CIDB mulls end-to-end driving of Contractor Development Programme

CIDB mulls end-to-end driving of Contractor Development Programme

German Mphahlele, Acting Programme Manager: Provincial Offices and Contractor Development (PCD)

In December South African Builder spoke to Mr German Mphahlele, Acting Programme Manager: Provincial Offices and Contractor Development (PCD) of the Construction Industry Development Board (CIDB) about the current role of the CIDB in the support and development of Emerging Contractors – and the Board’s vision for future development of contractors.

Presently the role of the CIDB in Contractor Development is that of providing leadership, guidance and direction in the development of emerging contractors. “Our objective is to make contractor development more sustainable – to the point where these Emerging Contractors progress and enhance their capabilities and competencies which will ultimately enable them to improve their performance,” said Mphahlele.

He explained that, whilst the CIDB can boast significant success in creating an enabling framework that promotes contractor development, the inconsistent implementation and the slow uptake of best practice contractor development principles is of great concern.
“The current CIDB Contractor Development Programme (CDP) has to date been focused primarily on public sector infrastructure clients such as departments of public works municipalities and state-owned enterprises (SOEs).” continued Mphahlele. “As there is a need to embrace both the public and private sectors to the full – to same level of Contractor Development – we have analysed different contractor development models in the construction sector and have developed guidelines for a uniform, coordinated and over-arching Contractor Development Programme complete with set Standards and Best Practice procedures.”

The Future of CPD
It is against this background that, with the contractor support framework and grading system firmly in place following extensive development over recent years, the CIDB is now poised to broaden that framework. “We are ready to move beyond the supporting role to the actual driving of Contractor Development to the full,” explains Mphahlele. “And we are exploring ways and means of playing a leading role in taking contractor development to the next level.”

To this end a CIDB think tank is working actively on setting standards for contractor development, the CIDB has published the CIDB Competence Standard for Contractors. The standard establishes the competencies of a contracting enterprise which need to reside with the owner and/or key nominated representative of the contractor. It is a requirement of the CIDB contractor development framework that, to graduate out of a development programme, a contractor must meet the requirement of the CIDB Competence Standard for Contractors.
These standards have changed perspectives on contractor development and will enable and encourage construction entities to engage with and employ registered sub-contractors. It follows therefore that a Register of all contractors will be a crucial requirement, i.e. including sub-contractors.

Going forward the CIDB development support strategy will be enhanced by providing development support through the proposed CIDB Best Practice Fee.

Such a support will incorporate a coordinated mentoring of contractors, assessment and top-up training in line with the CIDB competence standard for contractors, implementation of Construction Management Systems coupled with CIDB financial support.

In addition, close collaboration and partnerships with industry bodies and stakeholders such as Master Builders South Africa (MBSA), Black Business Caucus in the Built Environment (BBCBE) the South African Forum of Civil Engineering Contractors (SAFCEC), the Association of Architectural Aluminium Manufacturers of South Africa (AAAMSA), the Association of South African Quantity Surveyors (ASAQS) and others, is essential.

“It is hoped that a full definition will be achieved by mid-2019 with implementation set to be initiated by year end,” concluded Mphahlele.

Fast building but slow payment becoming the norm in SA warns JBCC

Fast building but slow payment becoming the norm in SA warns JBCC

 

 

Unreasonable demands for fast-track construction – coupled with unreasonable delays in payment – are two of the major challenges facing the South African building industry at the moment, says Uwe Putlitz, CEO of the Joint Building Contracts Committee (JBCC).
Putlitz went on to say the building industry has drastically changed from a craft-oriented builder whose staff carried out the bulk of the work to one where more work is done by specialist subcontractors often using sophisticated manufacturing and installation techniques – generally completing work faster than only 50 years ago.

“This need for speed and utilisation of outside resources pose new challenges for the building contractor. Training and retaining qualified staff is not easy in an uncertain economy where retrenchments at the end of a project are common as there is not a steady work-flow – largely due to political uncertainty, both locally and internationally.

