municipality,” Blose said.

He said Masakeni still owed FFE the R44-million it had loaned to the company.

On Tuesday last week, the high court granted the application for the provisional winding-up of Masakeni, giving interested parties until July 4 to show cause, if any, why the firm should not be finally liquidated.

Leave a Reply