By Carmel Rickard
FEAR, anxiety, anger, confusion. These are the feelings of the people of Smithfield now that Rainbow Construction has officially pulled out of town.
The company is dumping its three road-building projects to save itself from bankruptcy. Rainbow will concentrate on its ‘core building division’ in the hope of covering its losses.
Our main street
In the dramatic hours after Smithfield learned Rainbow was pulling out of the road project, a project which has left the town and its economy in a shambles, there was more chaos – some workers operating the stop/go sections of the N6 went on strike because they had not been paid. The traffic department and police were unable to find an alternative way of keeping the stop/go sections operating and so the national road was closed in the interests of safety.
Local businesses, already hard hit by the roadwork, were thus completely cut-off from the outside world, leaving a strange silence over the town. As Smiffie went to press on Tuesday the police reported that, after being closed for more than 24 hours, the N6 was to be officially reopened at 6pm.
Among rumours abounding was talk of ‘a rescue company’ coming to pick up the pieces and carry on with the road project but by late Tuesday there was still no official confirmation.
Since the road reconstruction project started, centrally located local businesses have come under enormous financial pressure as they were effectively cut off from N6 traffic. Some have closed; others say they may have to follow suit after suffering the worst trading years in a decade. Now they face additional uncertainty because there is no information about when – or whether – the N6 will get back to normal.
In addition, individuals who have been working for construction officials – cleaners, gardeners as well as those operating the stop/go’s – have been left without pay.
The already fragile economy of the town has been dealt an enormous blow. With the year-end season approaching it is clear that many visitors who usually stay over in the town are planning to by-pass it because of the chaos caused by the road works. This is one of the main sources of income for the town, and if visitors continue to stay away the future is bleak.
Smithfield, you’re on your own
Since the traumatic discovery that Rainbow was dumping the town, there has been a complete lack of official information and communication with the people of Smithfield.
Alarmed at the implications for the town, Smiffie requested comment from the acting town manager but there was no response. Officials from South African National Roads Agency simply referred Smiffie from one phone number to another with no outcome. The silence and inaction of SANRAL is all the more shocking given the obvious danger to road users posed by the likelihood that the stop/go system would collapse. As predicted, the national road was closed following an expected worker strike, but there has still not been any official comment. Asked for help, SANRAL’s Pottie Potgieter unhelpfully commented that the road could be opened tomorrow – or in three months.
As for Rainbow itself, the initial response by people at the company’s head office was to deny there was anything wrong. When Smiffie contacted the company a representative of the managing director Gerald Loe, said they had no comment for the people of the town. However, they would reconsider things, perhaps next week, and might ‘possibly’ make a statement then.
Told that Smiffie was in possession of a letter from the company spelling out its financial troubles and the steps it was taking to rescue Rainbow from liquidation, the official said that this letter ‘could not be used’ by Smiffie as it had not been cleared for use by the media. She added it was ‘a pity’ that Smiffie had decided to run a story about Rainbow and its decision to pull out despite the fact that the company had refused to comment.
It’s as though the people of Smithfield, who are being most harmed by recent developments, have become invisible.
What the Rainbow letter says:
In this letter, sent to the company’s creditors, the company says it appears reasonably likely’ that Rainbow will become insolvent within the next six months. Rainbow’s three roadwork projects – Smithfield itself, the N6 between Smithfield and Reddersburg as well as a project at Bethlehem – are blamed for the company’s ‘current financial distress’ because they are incurring ‘substantial losses’. It appears ‘reasonably unlikely’ that Rainbow will be able to pay its debts as they fall due over the next six months. The directors therefore decided to place Rainbow under ‘Business Rescue’ supervision in an attempt to patch up its ailing finances.
The figures:
While Rainbow has been working on the three road contracts it has generated more than R261-million while its costs have been almost R321-million. As at 31 July 2011 the company had made an actual loss of virtually R60-million. As a results of these losses, ‘the company has no cash on hand, has current liabilities of R119 984 000 and current assets of R72 150 000.’
Blaming the roadwork contracts:
Rainbow’s board says that its ‘fairly recently established roads and earthworks division, which is the division involved in the three roads contracts … has caused the company’s financial distress. By closing or restructuring this division, which has proved unsuccessful, the company could continue with its core building division…. Thus the board is reasonably of the belief that the company can be rescued by the closure of or restructuring of the roads and earthworks division, and the disposal or renegotiation of the current roads contracts with the employer and other potential contractors.’
What about the physical mess left behind?
In addition to the economic hardship caused by the roadwork, there is the physical mess left behind. Several clumps of enormous old trees have been cut down, roads have been torn up, the entrance to town, once the pride of Smithfield, is now a shambles. Parking around the all-important garage and police station is chaotic and likely to be worse over the Christmas season. And still the people of the town are told nothing.
How come you say nothing about the Rainbow works foreman who was murdered (had his throat slit) by Rainbow workers, shortly before the project was abandoned?
By the way, the main income of the town is not, as alleged, the passing N6 trade. Nor has silence fallen over the town as a result. The main income of the town is and will always be the government’s social security benefit payments. Not much silence around here on “pension” day. Unfortunately.