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.

SMME Contractors Step Up As Big Construction Companies Collapse

SMME Contractors Step Up As Big Construction Companies Collapse

By Janine Espin, Managing Director at Economic Development Solutions

The ground has shifted significantly under big construction players as market dynamics change and small and medium-sized (SMME) contractors step up to contribute more to the sector. These SMMEs represent the future of the industry. As sector interests converge, interesting new SMME development models are emerging.

SMME development in the construction sector is vital, not just to ensure Broad-Based Black Economic Empowerment (B-BBEE) requirements are met, but to help grow the construction industry. As large contractors continue to restructure, retrenched workers are looking for alternatives and so are construction clients. While the opportunities for SMME contractors are growing, their lack of business and management skills confound their ability to grow.

To help develop these companies and create a solid base of skills in the market to grow the sector, a deeper understanding of SMMEs shortcomings—and how they can be addressed—is required.

Challenges for SMMEs

Construction sector SMMEs typically specialise in focussing on civils, electrical or concrete work, steelwork or glazing, for example. Their turnovers can reach up to R50 million and they may employ anything from 100-200 people. With a strong appetite for work, these companies are more flexible in their approach to pricing, scope of work and willingness to employ local workers.

These characteristics make them attractive to contract winners looking to subcontract key aspects of a build, especially where local input quotas are required. However, to qualify for these opportunities, SMMEs must be able to demonstrate accountability—be able to deliver on time and budget, prove they have the skills and qualifications to complete the project, and comply with labour laws and other legislation. Many SMMEs with grassroots origins are not yet able to operate at this level.

With Preferential Procurement and Supplier Development making up 34 of the total 123 B-BBEE points for large enterprises (as per the Amended Construction Sector Code) it is imperative that SMME development strategies be put in place. But to be successful these investments need to be accurately targeted.

From the SMME’s perspective, some of the biggest challenges are knowing where and how to find work, how to bid, how to negotiate contracts, how to comply (with HR and labour laws, B-BBEE requirements, financial reporting), and how to plan and manage projects to meet deadlines and avoid penalties.

Innovative SMME development solutions

One client, a large roadworks company is running a 12-month construction incubator in collaboration with the Department of Roads. EDS worked with the Department of Roads and Transport to identify 36 SMME companies to receive technical road building training from the Department of Roads. The training ensures standards are met in roadworks projects. The construction company sponsors this training. Over the 12-month incubation period, the SMMEs also receive training in basic business skills from the Department of Trade and Industry (DTI’s) Small Enterprise Development Agency (Seda). EDS monitors and reports on all these efforts against the company’s B-BBEE requirements.

The benefits for all players are significant—the country’s skills pool grows, the SMMEs gain skills and jobs, and the sponsoring company can access a pool of trained and certified skills to deliver on its contracts.

In another project, EDS is working with the DTI and a client company. The DTI has committed to match the funding of the client company to ensure a sustainable training model is established.

These are just two of a cluster of SMME projects that EDS is involved in. For our clients in the renewable energy sector, we are working on a number of SMME development projects in rural areas. In addition to Seda business coaching, we provide ongoing mentorship, engaging with SMMEs on a regular basis to help them get set up on government databases, identify projects in their areas, and help them maximise their potential.

Start now – collaborate

As public, private and industry needs to converge, it is becoming easier to create innovative SMME development solutions. The winners will be those companies that band together to drive progress and change.