Henties council moves to resuscitate housing project

Subcontractors ‘taken for a ride’

13 July 2020 | Infrastructure

Mahne Kruger; Henties Bay municipality; “…the way forward will be determined by the outcome of this legal process.”

Henties Bay • [email protected]

The Henties Bay municipal council has initiated a legal process to ensure that a low cost housing project in Extension 7 of Omdel which came to a standstill, is completed.

This follows after a number of complaints against the project’s main contractor by subcontractors.

Mahne Kruger, the strategic executive for corporate services, economic development and urban management at the municipality of Henties Bay, said several notices were issued to the joint venture (JV) partner, Bay Construction, with no written feedback received.

“Council is aware of and sympathetic to the plight of the aggrieved sub-contractors. Due processes with regard to the JV agreement however need to be followed. The municipality initiated a legal process as stipulated in the JV agreement and the way forward will be determined by the outcome of this legal process. We cannot pre-empt the legal process.”

Kruger said that council was approach with a public private venture engagement and then approached the ministry of urban and rural development (MURD) to advise on the feasibility of the proposal.

“This was not a tender award,” he emphasised.

He said that the JV agreement is of such a nature that the municipality avails land in exchange for low cost houses.

“The JV was approved by MURD on the advice of the Attorney General to safeguard and minimise risks to the municipality of Henties Bay. As the record stands, five houses have been completed. Bay Construction as JV partners are responsible for all losses on this project as per the agreement. Council availed the land as part of its contribution to the agreement.”

Financial losses

According to Edward Yon, who is one of the subcontractors, he has suffered considerable financial losses due to the inability of Bay Construction to make payments.

Yon’s company (Edward Yon Construction) is one of two subcontractors that entered into an agreement with Bay Construction owned by Alvin Naaidoo.

“My company and ISS Construction signed a contract with Bay Construction to build 27 low cost houses at Omdel Extension 7 in Henties Bay in June 2019. The main contractor promised guarantees, which included the release of an advance payment on the percentage of the work done after 60 days.”

Yon alleges that Naidoo confirmed and gave the assurance that funds were available through the Development Bank of Namibia (DBN) for this purpose in particular.

“The main contractor and bank officials subsequently visited the site after 60 days. They conducted an estimation and valuation of the work rendered on 5 July 2019. Naidoo said that he was only waiting on the bank to release funds in order for him to pay us.”

Yon says the forthcoming payment never materialised.

“The reason provided by Naidoo was that the percentage of work done did not warrant any payment and therefore the money was not released. The construction of the houses stood at 30% according to a valuation conducted by Bay Construction.”

According to Yon, by that stage of the construction process he had already spent N$380 000.

“I used this money to purchase material. The establishment of the site, subsistence and travel allowance (S&T) and labour costs are excluded. Each of the ten homes my company was building were to be constructed at a cost of N$95 000 at a total cost of N$1.5 million. I am owed N$495 000 without interest calculated for the past 13 months.”

‘Reputation in tatters’

Yon said that Naidoo had no overheads.

“The subcontractors established the site and were building the houses. Now the suppliers are demanding payment and have handed us over to the lawyers. Our reputation and financial credibility is in tatters.”

He has been struggling since then to obtain what’s due to him.

“I visited the Bay Construction offices in Walvis Bay on numerous occasions to get what is rightfully due to my company, to no avail. Naidoo keeps making promises that he does not honour. Four months ago he informed me that money was due to him from an EBH development project and that he would use some of these funds to pay me and the other contractor who was working on 15 houses. I’ve also approached numerous politicians and officials for help to resolve this issue. Each time I hit a brick wall.”

Naidoo said telephonically from South Africa that he was in lockdown and was trying by all means to return to Namibia.

“I left Namibia in March. Since then the borders have been closed due to Covid-19 and I am stuck in SA. Once I am back, I will handle matters. At this moment there is absolutely nothing happening at the site.”

He said that he had an attorney handling issues on his behalf.

“The contract clearly states that work was being done on a fit and supply basis and that the service providers would be paid on completion. None of the sub-contractors completed the houses they were allocated to construct. They signed the agreement knowing that they did not have the capacity to deliver. I am now in tussle with the municipality.”

Semi-complete

Yon further alleges that Naidoo approached the Development Bank of Namibia under the auspices of creating jobs for Namibians (for small contractors in particular) and on this basis an agreement was struck that funds would be released as the project (construction process) progress.

He says the 12 houses his company was awarded to construct is half complete, while a second sub-contractor completed five of the 15 houses allocated to his company.

“I stopped the construction process in July 2019 when I saw there was no funds or payment forthcoming from the main contractor. The project is now at a complete standstill. We are worried because we learned through a reliable source that N$5 million was withdrawn on different occasions from the DBN account. This was the total cost for the construction of 100 homes.”

According to Yon, many subcontractors are falling prey to what he termed a “dodgy way of doing business” and lost millions in the process.

“We should not sit back and allow this to become the acceptable way of doing business. There was no official handover of the site and the contractors had to connect the water out of their own pockets. The site allocated to ISS construction was also wrong. They discovered this only after the excavation for the foundation was already completed. This also put the project off for two months.”

Yon said the initial agreement between the municipality of Henties Bay and the main contractor stipulated that 30 houses should be built in exchange for upmarket erven which was to be developed as a means of payment for the completed houses.

“The project I worked on involving the construction of 27 houses was supposed to be completed in three months (by August 2019) after the construction process started.”

According to Naidoo, the municipality had already threatened to cancel the contract due to slow progress.

“Should this happen, the subcontractors will receive payment for services provided. Three agreements have already been cancelled and I had to intervene. I tried to help where I could and paid most of the labourers out of my pocket. Unfortunately I cannot pay the suppliers for material used in the construction of the incomplete houses.”

‘Let us finish’

Yon was adamant that the municipality should terminate the project contract with Bay Construction and hand it over to the subcontractors to complete.

“They must also do away with the plot and plan concept. Subcontractors should be paid for what was valuated, be allowed to finish the construction process fully and be paid what is due. Guarantees should be in place.”

When approached for a comment the mayor of Henties Bay said he was aware of the issue but had no knowledge of the man contractor allegedly withdrawing all the money intended for the project from his business account.

“It’s a pity that the project came to a standstill. The abandoned site is a thorn in the flesh of council. I instructed the chief executive officer to look into the matter. We want to know why things turned out the way they did. The chief executive will provide a technical update and we will discuss the way forward as a matter of urgency. The issue will also be addressed at council level.”

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