“Without timeous payment contractors are not going to retain the services of qualified subcontractors for future contracts. Yet prompt payment in the industry remains problematic as many owners/employers simply do not pay on time, and do not honour regular payment commitments in full by the due date. This causes a ripple effect where subcontractors and suppliers are not paid leading to insolvency and unemployment. The Construction Industry Development Board (CIDB) is seeking to manage this problem by introducing best practice guidelines to eliminate ‘pay when paid’ practices in the industry but proper implementation could still take a long time.”

Putlitz says JBCC agreements embody such payment-commitment criteria already. “But agreements can be changed and stipulated payment dates simply be ‘unilaterally’ removed at the negotiation stage. Faced with the prospect of late payment, or no work at all, the other party – usually the subcontractor – will reluctantly have to accept the amendments or simply lose his or her appointment. That’s hardly the definition of a unilateral agreement, but it’s often the case.

“So, sad to say, it is indeed the specialist subcontractor who often struggles to find a regular flow of work … and then to get paid in full, and on time. And yet the building industry continues to ignore the important role of subcontractors and they are treated shabbily. The skill of subcontractors is essential for the industry to perform satisfactorily. Subcontractors deserve to be treated as an integral member of the construction team. It is time that starts to happen,” Putlitz adds.

JBCC is a non-profit company representing building owners and developers, professional consultants, and general and specialist contractors who all provide input for the compilation of JBCC agreements (building contracts) that portray the consensus view of the committee’s members.

Construction industry sheds 140 000 jobs in the first half of 2017

Construction industry sheds 140 000 jobs in the first half of 2017

This report by Roy Cokayne of IOL

The construction industry shed 140 000 jobs between the first and second quarters of 2017, a figure that could amount to about 240000 this calendar year, according the Construction Industry Development Board (CIDB).

The board’s latest construction monitor highlighted the close correlation between gross fixed capital formation (GFCF) and employment in the contracting and professional services sectors and expressed concern that most economic projections forecast a decline in real terms in GFCF over the short to medium term that would result in job losses over this period.

It also stressed that under-spending by the government resulted in lost employment opportunities. Underspend at the end of 2016/17 by provincial departments against “linear phased budget” amounted to about R1.4billion and by municipalities about R15bn, it said. This amounted to about 36000 lost job opportunities.

The construction industry has been experiencing high lack of demand. Under-spending also contributes to the lack of demand in the industry.”

Ntando Skosana, the project manager for monitoring and evaluation at the CIDB, said losing 140000 jobs, especially in an economy that already had a high unemployment rate, was “both concerning and disheartening”.

Gauteng shed 113000 formal and informal construction sector jobs between the first and second quarters of this year.

This is of major concern, because Gauteng contributes around 28percent of total construction employment,” she said.

Skosana said the job losses were a reflection of the pressure the construction industry was under, which was also reflected by the StatsSA GDP statistics that recorded that the construction industry contracted by 0.8percent quarter-on-quarter in the first quarter of this year and by 0.5percent in the second quarter.

However, Skosana said that over the long term the construction industry had contributed to employment by creating 184000 jobs between the first quarter of 2008 and third quarter of this year.

The CIDB/Bureau for Economic Research employment index for both general building and civil engineering has remained negative since 2008, which reflects that more employers were laying off staff than employing additional staff.

The CIDB said this unfavourable employment index was largely attributable to ongoing difficult business conditions, a slowdown in construction activity and increasing pressure on profitability.

Construction workers were being laid off because of a decline in construction activity.

The monitor said the construction industry was an important player in job creation, not only in the construction sector but in other sectors of the economy because it used a wide range of inputs from many other industries to produce its goods and services.

The direct job multiplier in the construction industry was about 3.5 jobs per R1m invested and 1.1 jobs in the informal sector per R1m of investment.

