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GOVT TERMINATES KISS JOINT VENTURE

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MBABANE – Bombshell! Thousands of jobs are expected to be lost following a decision by government, specifically the Ministry of Economic Planning and Development, to terminate its contract with the infamous KISS Joint Venture for the construction of the multi-billion Emalangeni International Convention Centre (ICC). 

The KISS Joint Venture’s main players are three construction giants; namely, Kukhanya, Inyatsi and Stefanutti Stocks.   

They were awarded the principal contract of Tender No. 210 of 2014/2015.

The main reason for the termination is failure by KISS to renew its performance security within 28 days after its expiry, something that constitutes a violation of the contract.

KISS has now been given a 14-day ultimatum to vacate the ICC construction site in Ezulwini. The ICC is being constructed alongside a five star hotel, which is also a project being undertaken by the joint venture and the entire project is known as ICC&FISH.

Addressed

Eswatini News has seen a letter written yesterday (October 23, 2020) by Bheki Bhembe, the Principal Secretary in the Ministry of Economic Planning and Development, and addressed to the FIDIC Engineer of the ICC&FISH Project who is based at Atrium Design and Decoration, an entity of architects and engineering consultants, in Ezulwini.

FIDIC is the International Federation of Consulting Engineers.

The letter has been addressed to the attention of Andre Farrell whom it instructs to communicate with KISS about the termination of the contract.

The termination of the contract comes a few days after Stefanutti Stocks and Kukhanya challenged the awarding of the interior works of the ICC to CA Interiors (PTY) Ltd as they alleged that the latter was a wholly owned subsidiary of Inyatsi.    

The tender for the interior works is reportedly worth E1.2 billion.   

The principal contract as concluded between the Ministry of Economic Planning and Development (employer) and the contractor (KISS JV), according to the letter, is regulated by the FIDIC conditions of contract for construction of building and engineering works designed by the employer, First Edition (Red Book) as mended by particular conditions as contained in the Bills of Quantities document.

Security

This contract has been quoted as addressing the issue of the performance security.

Sub-clause 4.2 of the contract has been cited as stating that the contractor (KISS) shall deliver the performance security to the employer within 28 days after receiving a letter of acceptance and shall send a copy to the engineer.

The sub-clause is said to provide that the performance security shall be issued by an entity and from within a country (or other jurisdiction) approved by the employer and shall be in the form annexed to the particular conditions or in another form approved by the employer.

The contractor, the sub-clause further states, shall ensure that the performance security is valid and enforceable until the contractor has executed and completed the works and remedied any defects.

Expiry

PS Bhembe then emphasised a part of the sub-clause that reads: “If the terms of the performance security specify its expiry date, and the contractor has not become entitled to receive the performance certificate by the date 28 days prior to the expiry date, the contractor shall extend the validity of the performance security until the works have been completed and any defects have been remedied.”      

The PS has also cited sub-clause 15.2 of the Red Book (termination by employer) as providing that, among other things, ‘the employer shall be entitled to terminate the contract if the contractor fails to comply with Sub-clause 4.2 (performance security) or with a notice under Sub-clause 15.1 (notice to correct)’’. 

Bhembe highlighted that in any of these circumstances, the employer may, upon giving 14 days’ notice to the contractor, terminate the contract and expel the contractor from the site. 

Stipulated

He further stipulated that in the case of sub-paragraphs (e) and (f), the employer may, by notice, terminate the contract immediately. 

The PS stated that the KISS JV has, contrary to their express obligations as they arise in terms of sub-clause 4.2 of the Red Book, failed to renew the performance security, as was provided to the ministry, within 28 days of the expiry of such performance security. 

“As a consequence of such default, the ministry hereby gives notice, in accordance with sub-clause 15.2 of the Red Book, of its termination of the principal contract,” reads the letter. 

The PS added that the termination would take effect 14 calendar days from the date of issue of the correspondence. 

He also communicated that the failure of the KISS JV to renew the performance guarantee further constituted repudiation by the joint venture of its obligations as they arose out of the principal contract. 

Bhembe further placed on record that notwithstanding no obligation on the employer’s part, KISS had already been allowed an opportunity to remedy its default, in failing to timeously renew the performance guaranteed. 

The PS stated that in this regard, the engineer issued Site Instruction 0184 to the KISS JV, which was dated October 14, 2020. 

He submitted that at paragraph 1.3 of the Site Instruction, the engineer noted that the performance security had lapsed. 

“The engineer further noted that on previous occasions the contractor has been requested to provide the employer with an updated security,” reads the letter. 

It was further highlighted that the engineer thereafter instructed the KISS JV to remedy its breach in failing to provide a renewed performance guarantee with immediate effect. 

Bhembe said the ministry considered Site Instruction 0184 in so far as it required KISS JV to provide a renewed performance guarantee to constitute a Notice to Correct as contemplated in terms of Sub-clause 15.1 of the Red Book. 

Enforceable

“To date KISS JV has failed to provide a valid, enforceable performance security,” said the PS. 

He further said the engineer shall advise the KISS JV of the required goods and or contractors documents to be delivered to the engineer.

“The KISS JV is to immediately place all necessary and relevant information pertaining to the various subcontractors as may have been concluded with its subcontractors, such that the ministry can evaluate these documents, with a view to assigning such subcontracts from the KISS JV to the ministry,” the letter further reads.

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