Hard-Hitting Master Builders South Africa Congress 2019 Sets The Scene for Re-construction Of The Construction Sector

Hard-Hitting Master Builders South Africa Congress 2019 Sets The Scene for Re-construction Of The Construction Sector

Emperor’s Palace, Johannesburg, 9 September 2019

In what is arguably the most robust construction-related events in recent history, the Master Builders South Africa Congress pulled no punches in presenting the dire state of the construction industry and trying to find solutions to help struggling contractors and to revive the sector.

The panel discussions often became somewhat passionate and heated, and the presence of bodies such as the Federation for Radical Economic Transformation (FRET) certainly surprised the audience. However, the Congress resulted in concrete resolutions being formulated on how the industry will work together in resolving complex matters such as the sensitive issue of transformation in the industry, and how to tackle the culture of late and non-payment of contractors by the state and state-agencies.

The event was well attended by some 210 delegates representing all facets of the construction and related industries, including the full staff complement and office bearers of Master Builders South Africa – as well as a number of its Past Presidents; Master Builders Associations from all regions of the country; Directors of Government Departments; the South African Police service (SAPS); the SA Reserve Bank; the South African Forum of Civil Engineering Contractors (SAFCEC); the Construction Industry Development Board (CIDB); the National Federation for Building Industry; the Forum for Radical Economic Transformation; various industry Sector Charter Councils; the Black Business Council in the Built Environment (BBC-BE); the SA Association of Quantity Surveyors (ASAQS); the SA Property Association (SAPOA); the National Union of Mine Workers; the Construction Education Training Authority (CETA); the Joint Building Contracts Committee (JBCC); National Home Builders Registration Council (NHBRC); the Federated Employers Mutual Assurance Company (FEM), amongst others.

Setting the scene in his opening address the President of MBSA John Matthews, noted that such forums were critical to break the log jam inhibiting the growth of the construction sector and the economy. “The show must go on,” he said. “It is our collective responsibility to heed the call to continue to seek solutions.”

The keynote speaker, Mr Choeu Makabate of the Faculty of Engineering and the Built Environment, Centre for Applied Research and Innovation in the Built Environment (CARINBE) of the University of Johannesburg, presented his report on “The Collapse Of Construction Companies In South Africa And Implications For The Sector” which was commissioned by MBSA.

Makabate noted that contributing factors include inter alia: late or non-payment of contractors resulting in their inability to pay suppliers and subcontractors and the misinterpretation of pieces of legislation which resulted in the emergence of Community Business Forums – commonly known as the “construction mafia”. Other factors cited included the economic decline experience since 2018 which has resulted in a negative impact on infrastructure investment; the reduction in infrastructure spending post-2010; and corruption in the public and private sectors. These challenges had in-part, resulted in the liquidation of major construction companies in South Africa, and negatively affected emerging contractors’ sustainability.

[The full report will soon be available online at www.sabuilder.co.za]

The Resolutions of MBSA Congress 2019 were summarised by MBSA Vice-President, Vic Naidoo as follows:

1. Re-model Construction Industry Procurement System;

2. Aim to re-establish trust (between all parties – contractors/professional teams/clients);

3. Engage with all legitimate role players such as industry bodies and forums, including the Forum for Radical Economic Transformation;

4. Look at role of “implementing agents”. Engage closely with National Department of Public Works (NDPW) – raised by the Association of South African Quantity Surveyors (ASAQS);

5. Evaluate and review the tender framework, including training requirements;

6. Engage CIDB on 30% set aside for SMMEs, designated groups (Some felt the CIDB’s draft standard on issue should simply be scrapped).

7. Look into circumstances to claim Force Majeure provided in the JBCC Principal Building Agreement

8. Consider the effect on the building industry with property developers’ preference to invest in countries other than RSA.

The MBSA Annual General Meeting, a closed session, followed the Congress formalities. Here John Matthews and Vic Naidoo were both re-elected for their second terms as President and Vice-President respectively.

