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.

Building a Sustainable Construction Company

Building a Sustainable Construction Company

Sherwyn Esbend, owner of Sbenz Construction

Over the past two years Sbenz Construction, a member of KwaZulu-Natal Master Builders Association, has matured into a vibrant construction business which specialises in the repair of properties on behalf of insurance companies.

In 2017, Sherwyn Esbend’s office in North Coast Road was an empty space. Today, it has been subdivided into separate offices and a smart reception area and he has just taken delivery of two brand new bakkies.

But it has been a challenging journey and one where his business philosophy of delivering quality results and ensuring top notch service have stood him in good stead.

“I tell people who want to go into business that the more they grow, the bigger the challenges they will face and the larger the potential problems will be. In the school of life, before you go to the next grade, you have to pass the test. So, don’t keep going around the same mountain like the Israelites. Keep your eye on that next level.”

Esbend was born and grew up in Pietermaritzburg into a family of entrepreneurs. Both his grandfather and his father, who passed away when he was just 12, were in the construction industry and he admits that following them seemed the natural thing to do.

After completing his matric, however, he headed to the United States for a year and a half where he helped his sister who ran a laundromat and a construction business.

Back in South Africa, he joined Waltons Stationery and then moved to the Road Traffic Inspectorate. Five years later, when his second son was born, he decided that the dangers and shift work weren’t worth it and moved to eThekwini Municipality where he worked in the signage and advertising department.

On the side, he was doing a few small construction jobs. “I wasn’t satisfied. I knew I wanted to go into business and, specifically, into construction. I’d been trying to do some small jobs but things didn’t always work out. I bumped my head and lost a lot of money but I persevered,” he recalls.

The Sbenz Construction team

Three to four years ago, Esbend remembers being so broke that he couldn’t scrape together enough money to buy a loaf of bread. His wife Karen, who he says has been by his side throughout, dipped into her salary to help pay workers. Without a car, he relied on public transport and hired a bakkie to do jobs.

Having his wife by his side has been one of his biggest assets, though. “If we face a hurdle, we only give ourselves one day to mope. After that, we look for solutions and pick ourselves up,” he says.

He resigned in November 2016, using his pension payout to set up Sbenz Construction. Now that “everything was on the line”, he no longer had the option of failing.

Because he believes that a good business needs to have a professional image, he invested in branding his company and building a professional image to give his business credibility. Quotes and invoices were delivered on smart letterheads. He registered a domain name rather than resort to a Gmail address.

Whilst subcontracting for one particular construction company, Esbend realised that the future of his company lay in the insurance sector. Repairs in response to insurance claims provided a significant and steady volume of work with reliable payments.

But being accepted onto the service provider panels of large insurance companies and financial institutions proved difficult. Companies were looking for a track record and references from others in the sector.

He says the turning point came when he joined the Sekela Development Programme (Sekela), which develops and supports small enterprises through workshops and mentorship.

This, in turn, resulted in Sbenz Construction being accepted on to the SA Home Loans (SAHL) panel of contractors who are called in to effect repairs in response to insurance claims.
“SAHL opened the door for me. Without being included on the SAHL panel, I would not have been able to get on to other panels. They have given us references. Now we are doing work for other major insurance brands and big banks and can grow our business,” he says.

Another game changer was the massive flash flood that hit Durban. As insurance companies scrambled to do the repairs, more contractors were needed and companies waiting in the wings were called in to assist with the excessive backlog of repairs that needed to be done.
“Through that storm, we made it on to one of our biggest clients panels, we had been requesting for some time but had been rejected,” he recalls.

Sbenz Construction completed about 200 jobs and has only just finished all their storm related work. Money earned was ploughed back into the business. This enabled Esbend to move to his much larger current office and employ another 20 people. With more big clients in the pipeline, he expects to grow his staff even more.

His association with SAHL also influenced his decision to study further. Following a Sekela advisory board session with SAHL which covered self-development, he registered with MANCOSA for a Bachelor of Business Administration. He has on-the-ground experience of much of the study material but believes this qualification will give him a far broader overview of business and increase his credibility with clients.

He is also focusing on improving his company’s Construction Industry Development Board (CIDB) grading which will open doors to other opportunities in the far broader construction business. “When we joined Sekela, we were on CIDB Grade 1, now we are in the process of applying for Grade 5. This is not something I even dreamed of. I thought if I could get to Grade 3, I would be fine!” he says.

At present, 95 percent of his work is for the insurance industry and this remains his primary focus.

Esbend’s long term plans include pitching for work from the petroleum industry and, in the medium term, he plans to partner with larger construction companies on major contracts as part of their Enterprise Development Programmes.

