Major Chinese building firms ‘not AA compliant’

FEW, if any, Chinese state-owned construction companies – despite some having been in business in Namibia for 18 years, and having landed over N$1 billion in State construction contracts in total – have not met statutory employment equity targets under the Affirmative Action Act, it has emerged.

The Affirmative Action Act (Act 29 of 1998) was enacted 10 years ago and requires every company in Namibia with more than 50 employees to submit affirmative action reports to the Employment Equity Commissioner to show how they implement affirmative action. This was subsequently amended on July 1 2006 to include companies with 25 or more employees.Failure to do so carries a fine of up to N$100 000.The Chinese companies – although they deny this – have allegedly avoided being subjected to the AA Act by, among others, sub-contracting maller Chinese companies with fewer than 25 employees, an investigation showed.Documents filed in a pending High Court case to challenge the award of the N$70 million Ministry of Lands, Resettlement and Rehabilitation building to China Nanjing International (CNI) showed that the Employment Equity Commission had exempted the Chinese company from affirmative action measures.A letter signed by EEC Deputy Director Otniel Podewiltz on June 27 2007, stated that CNI was “not a relevant employer” and therefore exempt from the requirements of the AA Act.Similar letters for Ziangsu Zhentai Construction and China State Construction were also issued.Podewiltz said the EEC, in issuing such letters, relies on the accuracy of figures reported by companies themselves when applying for exemption, and could only verify these against employment figures reported to the Social Security Commission.”At that time, we had more than 400 companies applying for exemption.It is very difficult and time-consuming to check […] it took us three months of investigations on just one such a company,” he said in an interview.Although China Jiangsu International (CJI) – charged in April last year for failing to do so – has now submitted an AA report, he was not aware of any other Chinese company doing so.China State, for example, has been in business since 1990; CJI and CNI, the two best-known ones, were registered between 1993 and 1994.Podewiltz said he was unaware of monthly figures reported by the local quantity surveyors and architect’s council, who monitor progress and manpower deployed at construction sites to avoid cost and time over-runs.”I only became aware of [those reports] in the course of the ongoing court case over the Lands building,” which showed that all four state-owned Chinese companies who tendered should have submitted AA reports, he said.Of nine construction companies that bid for the Lands Building, four were Chinese.Consulting architect, Kerry McNamara, disqualified all four for failing to satisfy requirements of the AA Act, including China Nanjing who eventually won the tender.McNamara’s report showed that China Nanjing, when the Lands building tender was issued, was employing 78 workers at the United Nations building site in Klein Windhoek.In terms of Section 42 of the Labour Act, no state tender may be awarded to any construction company that did not include an AA Compliance Certificate together with their tender.Construction companies tendering for state business also have to hand in a Certificate of Good Standing from the Receiver of Revenue, but the wording of the tender for the Lands building suggested that Chinese construction companies are exempt from paying local income tax.McNamara said he had appraised the Ministry of Works and the Tender Board of this breach (amongst others) by the Chinese companies – but his advice appears to have been ignored.Finance Permanent Secretary, Calle Schlettwein, is currently in Washington D.C.and could not be reached for confirmation in this regard.McNamara’s report also showed that all state-owned Chinese construction companies should be subject to the AA Act.Podewiltz said he was aware of “some” reports being subsequently submitted by the Chinese companies, but could not say which ones.Podewiltz said the low salaries paid locally to Chinese employees suggested that most of their money was being paid out in China instead – as had been the case with the Chinese workers employed at Ramatex.Chinese firms pay as little as N$2,50-2,70 per hour – a quarter of the legal minimum wage of N$8.44; with labour costs making up about 40 per cent of total, giving them an unfair advantage over local firms who toe the legal line, industry sources said.By under-reporting or failing to report the true number of local workers to the SSC, not adhering to minimum industry standards and legal requirements to set up a pension fund for their workers, McNamara estimated the Chinese companies were siphoning between 20 and 35 per cent of any state contract’s value out of Namibia.* John Grobler is a freelance journalist; 081 2401587This was subsequently amended on July 1 2006 to include companies with 25 or more employees.Failure to do so carries a fine of up to N$100 000.The Chinese companies – although they deny this – have allegedly avoided being subjected to the AA Act by, among others, sub-contracting maller Chinese companies with fewer than 25 employees, an investigation showed.Documents filed in a pending High Court case to challenge the award of the N$70 million Ministry of Lands, Resettlement and Rehabilitation building to China Nanjing International (CNI) showed that the Employment Equity Commission had exempted the Chinese company from affirmative action measures.A letter signed by EEC Deputy Director Otniel Podewiltz on June 27 2007, stated that CNI was “not a relevant employer” and therefore exempt from the requirements of the AA Act.Similar letters for Ziangsu Zhentai Construction and China State Construction were also issued.Podewiltz said the EEC, in issuing such letters, relies on the accuracy of figures reported by companies themselves when applying for exemption, and could only verify these against employment figures reported to the Social Security Commission.”At that time, we had more than 400 companies applying for exemption.It is very difficult and time-consuming to check […] it took us three months of investigations on just one such a company,” he said in an interview.Although China Jiangsu International (CJI) – charged in April last year for failing to do so – has now submitted an AA report, he was not aware of any other Chinese company doing so.China State, for example, has been in business since 1990; CJI and CNI, the two best-known ones, were registered between 1993 and 1994.Podewiltz said he was unaware of monthly figures reported by the local quantity surveyors and architect’s council, who monitor progress and manpower deployed at construction sites to avoid cost and time over-runs.”I only became aware of [those reports] in the course of the ongoing court case over the Lands building,” which showed that all four state-owned Chinese companies who tendered should have submitted AA reports, he said.Of nine construction companies that bid for the Lands Building, four were Chinese.Consulting architect, Kerry McNamara, disqualified all four for failing to satisfy requirements of the AA Act, including China Nanjing who eventually won the tender. McNamara’s report showed that China Nanjing, when the Lands building tender was issued, was employing 78 workers at the United Nations building site in Klein Windhoek.In terms of Section 42 of the Labour Act, no state tender may be awarded to any construction company that did not include an AA Compliance Certificate together with their tender.Construction companies tendering for state business also have to hand in a Certificate of Good Standing from the Receiver of Revenue, but the wording of the tender for the Lands building suggested that Chinese construction companies are exempt from paying local income tax.McNamara said he had appraised the Ministry of Works and the Tender Board of this breach (amongst others) by the Chinese companies – but his advice appears to have been ignored.Finance Permanent Secretary, Calle Schlettwein, is currently in Washington D.C.and could not be reached for confirmation in this regard.McNamara’s report also showed that all state-owned Chinese construction companies should be subject to the AA Act.Podewiltz said he was aware of “some” reports being subsequently submitted by the Chinese companies, but could not say which ones.Podewiltz said the low salaries paid locally to Chinese employees suggested that most of their money was being paid out in China instead – as had been the case with the Chinese workers employed at Ramatex.Chinese firms pay as little as N$2,50-2,70 per hour – a quarter of the legal minimum wage of N$8.44; with labour costs making up about 40 per cent of total, giving them an unfair advantage over local firms who toe the legal line, industry sources said.By under-reporting or failing to report the true number of local workers to the SSC, not adhering to minimum industry standards and legal requirements to set up a pension fund for their workers, McNamara estimated the Chinese companies were siphoning between 20 and 35 per cent of any state contract’s value out of Namibia.* John Grobler is a freelance journalist; 081 2401587