The future of the Roads Contractor Company (RCC) hangs in the balance with sources claiming this week that the Cabinet Committee on Treasury has recommended that the insolvent company be closed.
The decision by the committee, which will soon be presented to cabinet for deliberation, will result in over 400 jobs losses.
If Cabinet approves the plan, it means government would have rescinded its earlier plan to rescue the financial troubled company through awarding it multi-million road maintenance contracts as part of a turnaround plan, while committing to finance its salary and tax obligations.
The recommendation comes amid increased speculation that government has lost faith in any possible turn-around for the troubled contractor, which owes tens of millions, a position which has caused various assets to be repossessed and auctioned off.
RCC’s head office in southern industrial area was due to go under the hammer last week as Bank Windhoek sought to recover over N$100 million owed to it, but government stepped in at the eleventh hour to rescue the situation.
Public Enterprises Minister, Leon Jooste, was tight-lipped on the future of the company when approached for comment.
“This item is on the Agenda of the Cabinet Committee on Treasury (CCT), and the recommendation is on the way to Cabinet from this committee as a collective resolution, not from the Ministry of Public Enterprises,” he said.
Asked whether he supported the decision to use funds from the cash rich NPTH to save the RCC head office from being auctioned, Jooste said he will not support a recommendation where profitable public enterprises are instructed to bail out distressed enterprises.
“NPTH is not bailing out the RCC at all. The Cabinet Committee on Treasury has merely recommended that another Public Enterprise be identified to secure the property and prevent the bank from attaching it,” Jooste said.
“NPTH has the ability and mandate to purchase this property at a market-related value. If Cabinet later decides that the RCC must be rescued, the property can be returned to the RCC.
“The property is of high strategic value and Government, as the shareholder of Public Enterprises, will not be acting in the interest of the State if we were to allow for this valuable asset to be alienated.”
He said not all government directives to parastatals to fund various initiatives are contrary to good corporate governance or impact negatively on the fiduciary duties of their boards.
“The board has to act in the best interest of the entity at all times and if the shareholder makes any request that may compromise the entity, the board of the entity must discuss the matter with the shareholder to come to an agreement.
“A professional shareholder with integrity will not make demands that may threaten the commercial sustainability of an entity,” the minister said.
Jooste further said SOE boards were not compelled to agree with all government requests, as the boards have the power to decline in the best interest of the organizations they lead.
“This is already the case and any board has always had the right to decline requests made. Commercial Public Enterprises will now be required to have approved dividend policies in place and Treasury will then be free to allocate the funds from dividends.
“I will, in fact, be disappointed if boards blindly agree to any demands made without considering the potential consequences to the commercial and operational viability of the entity. If a Public Enterprise is requested to participate in an activity that may threaten its viability, the shareholder will have to subsidize such activity as may be required to mitigate the consequences.”
RCC’s Acting CEO, Gerson Karaerua did not want to comment when contacted, saying that he was in a meeting.
The company has struggled to remain in a viable position which insiders claim was caused by the failure by government to give it exclusive rights to road construction contracts.
The Roads Authority has in the past awarded contracts to RCC without going on tender, but the company has been accused of carrying out substandard work.
In some cases, the RCC is alleged to have been sub-contracting other companies, especially Chinese firms, to work on tenders awarded.
The company was embroiled in controversy last year for entering into an N$2 billion partnership with a Chinese company without prior government approval.