The Master Builders banquet followed in the evening – the highlight of which was the announcement of the winners of the National Safety Competition, in which the overall winner of Category I for projects of over R750 million was the River Creek Deloitte project currently under construction by WBHO.

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Master Builders Congress 2019 Poised To Address The Destruction Of The Construction Sector

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Master Builders Congress 2019 Poised To Address The Destruction Of The Construction Sector

President Cyril Ramaphosa has slammed the conduct of the so-called construction mafia and called for consequences in situations where individuals “disrupt work projects demanding a 30% stake”.
Moneyweb has reported that the so-called construction mafia has been disrupting construction projects countrywide, demanding that 30% of the project value be awarded to local companies. In some instances, the groups, calling themselves business forums, seek control of the full 30%, with the aim of distributing jobs and contracts among local workers and business people themselves.
JSE-listed Wilson Bayly Holmes-Ovcon (WBHO) chief executive Louwtjie Nel Moneyweb that hardly any projects get started without being disrupted by these groups, which he says are not bona fide business forums.
Moneyweb also reported that virtually every major construction project in KwaZulu-Natal has been similarly affected due to threats of violence. Law firm Cox Yeats Attorneys has won about 30 court interdicts against such groups in the province.
Source: Moneyweb
President Cyril Ramaphosa, September 2018
Image: Elmond Jiyane, GCIS

 

Minister of Public Works and Infrastructure, Ms Patricia de Lille, has launched a full-scale investigation into the failure of the department to pay its service providers within 30 days.
It deals with major construction projects and includes both contractors and consultants.
This, coupled with day-to-day maintenance are the core of the department and, together, they constitute 94% of the unpaid invoices that have gone beyond 30 days.
“This is simply not good enough,” she said in her statement.
Minister de Lille is in the process of implementing a Contract Management System, together with a Consequence Management System to keep track of payments and warns that there will be consequences for individuals who fail to comply with what is a legal requirement.
“The buck stops with us. We need to return to the Batho Pele principles.”
Ms Patricia de Lille, Minister of Public Works and Infrastructure, July 2019

“The issues of late and non-payment of contractors and the illegal work-stoppages on construction sites remain significant threats and we still have companies closing down and jobs being lost as a result. Its deeply concerning that in the first quarter of 2019 alone, the construction industry lost 142 000 (one hundred and forty-two thousand) jobs. This is the biggest loss of jobs compared to any other industry in the country.”
Roy Mnisi, Executive Director, Master Builders South Africa, April 2019

Right now, one of the biggest stumbling blocks to the health of the building industry in South Africa is the less than prompt payment for work done. Industry leaders are consistently addressing this difficulty at every corporate and government level, to the point where a discussion on the subject is on the cards with the President himself.
Because good and bad practices have a distinct knock-on effect – non-payment by clients both public and private to their primary contractors, means that the next level of service providers doesn’t get paid and the dominoes start to fall.
John Matthews, President, Master Builders South Africa, June 2019

Listed construction has lost almost 75% of their value or ‘size’ since 2008.
There appears to be little light at the end of the tunnel for South Africa’s beleaguered construction industry, with many major listed construction companies still fighting for their survival.
Basil Read, Group Five, Esor Construction and Liviero Group are in business rescue while others, such as Aveng, have been forced to downscale their operations to strengthen their balance sheets and improve their liquidity.
The problems in the industry have been largely attributed to a combination of a lack of large government infrastructure contracts because of government’s strained financial resources and problematic and loss-making contracts.
This resulted in construction industry employment dropping by 3.6% year-on-year in the first quarter to an estimated 618 000 as the industry shed a further 23 000 jobs in the quarter.
Roy Cokayne, Moneyweb, July 2019

An absolute destruction of a sector never before seen on the JSE
David Metelerkamp, Industry Insight, July 2019

 

 

 

 

 

 

At the time of writing, PROBUILD has now gone into liquidation, Stefanutti Stocks has gone into business rescue and Mittal is retrenching 2 000 people.