Source:

BUSINESS REPORT

www.iol.co.za/

CIDB survey reflects improved sentiment for Grades 3 & 4 civil contractors

CIDB survey reflects improved sentiment for Grades 3 & 4 civil contractors

After a largely flat 2016 and a disappointing start to 2017, civil engineering confidence, as measured in the Construction Industry Development Board (CIDB) SME business conditions survey, picked up by six index points to 43 during the second quarter of 2017 (2017Q2). Overall, pressure on business conditions was relieved somewhat as profitability found support from a combination of improved momentum in building activity and a less hostile tendering environment.

From a grades perspective, CIDB Grades 3 and 4 civil contractors were the only groups where sentiment improved. The confidence indicator for this group picked up by 11 index points to 44 in Q2, in line with key performance indicators. Ntando Skosana, Project Manager of Construction Industry Performance at the CIDB noted that: “The smaller grades were responsible for much of the overall improvement in the civil sector during the quarter. These contractors primarily participate in regional or municipal projects. With June representing the end of the municipal government financial year, it is likely that Grades 3 and 4 civil contractors benefited from the “rush” to spend on capex.”

General Building (GB):
Business confidence per grade
Source: BER, Stellenbosch University

Conversely for Grades 5 and 6 as well as Grades 7 and 8 civil contractors, sentiment deteriorated as activity and profitability remained under pressure.

Unlike the civil sector, general building confidence dropped to 42 index points in 2017Q2, from 46 previously. Discouragingly, the theme of pessimism was further entrenched during the quarter, against the backdrop of weaker construction activity. Skosana commented, “Contrary to last quarter, the somewhat more benign tendering environment for public sector building projects failed to support profitability this time round. In all, there was renewed pessimism in the building sector during Q2.”

For all three grades, confidence was below 50 index points. Whereas Grades 3 and 4 building contractors lost the most confidence to 41 index points, the level of confidence for Grades 7 and 8 contractors remained the lowest at 39 index points. Sentiment for Grades 5 and 6 contractors was barely changed at 43 index points.

Building confidence across all the four surveyed provinces was also downbeat and below 50 index points. “Whereas general builders in the Western Cape had held the fort of optimism over the past few quarters, this changed during the quarter. Nevertheless, building contractors in this province remain the least pessimistic,” Skosana explained. Western Cape building contractor confidence dropped significantly to 47 points (lowest level since 2014Q4), from 64 previously. Gauteng builders also lost confidence in line with poorer activity and profitability. Although sentiment improved in the Eastern Cape and KwaZulu-Natal, confidence levels remained depressed.

Conclusion

2017Q2 marked the eighth consecutive quarter where business confidence for the SME segment for both the building and civil engineering sectors read below the neutral 50-point mark. Encouragingly for civil contractors, there was broad-based improvement in the underlying performance indicators. Grades 3 and 4 contractors were solely responsible for this outcome, as they benefited from increased construction activity in line with the June financial year-end for municipal government. Unfortunately for the already ailing building sector, there was renewed pessimism during the quarter as weaker activity led to an even greater squeeze in profit margins.

The latest GDP growth report from Stats SA showed that an annualised contraction of 0.7% q-o-q during 2017Q1 led the SA economy into a technical recession. Looking ahead, this renewed weakness in the broader macroeconomic outlook bodes ill for both the civil and building sectors. During 2017Q2, insufficient demand for work was flagged as an impediment to business operations. This suggests that going forward, the pressure on construction and building work will persist.

General builder and civil contractor sentiment remains pessimistic in 2017

73218518General builder and civil contractor sentiment remains pessimistic in 2017

During the first quarter of 2017, the confidence of general builders as measured by the CIDB SME business conditions survey barely moved to 46 index points (from 45 points previously).

In all, sentiment remained pessimistic, as building activity weakened. Tendering competition intensity abated slightly, and this helped alleviate some of the pressure on profitability.

