Chinese company losing millions as disgruntled SMMEs shut down factory
South Africa’s biggest automotive investment in four decades is five months behind schedule due to forced shutdowns by small businesses unhappy with tender processes – sparking fears potential investors will be scared away.
The Beijing Automotive Group (BAIC), which is building a factory at Coega, has lost R10.4-million due to four days of forced shutdowns by small, medium and micro-sized enterprises (SMMEs).
The SMMEs claim they are not benefiting from the 35% stake in tenders they were promised when the project was announced and that BEE fronting is taking place.
Protesters shut down the Chinese automotive giant’s premises in Port Elizabeth late last week as SMMEs vowed to intensify their fight for tenders for the construction phase.
However, BAIC officials say the tender process has been fair and transparent, with 35% of the R800-million for the first phase of the plant’s construction reserved for black-owned SMMEs as promised.
The automotive group announced its R11-billion investment in April last year, with production scheduled to start next year.
According to the Industrial Development Corporation (IDC), BAIC’S local partner, the plant was supposed to be 50% complete by now.
A number of SMME owners say a significant portion of the tender was awarded to larger companies at the expense of small entities.
On Friday, members of six Bay SMMEs descended on the plant, calling on management to shut down operations until their demands were met.
African Chamber of Business president Luvuyo Popo, who represents the SMMEs, said they felt insulted and undermined by BAIC.
“Big companies that are not even BEE-compliant are allocated tenders while SMMEs are left in the dark,” he claimed. “Some of them are fronting. “We want our 35% in terms of the legislation.
“We are not saying do it overnight, but something must be done.”
BAIC spokeswoman Mercy Thinyane said the procurement plan and tender procedures had been clearly published as well as being discussed in various stakeholder engagement meetings.
“All qualified black-owned SMMEs are welcome to tender,” she said.
“Several construction work packages will go out on tender over the next few weeks. We will also announce later the progress on each of these activities.”
Thinyane denied allegations of fronting, saying the tender procedure was fair and transparent.
“Qualifications of tender winners comply with the terms of reference and conditions that have been specified,” she said.
Thinyane said the delays – which cost BAIC R2.6-million a day – were not only detrimental to the company, but also “to all parties, including SMMEs, who are already economically participating and benefiting from this project”.
The company has lost four days of construction due to shutdowns.
She said the factory was still expected to be operational in the first half of next year.
IDC public relations manager Mandla Mpangase, who confirmed the project was five months behind schedule, said the organisation had a session with a number of business organisations a week ago, regarding procurement.
“This was done in the spirit of fairness and transparency,” he said.
“We also dealt with the criteria to award work to SMMEs.
“We discussed both the packages that have been awarded and those that are yet to be awarded.
“Fronting – as you will know – is a criminal offence and anyone with evidence must report this to the relevant law enforcement agencies.”
According to Mpangase, once fully operational, phases one and two of the BAIC plant were expected to employ a workforce of 789.
Five percent of the employment at management level was expected to be made up of foreign nationals, probably Chinese people, but no blue-collar workers would be brought in from China.
National African Federated Chamber of Commerce (Nafcoc) Eastern Cape president Litemba Singapi denounced the shutdown, describing it as an act of criminality.
“We have advised the IDC to take legal action,” he said.
“Anyone disrupting the site must be removed from their database.
“That era of going around disrupting projects without engaging at the relevant platform is gone.” Singapi said the SMMEs’ action had the potential to drive away further investors.
“Remember, the Chinese are not patient people,” he said.
“They came to invest here and something like this happens.
“This does not reflect well and has the potential to drive out other investors.”
When the project first started, a platform had been created for role players to air their concerns, Singapi said.
“Yes, we were initially unhappy about some of the decisions, but a platform was there to engage on matters that made us uncomfortable as black business in particular,” he said.
The Coega Development Corporation’s Dr Ayanda Vilakazi said Coega’s responsibility during phase one was site preparation, electricity and roads, and it no longer had direct involvement in the project.
The Nelson Mandela Bay Business Chamber was aware of the dispute, with acting chief executive Prince Matonsi saying the chamber hoped the timeline, for the first cars to roll off the production line by the middle of next year, was still on track.
“We wish for a speedy resolution,” Matonsi said.