A dispute between Vedanta Zinc International, a large mining corporation, and two small construction firms -- 3C Projects and ChadCon -- formed the basis of the proceedings. The issues related to the scaling down of a housing project for a mining operation in the Northern Cape, allegations of sub-standard work and poor labour practices, and the subsequent use by Vedanta of 3C Project’s housing design. The parties presented their individual accounts of what had occurred, and all indications pointed to there being a breakdown in communications with regard to the parties’ contractual obligations.
During discussion, a Member described the situation as an irreconcilable scenario, and suggested that big businesses like Vedanta should help small ones in the context of transformation. They also pointed out that this was the first case of a dispute being brought to them, and it should be recognised that South Africa did not have an easily accessible dispute mechanism. This was problematic, but the Committee needed to learn and recommend policy reform to address these issues.
Subsequently the Members were unanimous in suggesting that big business should act as a source of support for small firms, and that the incidents which had occurred could be rectified and used as case study for solving similar disputes in the future.
The Department of Small Business Development (DSBD) provided an update on the appointments to the National Business Advisory Council. Three short-listed candidates had been disqualified because of previous criminal convictions. The process would be completed by the end of October.
In the absence of the Committee Chairperson, Ms N Bhengu (ANC), Mr X Mabasa (ANC) was nominated as the interim Chairperson until her arrival.
Mr H Kruger (DA) commenced by relating the unhappiness expressed by MP’s who had stayed at a guest house during the funeral for the late Mr T Khoza (ANC), which had taken place on 11 August. He suggested the Department of Small Business Development (DSBD) should visit the guest house and find solutions to enable it to obtain a three-star rating, especially since it was located near the Kruger Park. He read the letter of apology sent by the owner of the guest house. He believed the Committee had a role to play in helping to promote small businesses.
Mr S Mncwabe (ANC) suggested that a letter accepting the apology should be sent as well, to motivate the owners in their future activities.
Mr N Capa (ANC) agreed with Mr Kruger and Mr Mncwabe
Ms Bhengu arrived and apologised for her lateness. She said the Committee should do its best to help, because small businesses provided 90% of jobs. Parliamentarians needed to be educated on how to approach small business owners, because they disrespected them but did not have the same approach to large business owners.
Mr Kruger felt a letter should be sent to the owner, and Parliament should be engaged as well as the Small Enterprise Development Agency (SEDA), so that more guest houses could be provided with resources in order to improve their ratings.
Mr Capa agreed with the previous comments and said that other businesses in the same area should be looked at, as a way of promoting small firms.
Mr Mabasa emphasised on the need to support small businesses.
At this stage, the Chairperson called for a moment of silence to pay tribute to the late Mr Khoza, who had been a Member of the Committee. She recalled how dedicated an MP he had been, and how much he would be missed by his colleagues.
The Chairperson said that there had to be support for Small and Medium Sized Enterprises (SMMEs) and that engaging with them helped to create better relations with such firms and also helped the committee to work better. She explained that big companies had a tendency of bullying smaller ones and with the growing relationship which South Africa had with the BRICS countries and the eventual arrival of companies from those nations, there was a need to ensure that such approaches were not adopted. The briefing for the day was meant to assess whether the policies implemented by certain companies were in line the concept of economic transformation.
Vedanta Zinc International: Presentation
Ms Deshnee Naidoo, Chief Executive Officer (CEO): Vedanta Zinc International presented herself as an example of positive socio-economic transformation. She subsequently introduced members of her delegation, and described the history of the company as well as the various locations where Vedanta had operations. She claimed they were the only company in South Africa undertaking greenfield investments in the mining sector. She provided an overview of the Black Mountain operations in the Northern Cape, which was the largest private employer in the province, with 1 500 employees. Vedanta operated in compliance with Black Economic Empowerment (BEE) obligations, and placed high importance on community engagement and support. She supported this assertion by referring to the company’s women’s empowerment programme and its support of 64 SMMEs through mentoring, marketing and training.
Mr Andre Trytsman, Manager of Vedanta, provided an outline of their dealings with 3C Projects and ChadCon.
3C Projects had been considered for a tender for building 100 houses, but had later been granted a concession to construct three. Despite the reduced number, the work had been finished late and was of a substandard quality. Nonetheless, 3C had been awarded another contract to construct two additional houses, which they had declined to accept.
