Idle RCC strains emergency fund

Despite not lifting a finger for nearly three years, RCC employees continue to be paid from the state fund meant for emergencies.

16 January 2020 | Infrastructure

Despite being currently dormant, state-owned Roads Contractor Company (RCC) continues to dip its hands into the government's contingency fund to pay salaries of N$5.4 million a month.

The company had about 400 workers when it went into dormancy, although some have since resigned.

Between 2017 and 2019, the company, which has placed its operations on hold due to financial difficulties, has received state subsidy amounting to N$41.4 million.

A separate N$42 million had been advanced from the contingency fund – between 2017 and 2018 - to service the RCC wage bill. This is contained in a spending document accompanying the 2018/19 budget documents tabled in parliament.

Works and transport minister John Mutorwa confirmed that RCC continues to use the contingency fund, meaning money used by the company from the fund has increasingly escalated. Officials refused to divulge an updated report on how much the fund has spent on RCC so far.

The fund is normally used to deal with emergencies like a shortage of state medicines, drought relief and to cope with other natural disasters.

RCC acting CEO Gerson Karaerua confirmed the N$5.4 million monthly salary bill to Namibian Sun earlier this week.

The parastatal's workers are receiving their salaries despite the company being in limbo, with no construction projects currently in progress – a situation that resulted from the ongoing impasse over what should happen to it.

The RCC was the subject of a proposed move to place it under judicial management in 2017 after its previous board, led by engineer Fritz Jacobs, had a turnaround strategy to rope in Chinese investors.

“The monthly wage bill of the company is about N$5.4 million. The status quo is still remaining,” Karaerua said, while also referring to the move to place the company under judicial management.

A judicial management bill was proposed to save the RCC from having to pay its creditors or having its assets attached while an attempt is made to save it from demise. This after a local commercial bank tried to attach its property last year over a debt of approximately N$200 million.

“Cabinet made the decision for the government to advance salary subsidy to RCC until such time that the government has made a final decision on the future status of the company,” Karaerua said.

Mutorwa recently told Namibian Sun during a telephonic discussion that there was nothing untoward about paying the RCC out of the contingency fund, and that a decision would be made about its future in due course.

A company insider told Namibian Sun that an agreement was signed with the Roads Authority (RA) to ensure that the RCC could generate revenue as it waits for a decision about its future.

“We signed an agreement with RA, which will start in March. We will only know in March what the scope of the work will be,” the source, who spoke off the record, said.

When asked whether RCC employees were now getting paid on time, the source indicated that payments had normalised.

RCC employees had not received their salaries last September when the ministry of works suspended payments.

Public enterprises minister Leon Jooste had suggested giving the RCC a sizeable bailout to save it from demise or close it down entirely when asked to weigh-in on the entity's future recently.

“What we should guard against is the usual 'piecemeal' approach where inadequate funding is provided as a 'stop-gap' rather than adequate funding to allow for a return to solvency,” he said.

“As to the merits of supporting such funding for the company, cabinet will once again have to weigh this demand against the multiple other demands for funding of the various social and development programmes and projects and associated opportunity costs as a result of allocating significant funding towards the company.”

He reasoned that a sizeable re-investment into the RCC would allow it to return to profitability.


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