Don’t get us wrong: RCC
As Namibia’s largest civil engineering company, the Roads Contractor Company (RCC) has representation throughout Namibia, driven by its mandate to complete work in its core business focus of road maintenance, road construction, railway construction and other other civil engineering projects.
More often than not, this public enterprise has been on the receiving end for poor road maintenance in most towns and cities.
But as Chief Executive Officer Engelhard Haihambo (EH) points out, the fact, however, is that there are a lot of misconceptions about the road infrastructure in Namibia in terms of mandate.
Local and urban municipalities have a mandate to maintain their roads, he tells Prime Focus this month, clarifying the difference between RCC, the Roads Authority (RA) and the Road Fund Adminstration (RFA) while elaborating on his organisation’s turnaround plan which has seen the company abandoning all other civil engineering projects to concentrate on roads construction, rehabilitation and mantainance related services.
PF: RCC operates in a competitive civil engineering construction and infrastructure development market where there is the Roads Fund Administration and the Roads Authority. How have you fared as a company?
EH: From the onset, let me explain the difference between the RCC, RA and RFA.
The RFA collects monies from licences, cross border charges, and manages the funding which also includes funds from the Government. Whereas the RA is mandated to manage the national road network and thus must ensure that these roads are constructed, rehabilitated and maintained to good quality within cost efficiencies and parameters. The RCC is but one of the many road contractors which are appointed to construct, and or rehabilitate as well as maintain some of these roads falling under the RA mandate.
Therefore, the RCC competes for projects with other private contractors. As far as the gravel roads market is concerned, RCC is the market leader. Partly this is due to the fact that approximately 64% of the annual gravel roads rehabilitation and maintenance budget of RA is awarded to the RCC on a negotiated tender and for the rest of the projects, RCC competes with other private contractors. While the competition since inception, has been tough as RCC costs structure was expensive and thus made its tender prices uncompetitive, the situation, under the Turnaround Plan that we embarked upon in 2008, has improved. As for the open tender road construction project, RCC will, in the near future, be able to submit a competitive tender and challenge its competitors for such projects.
PF: How do you stay afloat in such a competitive environment where we have a strong private sector participation in the construction industry?
EH: Yes, survival is tough. However, RCC has developed a strategy which allows the company to plot several techniques on how to procure tenders via open tenders. RCC can compete with most contractors but lately the prices from the Chinese contracting companies has shown all the other contractors that, on price alone, the Chinese competitors are mostly impossible to beat.
PF: What are some of the major activities of the company that distinguishes it from the rest?
EH: The activities can be summarised as follows: Firstly, RCC is the only contractor in Namibia which can offer the best gravel roads construction, rehabilitation and maintenance in terms of quality. Secondly, RCC business operations are situated all over Namibia. This makes the company the only such contractor who can respond quickly to any emergency need across the whole of Namibia. Thirdly, RCC is the biggest Namibian employer in the industry with a workforce of 864 employees. Therefore, RCC is a major economic development contributor from the provision of efficient roads in Namibia’s perspective.
PF: RCC has some of the best equipment in Southern Africa. But why have you not considered going into property or mining? Until when will you be building roads? What’s stopping your expansion?
EH: As part of the business turnaround plan, RCC decided to suspend venturing in other civil engineering projects other than roads and related services. This was to allow the company to regain its position as the best roads contractor in Namibia. Once this is achieved, RCC will, without hesitation, resume its quest in venturing in other civil engineering infrastructure construction, rehabilitation and maintenance projects. A time frame of say, two years is adequate for this to start happening.
PF: At some stage, RCC had the idea of going into Zambia. What has happened to that expansion drive?
EH: RCC did indeed venture into the Zambian market. Currently, that business is under corporate restoration and operational stabilisation and no project is being undertaken at this moment. Once these key turnaround components are addressed, the future direction of the Zambian business will be mapped out.
PF: So what current major construction projects is RCC running this year and what is their status?
EH: Currently RCC is contracting the road from Tsumeb to Katwitwi (via Tsinsabis) which represents a 210km road. The project has been sub-divided into three sections. RCC is constructing Section A (70km) and Section B (70km) in joint venture with a foreign company called CCC. Section A will be completed by June 2011 while Section B will be completed by October 2011. The construction of Section C will commence in this new financial year and will take approximately 18 months to complete.
