Pricing brought Group Five to its knees, say board members
The ailing Group Five has largely blamed the under-pricing of construction projects for the company's downfall.
This is contained in minutes of the company's board meeting that was held on Monday.
The minutes, which were distributed yesterday and are on the company's website, form part of the firm's correspondence sent to "the affected persons".
In the documents the board says on March 11 it resolved to voluntarily commence with business rescue proceedings after it became financially distressed and was struggling to pay its debts.
"The effective date of the company's business rescue proceeding is accordingly 11 March 2019," said board chairman Thabo Kgogo, adding that the company's liabilities exceeded its assets.
"In addition, the company is financially distressed… as it will be unable to pay its debts as they become due and payable within the ensuing six months."
The company revealed that the group experienced negative cash flows from operating activities of R880m for 2018.
"Market conditions in the construction industry have worsened, and certain of the company's projects were under-priced which resulted in these projects being loss-making.
"In order to alleviate the cash-flow constraints of the G5 Construction Group brought about by virtue of the circumstances described above, bridge-funding in the sum of R650m was sought by the company from a consortium of lenders," reads the minutes.
David Sipunzi, the secretary-general of National Union of Mineworkers which has organisational rights at the company that employs 8,000 people, said he was hearing of the news for the first time from Sowetan.
"That is news to me. I think the company is being rude by not having communicated the matter with us. As a union, we can't be feeling good about this process," Sipunzi said.
Solidarity's Gideon du Plessis, whose union does not have organisational rights at Group Five but has represented workers when companies applied for business rescue, said the process created so much uncertainty in the workplace as the employees don't know whether their source of income would be safe.
He said the business rescue was tricky because it is meant to make a company cut down costs, adding that business rescuers would first consider retrenching employees to bring the costs down.
They will also target management as they earn higher salaries and are the ones who brought the company to its knees.