Among the different CIDB grades, Grades 3 and 4 general builder confidence rebounded by 20 index points to 55. This outcome was underlined by improved building activity. Ntando Skosana, project manager of Monitoring and Evaluation at the CIDB pointed out that, “After ending 2016 on a disappointing note, the smaller Grades 3 and 4 regained some ground this quarter. The underlying performance indicators improved immensely, especially building activity growth which is currently at a two year high.” This improvement in activity supported profitability and employment within this group of contractors.

General Builders: Business confidence per grade

(Source: BER, Stellenbosch University)

cidb

On the other hand, sentiment deteriorated for builders in Grades 5 and 6, with confidence levels dropping to below the 50-neutral mark. Building activity deteriorated for Grades 5 and 6 and Grades 7 and 8 builders, while profitability remained under pressure.

Looking at the provinces, general builder confidence in the Western Cape remained above the rest, albeit to a lesser extent. During the quarter, 64% of respondents were satisfied with prevailing business conditions. Skosana cautioned that, “Although Western Cape confidence remained relatively high; one should interpret this outcome with caution. Underlying indicators suggest that the Province fared poorly, to such an extent that they all fell into negative territory in Q1 after being mostly positive previously.” Results were even more discouraging in the other provinces.

Civil contracting confidence dipped by 4 index points during the first quarter of 2017 to 37, after moving sideways for the full year of 2016. The public sector is the largest client for civil engineering works, and civil contracting profitability came under more pressure, on the back of weaker construction activity. Tendering competition also intensified. “Civil confidence is disconcertingly low at this stage – the worst level in nearly 5 years. An overwhelmingly high majority of 63% was dissatisfied with prevailing business conditions during the quarter. What’s even more concerning is the fact that the deterioration was broad-based across all grades and provinces,” said Skosana.

The largest drop in confidence was registered among the smaller Grades 3 and 4 contractors to 33 points (-10 index points). For Grades 7 and 8, although confidence dropped marginally, it remained significantly low. A majority of 75% of respondents were dissatisfied with prevailing business conditions in Q1. Skosana noted that, “The picture across the grades was indeed very disappointing, with confidence falling further below the neutral 50-point mark. This is reflective of the weak fundamentals, particularly civil activity, which continued to deteriorate.”

Unfortunately, the provincial landscape for civil engineering offered no consolation. The highest confidence level was registered for civil contractors in the Western Cape, where 50% of respondents remained satisfied with prevailing business conditions. At the opposite end of the spectrum, Gauteng civil confidence deteriorated to a significantly low 25 points.

Conclusion

The SME segment in both the building and civil engineering sectors remained under pressure during the first quarter of 2017. Discouragingly, this marks the seventh consecutive quarter where business confidence for both sectors is below the neutral 50-point mark.
The outcome for the building sector was less severe, however there was an improvement in the performance of Grades 3 and 4 contractors. Unfortunately for civil contracting, the deterioration was broad-based.

Going forward, the outlook for both sectors remains clouded (albeit to a lesser extent for building), especially against the backdrop of weakness in the broader macro-economy. General builders expect to see some improvement in activity in the near-term, while there is very little pointing towards improvements for civil engineers. The survey also showed that 77% of respondents in the civil sector attested to insufficient demand for construction work being a hindrance to business operations. This suggests continued pressure on construction activity.

About the survey:

The CIDB SME business conditions survey is conducted quarterly among Grades 3 to 8 CIDB-registered contractors (categorised into Grades 3 to 4, Grades 5 and 6 and Grades 7 and 8), both for general building and civil engineering.

The main indicator used for analysis purposes is business confidence, which indicates whether respondents find the current business conditions satisfactory. A business confidence index can vary between zero (indicating an extreme lack of confidence) and 100 (indicating extreme confidence). The 50 index point mark is interpreted as neutral.

The fieldwork for the 2017Q1 survey was conducted during the period 30 January and 7 March 2017.