ChadCon had subsequently been awarded a much bigger contract to construct 93 houses, but had failed to build one unit and the project execution was reduced to a 20-housing unit. Health, safety and labour regulations had not been followed by ChadCon, but Black Mountain hoped to find an amicable solution to the problem.
Mr Trytsman went on to explain how Vedanta assisted SMMEs and provided the examples of Gulfstream Energy and Namaqualand Construction. The lessons to be learned from the situation included:
- Establishing financial milestones for SMMEs;
- Instituting proactive coaching and training;
- Addressing issues related to recruiting and retaining employees.
The Chairperson thanked the presenters for the presentation and said what had occurred was a learning experience and hoped that the various engagements would be respected. She asked the Members if they needed a recap about the cause of the dispute, because what the concerned SMMEs had said was different from what Vedanta was saying.
Mr S Bekwa (ANC) asked for a recap on the issue.
At this point, Ms Rachelle du Plooy: Director of 3C Projects, said she was concerned how Vedanta had handled the contract, as the cost breakdown presented to them had been lower than what other mining houses had presented. The company had been negatively affected by the reduction in the number of houses to be constructed, from 100 to three. Concerning the claims that they had not delivered the houses, she said 3C Projects had constructed three houses in good quality and in time.
Mr Kurt Alexander of ChadCon said that in October 2016, a contract had been awarded to ChadCon, but accommodation for workers had been a big problem because the original camp site had been rejected and a new laydown area had been provided only in December. However, by January the new site was not ready and there were issues related to the electrical connection. ChadCon had a good construction record with the other major mining houses and this was the first time he had been confronted with such a problem. He believed he should have served a notice of breach to Vedanta, but he had not wanted to jeopardise the relationship and was able to renegotiate the contract to 20 housing units. The labour camp was important for the productivity of the workers, and hopefully the agreement relating to 20 houses would be a new start.
The Chairperson said the issues raised by Vedanta were not related to the points of argument between it and the concerned SMMEs. No one questioned the policies of Vedanta, but rather the processes and structure of the contracts.
Mr T Chance (DA) said the interruption in the contract should be noted in relation to 3C Projects. The slowdown related to the fall in zinc prices was understandable, but the reduction of housing units from 100 to three should have been mentioned by Vedanta. He wanted to know what experience Vedanta had in awarding housing contracts, since they were a mining house and it appeared a lot of issues had emerged because of the process. Who was the project manager of Vedanta, because construction was a very challenging domain, and Vedanta was the first bad experience which ChadCon had in this domain? Concerning the housing laydown area which had not been properly established and which had led to extra costs, he believed Vedanta did not care about the situation. He wondered whether Vedanta had an enterprise supply and development scheme in relation to black economic empowerment (BEE).
Rev K Meshoe (ACDP) believed the SMMEs had been set up to fail, and believed the financial offer per square kilometer was insufficient and unfairly made. Regarding the labour camp, he said that the extra costs incurred had to be taken into consideration.
Mr T Mulaudzi (EFF) asked how many BEE companies were involved in these operations and whether any form of litigation had been pursued. What was the amount paid per square kilometer to 3C Projects, and had they lost money because of the contract cancellation? Who did Vedanta expect to take care of the human resources component of the project? He also wanted to know where ChadCon was based.
Mr N Capa (ANC) described the situation as an irreconcilable scenario, and suggested that big businesses like Vedanta should help small ones in the context of transformation. He hoped that a resolution would emerge.
Ms N Mthembu (ANC) appreciated the approach of Vedanta towards the community, but felt they should find better ways of engaging with their contractors.
The Chairperson asked whether Vedanta would assist SMMEs, because it seems as if they were opposed to each other
Ms Naidoo was given the chance to respond to the two accounts provided by 3C Projects and ChadCon. Concerning 3C, Ms Naidoo said the contract was never definitive and that the reduction in the number of units was to ensure that the partners would not demobilize. They were also trying to leave the door open for future contracts. She said no one had been set up for failure, because the effects of the conflict had been felt by all sides, and she “took such an allegation personally”
The Chairperson told Ms Naidoo in a very strong tone that she was not allowed to take matters personally, because Parliament was the highest law making institution in the country and whatever was discussed during the briefing would affect the whole country.
Ms Naidoo apologised for her comments, and asked Mr Sanjay Jain, Vedanta’s Head of Procurement and Supply Chain, to answer questions relating to the structure of the contract.
