Payment disputes keep Baic SA closed

(Carin Smith, Fin24)
(Carin Smith, Fin24)

The work stoppage over contractual and non-payment disputes entered its third week at the Baic SA car manufacturing project at the Coega special economic zone (SEZ) near Port Elizabeth.

The R11 billion project, currently China’s biggest investment outside Europe and Asia, has been dogged by work stoppages since its inception three years ago.

Its first car rolled off the assembly plant during the official opening of phase one in July. China’s President Xi Jinping and President Cyril Ramaphosa officiated via video link during the Brics summit.

In the latest dispute, big contractors such as Scribante, WBHO, Ivor Smith Electrical and others who declined to be named downed tools on August 31 demanding payment.

Some contractors say they have not been paid since July, with companies like Scribante owed about R40 million for work done. The work stoppage has adverse effects on production and the value chain is affected since the big contractors also subcontract some of their work to small, medium and micro enterprises (SMMEs).

In a terse statement to City Press this week, Baic SA said it had held a meeting with the contractors and “the matter was being resolved”.

Baic SA is 65% owned by Chinese state-owned vehicle manufacturer Baic Group and 35% held by the Industrial Development Corporation (IDC).

“The Beijing Industrial Design and Research Institute (BIDR) and some principal contractors today [Thursday] announced that they have resolved outstanding contractual disagreements,” said Baic SA.

The BIDR is the project implementing agent appointed by Baic SA as the engineering, procurement and construction agent.

“The BIDR, which is responsible for construction management of the Baic SA vehicle manufacturing facility at the Coega SEZ, says payment delays resulted in a partial temporary suspension of work by some main contractors.

“As part of the agreement, the company has agreed to settle outstanding payment so that work can resume as soon as possible.”

Asked what had caused the payment delays, how much the contractors were owed and when work would resume, Baic SA spokesperson Mandla Mpangase did not respond. Efforts to contact him by phone were futile. Mpangase is also spokesperson for the IDC.

Efforts to contact the contractors to confirm if they had a meeting with Baic SA were also unsuccessful, as City Press calls were not responded to. A visit by City Press to the plant this week found no contractors on site.

African Chamber of Business president Luvuyo Popo this week confirmed that the site was closed and that no contractors were working. His organisation represents about 40 SMMEs in Port Elizabeth. He also confirmed that they had held a meeting with the IDC on Thursday.

“We had a meeting with the IDC, where they promised to pay the contractors ‘soon’. As SMMEs we also did not understand why there was a problem in paying contractors. These people [the BIDR and Baic SA] are very difficult to deal with. You just can’t tell how they operate.

“We are not going on site until we are paid,” he said, adding that “everything seems to be run from China”.

Last week, Ivor Smith Electrical managing director Bradley Smith said they were owed more than R1 million. A WBHO spokesperson, who declined to be named, said they had not been paid for three months and were also owed “millions”.

A spokesperson for Babakhane, who only named himself as Msuthu, said earlier this month that work had stopped at the plant. Babakhane is a joint venture with Scribante.

“It is two months now without being paid. In July, [Baic SA] put us under immense pressure to do the work as they prepared for the official opening of phase one by the presidents of China and South Africa.

“Now it’s done and they do not want to pay,” said Msuthu.

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