TTI, BCC in road rehabilitation deal

Source: TTI, BCC in road rehabilitation deal | Sunday News (Business)

Vusumuzi Dube, Online News Editor 

TENDY Three Investments (TTI) has reportedly made moves to partner the Bulawayo City Council (BCC) in the procurement and operation of an Asphalt Batching plant and supporting equipment to expedite the rehabilitation of roads and parking bays in the city.

The multi-million-dollar project has however, raised eyebrows as the local authority has been given the go-ahead to negotiate with TTI without the matter going to tender, with council noting it has failed to fix and hand over all 7 200 parking bays agreed upon in the contract between the two parties. This comes amid revelations that according to the original contract between the two parties, BCC is expected to inject a bigger chunk of cash towards the project.

According to a council confidential report, TTI submitted an expression of interest to fix roads and parking bays in the Central Business District (CBD). The project is reportedly aimed at addressing the delayed fulfillment of the contractual obligations regarding the preparation and demarcation of parking bays through the procurement of a batching plant and supporting equipment to expedite the process.

The parking management project has 5 300 parking bays out of a planned 7 200 bays. Of the available 5 300 bays, 506 are disabled, taxi reserved and cycle bays and the difference of 4 794 bays is used as tolling bays. The batching plant will also be commercialised to neighbouring local authorities with anticipation that it will realise a net profit of US$4,3 million annually.

“An expression of interest letter was received from the counterparty (TTI) on July 26 2023. Council responded by requesting for further information, with TTI’s response received on December 6 2023. The response highlighted the slow roll out of the entire project area, thereby affecting the return on investment within the stipulated project period. 

“TTI proposed to procure and install the asphalt batching plant with supporting equipment to reduce the cost of pre-mix (asphalt concrete) production which is deemed to be the highest cost driver/input in the process of repairing the carriageway and parking bays. The counterparty is open to negotiating commercials around the batching plant package where the city council can be given major shareholding of the plant so that the plant can be jointly owned by TTI and the city council,” reads the report.

According to the negotiating party regarding the deal, it has been proposed that a Strategic Business Unit be formed, the plant to be managed by the engineering services department and also the possible formation of a Special Purpose Vehicle.

“The ownership ratio was also discussed, with the committee of the view that SBU and internal running be considered first. This was because council enjoys the greater goodwill of other road authorities and would create the clientele at the commercialisation of the plant. The sharing ratios were also to be interrogated and justified, as there was a feeling that council should have an even bigger stake due to this goodwill,” reads the report.

The negotiating party was last Wednesday given the greenlight to start negotiations on a possible shareholding model and contributions towards the US$2,1 million that will be required to purchase the plant.

“The machine can also be commercialised and used to produce premix for other neighbouring local authorities thereby being a new revenue stream to council. With the partnership currently running at 4 794 bays out of a possible 7 200 tolling bays, at current occupancy of 45 percent on parking bays, the city loses an estimated US$2,4 million annually due to the missing number of tolling bays. The batching plant is anticipated to generate another revenue stream. This avenue is also to be explored by the Special Purpose Vehicle and funds generated from the same will be shared between the two parties based on the ownership levels…a net profit of US$4,3 million can be realised annually by the commercialised use of the pant,” reads the report.

Meanwhile, TTI’s annual financial statement for 2022 has revealed that according to the original agreement between the two parties, the local authority is also expected to finance the project to the tune of US$3,6 million.

“The Company (counterparty) entered into a Public Private Partnership: Build, operate and transfer agreement with the City of Bulawayo (contracting authority). The company leases 7 200 parking bays in the City of Bulawayo with a lease contract for a fixed period of six years and an option of extension for a further four years. 

“Under the agreement, the counterparty shall finance the project from its own resources to a value of 

US$2  228 571, while the contracting authority shall contribute US$3 688 532 to the project financing. Revenue generating from services is shared as follows; parking fees: counterparty 70 percent; contracting authority 30 percent, clamping fees: counterparty 50 percent; contracting authority 50 percent,” reads the financial statement.

Revenue recognised from parking services in 2022 amounted to US$564 442, clamping services; US$108 141.

According to the financial statement, despite the company having made a loss of US$1.1 million and its current liabilities exceed its current assets by US$205 016, the directors said they were satisfied that the company had adequate financial resources to continue as a going concern.

“The financial statements have been prepared on a going concern basis, which assumes that the company will continue in existence for the foreseeable future. Although the company has made a loss of US$1 294 678 and its current liabilities exceed its current assets by US$205 016, the directors have assessed the ability of the company to continue operating as a going concern and have concluded that the preparation of these financial statements on a going concern basis is still appropriate.

“The company entered into a build, operate and transfer arrangement with the City of Bulawayo and the contract term being six years with an extension of four years. The contract can be terminated upon a breach by any party,” reads part of the financial statement.