Construction group Murray & Roberts (M&R) has confirmed its full participation in an agreement unveiled together with government on October 11, allowing for the settlement of potential claims arising from its much-publicised transgressions of South Africa’s competition laws. In return, the JSE-listed group has made various commitments, including a promise to dispose of a “meaningful interest” in its construction unit to a black-owned contractor.
M&R was one of 15 firms to conclude settlement agreements with the competition authorities in 2013, following the so-called fast-track settlement process. The companies were collectively fined R1.46-billion, with M&R’s portion of the penalty set at R309-million.
M&R reported that negotiations were at an “advanced stage” with a prospective buyer of the company’s infrastructure businesses, which, once consummated, would result in its exit from the general building and civil engineering sector.
The proposed disposal was signalled by CEO Henry Laas in August, when he released details of a board-sanctioned plan to reposition the group as a multinational project company, focused on oil and gas, underground mining, as well as power and water.
Laas reported that the decision to exit civil engineering and building arose from a two-year strategic review by the board.
The disposal of the infrastructure units, meanwhile, would result in the creation of a leading black-owned contractor, whose prospects would be enhanced by the procurement reforms being pursued by government, which included possible ‘set asides’ for black firms.
M&R was not alone in seeking to align its civil engineering and building interests to a transformed market dynamic, with rival Aveng announcing that it had concluded a binding agreement to sell a 51% beneficial interest in Aveng Grinaker-LTA to Kutana Construction for a maximum of R756-million. Kutana Construction is a black women-owned and -led business owned by the Kutana group, a Pan-African investment company.
As part of the October 11 settlement agreement between government and seven listed construction companies it was agreed that the companies would develop and/or mentor up to three emerging contractors to ensure workflow equivalent to at least 25% of their yearly construction turnover.
Alternatively, they should dispose of not less than a 40% in their respective civil engineering and general building construction businesses to enterprises that were more than 51% black-owned, -managed and -controlled.
Also agreed is that, over the next 12 years, M&R will contribute its portion, or R21.25-million, of a collective yearly payment of R125-million into a fund to support transformation and skills development. Over the period, R1.5-billion will be injected into the fund, which is to be administered by an agency appointed by the National Treasury.