Steven Motha: a success story of note

Steven Motha: a success story of note

By Tasveera Singh, Marketing and Membership Assistant, Master Builders KwaZulu-Natal

Steven Motha accepting the award for Commercial Buildings (under R50m) in 2018 alongside his mother, father and the Association’s President, Joyce Dolly Tembe

Rising from humble beginnings, Steven Siyabonga Motha was born and raised in Madadeni, a township in Newcastle. After attending Phendukani High School and matriculating in 2004, Steven went on to complete his certificate in Construction Management and then later completed a certificate in Project Management through the National Home Builders Registration Council (NHBRC).

Inspired by his father, who is also a contractor, Steven founded Sonqoba Motha’s Building Construction CC in 2015. He then joined Master Builders KwaZulu-Natal as a member and saw 2016 as life-changing when he was accepted into the Master Builders KwaZulu-Natal Emerging Contractor Programme.

The Master Builders KwaZulu-Natal Emerging Contractor Programme provides a platform for new business owners to learn and achieve their business goals.

Steven was one of 25 participants in the programme who completed the training aspect. He was allocated to a mentor, Mohammed Khan from ESE & Projects for six months in 2017. During this time, Mohammed Khan and Steven Motha discussed business goals and put a structured programme in place to achieve those goals.

When his journey with his mentor concluded, Steven entered the last phase of the programme which is “adopt-a-company”. This phase entails participants being linked to larger companies with projects underway where they gain practical exposure to on-site operations and relevant experience. This assists participants exiting the programme as they are more likely to conform to industry standards and best practice. Steven was ‘adopted’ by ESE & Projects for six months where he gained valuable industry experience.

Project ‘Pre-Eminence Studio’ for which Steven Motha won the Excellence in Construction Award in the Commercial Buildings (under R50m) category

The Emerging Contractor Programme has since inception enrolled 192 delegates – 23% female and 21% youth – from across KZN including both urban and rural beneficiaries. Of the 106 delegates who have since graduated, 33% were from women-owned companies while 23,5% were youth.

Steven won the Excellence in Construction Award in the Emerging Contractor category at the Master Builders KwaZulu-Natal Annual Awards in 2016 for his single storey building constructed on a strip foundation “64 Nagtagal Street”, as well as the Excellence in Construction Award in the Emerging Contractor category in 2017 for his project “No. 18 Olympic Street”. Steven proudly graduated from the Emerging Contractor Programme in 2018.

Proof that hard work and determination builds a road to success, Steven’s combined skills and education led him to construct the stunning “Pre-Eminence Studio” for which he won the Excellence in Construction Award in the Commercial Buildings (under R50m) category at the Master Builders KwaZulu-Natal Annual Awards in 2018.

Steven’s progression in the construction industry is a success story of note, a story which Master Builders KwaZulu-Natal believes is still being written.

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.

Emerging contractors set to benefit from SANRAL-Wirtgen MoU

Emerging contractors set to benefit from SANRAL-Wirtgen MoU

The South African National Roads Agency (SANRAL) and Wirtgen Group South Africa have signed a Memorandum of Understanding (MoU) that will give small enterprises better access to the road construction machinery they need to execute major SANRAL-owned projects.

The agreement will afford small to medium construction contractors full access to the Wirtgen Group’s full suite of leading equipment brands, as well as financing, training and logistics. “This is an important step in the broader national aim to transform the construction and engineering sectors and enable emerging black contractors, including enterprises owned by women and the youth, to participate more fully in major projects,” says Louw Kannemeyer, Engineering Executive at SANRAL.

Infrastructure development will be a major contributor to the efforts to attract investment to the country and was singled out at the recent Job Summit for its ability to create employment and stimulate economic activity.

We are delighted that a global leader in construction such as Wirtgen is stepping up to fill major gaps in the industry that constrain the growth of smaller contractors and impose barriers on their ability to tender for major work packages,” said Kannemeyer.

Equipment is one of the major success factors for contractors in the execution of their projects. If contractors are not well equipped, the country also faces the danger of sub-standard road infrastructure. The agreement will afford emerging contractors greater access to all Wirtgen Group equipment brands, namely Wirtgen, Vögele, Hamm, Kleemann, Benninghoven and Ciber,” says Waylon Kukard, National Sales Manager at Wirtgen South Africa.

The agreement with Wirtgen is part of a process introduced by SANRAL to open up the engineering and construction industries through its tender and enterprise development initiatives. It will greatly benefit smaller contractors who will now have access to the company’s range of equipment.

Through its leading brands, Wirtgen offers a wide range of equipment, all the way from rollers, bitumen spreaders, sweepers, milling machines, recyclers, slipform pavers, modular asphalt pavers, to mobile asphalt plants and crushers and screens.

Emerging contractors will be able to purchase or lease the sophisticated machinery required to meet the high standards that are in place within the South African road construction environment.

This move will open new doors for Wirtgen to collaborate with small contractors by offering them access to finance, technical assistance, mentoring and logistical support. SANRAL and Wirtgen will also collaborate on issues such as training, supply chains and access to information about tendering processes.

We are confident that this MoU will increase the number of participants across the value chain of the road construction sector and contribute to fair competition,” says Kannemeyer. яндекс