Low cost housing developer - Seakay may go bust

Low cost housing developer - Seakay may go bust

Johannesburg - Seakay, the country's largest developer of low-cost housing, is edging towards liquidation after government failed to pay it R218m for contract work - an amount for which the construction firm is preparing to sue.
Gerry Holtzhausen, executive director for Seakay, told Fin24.com the company had delivered two summonses for amounts totalling R218m to government's department of human settlements, led by Tokyo Sexwale, for the non-payment of contracts for the last two years.
"At this stage we have our hands tied behind our backs. We can't get an overdraft facility and the NHFC [National Housing Finance Corporation] is also threatening to foreclose us and liquidate us," said Holtzhausen. The NHFC is a government created financing institution.
Seakay is unable to apply for another loan owing to existing debt of R128m from the NHFC. Seakay ceded its entire debtors' book as security and has none left to give other banks.
"Government is not paying at all - and I mean at all," said Holtzhausen in an interview.
"It is more committed to 2010 [than to housing and health] and it has had to 'top slice' departments [to fund and accelerate 2010-related works] so that they can't sit with egg on their face. All the money is going to 2010-related work," he said.
Seakay's summonses relate to construction work on the N2 gateway project in Cape Town worth R133m, and an R85m sum for the Gauteng department, even though the actual contract value is R100m. "Contracts signed with government say [it will] pay in 47 days," said Holtzhausen.
More than 80% of Seakay's business is exposed to government-funded work. About 10 000 jobs related to Seakay's contract work are at risk.
Sexwale may help
"We've worked our way through the ranks and gone very high up; we've now asked for a meeting with Sexwale," said Holtzhausen.
Government asked Seakay in 2008 to support its own expenses until after the 2009 April general election, whereafter repayment would be made.
According to Holtzhausen, about R2.2bn in funds was transferred from Gauteng's treasury and handed to the Gautrain development, a high-speed rail public transport system. "All departments in Gauteng are cash-strapped."
Seakay's growing debtors' book has also heightened employee stress levels. Holtzhausen has reported site vandalism as well as the kidnapping of a contract manager.
He said it was a Catch 22 situation: the group did not wish to antagonise government as it would need it as a future source of work, but it was a listed company with shareholders. "Many smaller construction companies have closed doors because of non-payment by government."
Sexwale may look kindly on Seakay's proposals, which include a one-bar (lump sum) payment a year instead of rolling money coming in every month. "If we get cash flow stream on 90 days, we can build twice as many houses in one year.
"Tokyo [Sexwale] is going to make an announcement on housing in the next 60 days. Hopefully he's taken our bait, and if that happens it'll turn housing delivery and Seakay around."

Keywords - Seakay, Tokyo Sexwale, bust, bankrupt, low cost housing, developer, Human settlements, liquidation, nhfc, National Housing Finance Corporation, forclose, Gerry Holtzhausen, non-payment, N2 gateway