Mr Jain said the contract had been established with a broad scope to allow partners to contribute input. After three houses had been built, Vedanta had experienced a downturn due to the fall in zinc prices and the reduction of the number of houses to be built had been in order to prevent demobilisation of the companies and keep the project going. Silverline, the other company involved, had accepted the reduction from 100 units to three, but 3C Projects had refused. Mr Jain added that the contractors had not followed the safety regulations specified in the contract.
The Chairperson said the answers were not being made on the basis of common understanding. Concerning the work site establishment, the failure to provide ChadCon with a site had led to them incurring extra costs and delays in project execution, while 3C Projects had an issue with their design being used after the contract dispute.
Mr Jain tried to refute these allegations.
The Chairperson, who appeared annoyed at the response at this juncture, asked what had happened to Silverline.
Mr Jain said Silverline had been liquidated, but this had been after they stopped working with Vedanta, and they had not used the 3C design.
Ms Du Plooy countered that Vedanta had indeed used 3C Projects’ design.
The Chairperson commented that no matter the size or material used, 3C Projects’ design remained their design, and likened the situation to someone stealing a shoe design and just making slight changes.
Mr Jain said none of these issues had been raised by 3C Projects during the partnership, and mention of any problems had been made only in June.
Ms Du Plooy said 3C Projects had raised the issues to an individual.
Mr Alexander said ChadCon had talked to Vedanta about the absorbed costs related to the relocation.
Ms Naidoo responded by explaining that Black Mountain was a Greenfield project (brand new), and there was an insistence on using locally sourced labour. When things started to go wrong, communication had not been escalated, and that had been a mistake on Vedanta’s part. ChadCon had been asked to do more afterwards, but the company had not replied. She said ChadCon had made mistakes and also had problematic personnel issues, including bringing in workers without work permits, allegations of workplace bullying and disregard for health regulations. She reiterated that it was never the intention to terminate ChadCon’s contract.
Ms Du Plooy also thought 3C Projects should have contacted Vedanta earlier.
Mr X Mabasa (ANC) said that in this case, big business should have been the one to approach small companies.
Ms Du Plooy said 3C Projects had to lay off 200 employees, and the company had had a breakup because of the issues they had with Vedanta. She had not approached them because she did not know what was going on, and it was also her first time of dealing with a big mining house. She had learnt her lesson, but insisted that her design was her intellectual property and remained hers.
Mr Chance said this was the first case of a dispute being brought to them, and it should be recognised that South Africa did not have an easily accessible dispute mechanism. This was problematic but the Committee needed to learn and recommend policy reform to address these issues.
The Chairperson said such cases were important to establish legal responsibility, and to learn how disputes were handled. She indicated her desire for the matter to be resolved, and asked how the manner in which it was handled could be reviewed so the shortcomings could be identified. This was a case study on how to build relationships between small and big firms. She referred to the socio-economic challenges faced by the Northern Cape Province, and supported Vedanta’s desire to recruit labour locally. Looking at the country’s present economic situation, no company should be allowed to fail.
National Business Advisory Council: Appointments
Ms Edith Vries, Director General: Department of Small Business Development (DSBD) provided an update on the appointment of members to the National Business Advisory Council. She said criminal convictions prevented three short-listed individuals from being appointed. The Minister wanted Council members who could provide leadership and help the Department progress on a positive trajectory. However, it had been indicated only in the last two weeks that there was a headhunt for members taking place, where it was hoped to obtain a 50/50 male-female ratio. This would be finalised by 30 October.
Ms Mthembu said the timeframe given initially had been June, and asked if the Department was going to be able to fulfil its mandate in time. Could the Minister’s advisors could help her, because at this pace the Department would not achieve its goals.
Mr Mabasa asked if the National Small Business Council was needed, since a National Small Business Act existed. A review of the Act needed to be done in order to ensure action was being taken, and there should be an ultimatum set to ensure this happened soon.
Mr Capa was disappointed at the length of time it was taking to complete the appointments to the Council, and said that 60 days was too long a timeframe to complete the exercise.
Mr Mulaudzi complained that the Department was “full of stories.”
The Chairperson said that the meeting had to end early because the DA had booked the venue, but she was disappointed at the lack of action from the Department, as the work was scheduled to be completed by July.
The meeting was adjourned.
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