SANYATI, the black-empowered engineering and construction firm owed R60m by the Free State government, is to be liquidated.

President Jacob Zuma promised last Friday that the government would consider drastic measures to push its departments to pay service providers within a month, but this came too late to save one of its major private partners from oblivion.

A business rescue had been tried but the business rescue practitioner appointed, Trevor Murgatroyd, yesterday recommended Sanyati's liquidation.

Free State government spokesman Wisani Ngobeni said the roads department had "faced challenges in relation to resources". He expressed regret about the liquidation and extended his sympathies to staff at Sanyati likely to lose their jobs.

Presidency spokesman Harold Maloka said the Free State department of roads was subject to a national intervention team led by the National Treasury.

"The Presidency remains committed to ensure all government departments pay all service providers for services rendered within 30 days, as required by the Public Finance Management Act.

"The Presidency will verify the details of this case and take appropriate action where possible through the intervention mechanism already put in place."

Mr Murgatroyd said he proposed Sanyati's liquidation after the conditions upon which a business rescue relied had collapsed.

He said in May that Sanyati had an order book of about R895m. The short-term cash flow requirements to keep the company alive until a business rescue plan was considered were about R32m.

Mr Murgatroyd said the rescue's success was dependent on the preservation of the order book, the reduction of contingent claims related to performance and other guarantees, Sanyati's ability to continue trading and to pay for essential services when they fell due, and sufficient "breathing time" to develop and implement a business rescue plan.

"It was made clear, however, that the current basis of operation of Sanyati was not sustainable without a substantial capital injection and, in the absence of sufficient liquidity, the business would continue to spiral to an inevitable demise," he said.

Sanyati's bank cancelled its overdraft facilities and froze its accounts, "effectively strangling" the business, Mr Murgatroyd said.

Mike O'Reilly, MD of Sanyati's coastal division, who assumed the role of CEO during the rescue proceedings, yesterday referred all queries to Mr Murgatroyd.