PF: Last year, you awarded contracts to the value of N$41 million to Small and Medium Enterprises (SMEs) for the provision of road building support services for the 2010/2011 financial year. How has that progressed so far?
EH: This SMEs support initiative has become RCC’s annual contribution as part of our corporate responsibility to develop capacity and transfer skills and technology to upcoming SMEs. Annually, the RCC awards such contracts to the SME’s to transport gravel from borrow pits and provide such on the roads being rehabilitated especially the gravel roads across Namibia that are awarded to the RCC.
PF: What have been SMEs’ biggest challenge?
EH: The biggest challenge for SMEs has been the availability of finance to fund the acquisition of required trucks. However, this has partly been addressed by the facilities at the Development Bank of Namibia which the SMEs can apply for. Secondly, the general but serious entrepreneurial capacity is lacking in some of these SMEs and requires to be sharpened or else it becomes a risk to their business sustainability. In this regard, RCC will spearhead a development program to assist these SMEs as part of its social responsibility initiatives. This program will address all key business issues from technical, operational and financial perspectives.
PF: You coughed up N$6 million for the B1 City Development, at the corner of Independence Avenue and Western Bypass. The multi-million dollar mall has become a white elephant. What’s the latest on this property?
EH: There is not much I can say about this matter. It is currently sub judice. However, the public must be aware that RCC is at an advanced stage towards concluding this matter and allow this sore eye-sight to become a good business development initiative that Windhoek will be proud of. The promise is that this matter will be concluded before end of this year even possibly sooner.
PF: Even so, RCC was the project manager. What really went wrong with the property and who is to blame? Were you not doing something out of your mandate?
EH: There was nothing wrong for RCC to construct such a property as its mandate allows that. However, the rest I cannot comment, this matter is sub judice.
PF: Then there was the issue of a South African registered company (Pabodzi) that RCC paid N$2 million for the hire of construction equipment, but failed to deliver because it was bogus? Was that money ever accounted for? How has the matter been settled?
EH: RCC reported the case to the relevant security agencies to recover its monies and even trace the perpetrators. This is still not concluded. What I can, with confidence, inform the public is that RCC has implemented business risk management measures to prevent such incidents from happening again.
PF: Developed countries like the USA and giants like China, have the technology and know-how and should be given the opportunity to compete on bids to develop Africa’s power and roads. How do you respond to that?
EH: There are no restrictions that one must place to prevent any contractor from whatever country to participate in roads construction projects in Namibian. However, Namibia has authority to ensure that such participation is not to the detriment of the local contractors and the economy. We need to guard against foreign companies maximising their foreign export of monies from such projects without committing themselves from using local suppliers to also benefit from such projects. I am sure this is very possible.
PF: How do you foresee the potential of the creation of a major road network in sub-Saharan Africa, connecting all sub-Saharan capitals?
EH: In fact, there are already established road network corridors in SADC and Sub-Saharan Africa which have been identified and even endorsed by the relevant governments. Some are already under construction such as the Trans-Kalahari and the Trans-Caprivi road networks in Namibia. These road networks in the Sub-Saharan Africa will become the foundation of trade and improvement of the economies and most importantly the living standard of the people in those countries.
PF: The largest and fastest growing sector of Chinese exporting to Africa is not textiles and the cheap consumer goods we often hear about, but equipment and machinery. How does this relate to RCC?
EH: In the roads contracting industry not most of equipment comes from China. In fact, the Chinese companies also purchase most equipment from other countries such as Japan etc. What plays a major role is the cost effective financing available to such Chinese contractors which makes their prices very competitive. However, RCC has the ability to procure any reliable equipment for its projects from the known manufacturers.
PF: Chinese construction firms reported 2008 revenues of more than $20 billion from contracts across Africa. They reported that they had signed new construction contracts worth almost $40b that year. Chinese finance will pay for only a fraction of these. Most of the finance is coming from African governments, private companies in Africa, World Bank and African Development Bank loans, and donors who have untied their aid and whose tenders are being won by Chinese companies. What comes to your mind when you get these statistics, being in the same construction industry?
EH: What comes to mind is that the world economy has shifted towards the concept or realities that the world is but a global village. While those major funders propagate national economies to grow faster, they also encourage the same economies to become avenues of business from such major players which are not only from China but even South Africa. As I said before, nothing can be wrong for these companies to participate in any country, but the Government must implement measures to guard against exploitation by any foreign companies.
PF: Do Chinese companies bring in their workers? Travel across Namibia today and it’s hard to miss the dozens of Chinese construction companies working on roads, stadiums, bridges and buildings. What is your take on this?
EH: Our laws and conditions, if properly implemented, will not allow any Chinese contracting company to bring in any worker whose skill is available in Namibia. Therefore, the authorities must enforce this while any foreign contracting company must ensure they comply with this because I have also witnessed such practices with companies from South Africa during my years in this industry. So it is not only some of the Chinese contractors that might be guilty of such acts. As for whether it is fair, I am convinced that it is not fair to the Namibian people who must be recipients of such employment opportunities.
PF: To what extent has the recent rains damaged roads in Namibia? What is the projected total cost for repairing the damage to the roads done so far?
EH: This matter is already covered in local media and moreover falls under the RA.
PF: Where else do you source funds from for your projects?
EH: This is the mandate of RA and RFA, another situation where we are often misunderstood.
PF: How have your projects managed to fall in line with the International Roads Federation in terms of quality of roads and also depending on the areas that they are constructed in?
EH: This is a good question but can only answered by the Roads Authority.
PF: With all these RA-RCC misconceptions, what then are the immediate challenges of the RCC Chief Executive Officer?
EH: RCC has adopted a business turnaround plan whose implementation started from April 2008. Firstly, the focus was on rescuing the sinking ship, then stabilising the business in terms of cash management, revenue management, controls and governance practices. This has taken the company almost two years to accomplish. Now that the company’s overall business climate has been restored, the focus now is to become profitable, managing the debt, right-sizing the organisation, building a brand, growing the project book-value and implementing organisational efficiency initiatives. All these have been incorporated in the Business Strategic Plan which the Board, management and staff have adopted to steer the company towards achieving business sustainability, growth and reclaim its rightful position as the Namibian roads contractor of choice.
PF: Which of these do you see, remaining as acne within the coming years?
EH: I am highly confident that RCC will achieve acceptable profitability levels soon. I am also confident that RCC will be able to grow its revenue and thus generate surplus cash to fund its debt which must be reduced drastically. What is remaining as a challenge is for RCC to become 100 percent competitive. The remaining component of this to be achieved is the company’s ability to change and align its overall costs structure to be in-line with best industry benchmarks.
PF: How do you describe your first year in charge of RCC and where do you draw inspiration and pleasure in terms of progress made?
EH: I was appointed CEO from February 2010, before that I was acting CEO for a period of close to 16 months. It is vital to note that I was among three colleagues who pioneered and became implementers of the RCC Turnaround Plan since April 2008. Therefore, my role remains the overall leader in making sure RCC achieves its Turnaround Plan targets. RCC is slowly becoming profitable; its bank balance is becoming positive; its historical trading debt is reducing drastically; its employees are becoming focused and committed and its stakeholders such as suppliers are recognising that indeed the company is a business partner they wish to do business with. These are key realities which gives one the gratitude that the years of dedication, commitment, loyalty and smart leadership since April 2008 will make RCC the Namibian roads contractor of choice.
PF: What other skills development courses are being undertaken within the organisation?
EH: Firstly, RCC has over the years implemented an employee study-loan facility. Through this facility, any employee can enrol in a recognised institution and once they have attained the qualification, the company re-imburses them maximum 85 percent of the costs of the studies. Secondly, the company has provided funds to the tune of N$3.5 million to be utilised for training and development of its employees as part of its skills upgrading and capacity development initiatives. Thirdly, RCC is busy re-assessing its re-introduction of a bursary scheme to fund students who will study at tertiary institutions in fields such as engineering, finance and ICT.
PF: How are you working with institutions of higher learning such as Unam and the Polytechnic of Namibia to improve skill development and training in the sector?
EH: Nothing much is taking place. However, with the possible re-introduction of the bursary scheme this aspect will be attended too.
PF: Besides being CEO, how is your social life?
EH: I believe in African culture family values. I am married to Selma, and under my fatherhood I have seven children. Moreover, I recognise the broader family network and remain committed to ensuring that my African based family is successful.
PF: Finally, what would be your forecast for the RCC in the coming 10 years?
EH: Our aim is for RCC to become the best roads contractor in Namibia. RCC will also become a major contributor to the development of the Namibian economy through the provision of an efficient roads network. In another context, RCC will remain one of the major employers playing a significant role to compliment the Government in its quest to reduce the un-employment rate in the country. PF