TOUGH TALK

TOUGH TALK

It’s no surprise I’m sure, that tough talk ruled the hours we spent discussing our industry at Emperor’s Palace on September 9. But it was so much more than talk. This Congress, probably more so than any other in the history of Master Builders South Africa, was charged with the urgency of our situation, and we wasted no time on airy theory. We were looking for solutions.

John Matthews, President, Master Builders South Africa

And, as the editor of our industry journal, SA Builder, observed in his commendably comprehensive report on the Congress, there was no shortage of controversial opinion from some surprising participants that included SAPS, the SA Reserve Bank, and the Forum for Radical Economic Transformation, among other more likely protagonists.

We were lavishly well-informed, and in this respect not least by our keynote speaker 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. His discussion of ‘The Collapse of Construction Companies in South Africa and Implications for the Sector’, commissioned by MBSA, was loaded with the list of ills that have beset us, that include non-payment of contractors, and disruption of construction sites among a host of others that have led to unprecedented company failures.

In the face of this, and in the spirit of our industry, I ventured to arouse our flagging spirits with the old adage that the show must go on, and also reminded members that it was our collective responsibility to continue working for solutions. It’s a tough job, but there’s really no alternative – nobody’s going to do it for us. In response to a panel question from Lynette Ntuli, our programme director, about whose problem it was and what would it take to rebuild the sector, I gave the simple answer, that we couldn’t talk about it any more, we had to take action.

I am on record as having commended Minister of Public Works, Patricia de Lille, for addressing the issue of non-payment of contractors, and if there is any light right now, it’s that these payments are progressing. My apprehension continues to be that the amounts paid are far short of the huge outstanding debt, so it’s her tenacity that is being put to the test here.

The Congress, as you will all read in this issue of SA Builder, covered a welter of issues, some of them highly contentious, but I was pleased to note the observation that however heated the discussions may have become, the spirit of debate was observed and any animosity was not carried from the auditorium into the common spaces where delegates mingled and interacted cordially.

Here’s hoping that this mood of collaboration will last and that the concerted action by everyone who has a role to play will, as a result, be more effective.

John

CAMERA OBSCURA

CAMERA OBSCURA

This time last year, as we once again gathered to examine and discuss the state of our industry, I wrote that we lived in interesting times – not an original pronouncement, but certainly accurate for the time. And it holds true to this day 12 months later.

However, we can’t say that there hasn’t been a slight lifting of the mood, a lightening of the step, notwithstanding more members of our industry continuing to fail or going into business rescue. There are even those who have put a shine on that, and perhaps they have a point.

John Matthews, President, Master Builders South Africa

Times are still hard, but at least something seems to be getting done about the situation. Not least was the news that feisty former Mayor of Cape Town, Patricia de Lille, now Minister of Public Works and Infrastructure, is taking aim at nowhere less than Parliament, with a full-scale investigation into its non-payment of service providers within a prescribed period.

It was time to put the people first, she said, and return to the Batho Pele principles which require public servants to be polite, open and transparent and to deliver good service to the public. And to pay them on time for services rendered, we hope.

Significantly, a media release on July 31, from the Department of Public Works and Infrastructure, announced that almost 70% of service providers had been paid, following her investigation. Seems there’s a chance that she’ll get it right.

As for the continued failure of companies in the building industry, architect Patrick McInerny, writing about the gloom of the recent SAPOA Convention, wondered why, if things were that bad, do we have a record number of building cranes operating in places such as Sandton, Rosebank and Cape Town.

He believes the reason for the cranes is the ‘enormous property boom in the central nodes’. Many new A-grade buildings are coming on stream and being filled by tenants previously in B-grade buildings, he says. So there’s now an oversupply of B-grade property and, because of all the new projects, an oversupply of A-grade as well. But he says, it is part of the natural cycle of the industry and not the harbinger of its imminent doom. ‘Those empty B-grade spaces represent a massive opportunity for the future’. Pipe dreams, or just plain fact – we have yet to see.

Another little pinpoint of light piercing the gloom (it may just be spin but has a glimmer of hope), is a particular belief among some members of our industry that the failures of the ‘big guys’ opens doors for SMME contractors.

The argument seems to be that SMMEs represent the future of the industry, and as sector interests converge, interesting new SMME development models are emerging.

Individuals whose lives are turned upside-down by loss of work are filling the gaps left by the fallen giants. And clients might well like the idea of dealing with smaller, highly skilled groups, hungry to make their mark and probably more inclined to make a deal on the contracts they pitch for.

Given that these workers are short on business skills, there might even be an emerging market for professional management groups to offer their services. Opportunity knocks in sundry places.

Good wishes to everyone and let’s make the Congress memorable.

John

DREAMS AND REALITY

DREAMS AND REALITY

What could be better than a cheque handed over, on time, at the end of a completed contract? Possibly the prospect of work for the next few decades on a mega-billion rand project that would most definitely take its place in the history books – one way or another.

John Matthews, President, Master Builders South Africa

Both seemed to be possibilities from the very bullish State of the Nation address by President Ramaphosa late in June, when, together with his reference to the private sector’s commitment to invest R840 billion over the next five years, for a range of projects, he also said he dreamed of an entirely new city to meet the so-called fourth industrial revolution.

There is no doubt that a multi-billion rand injection from any source, has the potential to meet the promise of 155 000 new jobs he described, which will  have a spin-off for the building industry both in terms of capital and employment. But the dream of a massive new city, complete with skyscrapers, had many South Africans expressing reservations about its feasibility, in spite of the President’s strong motivation and some high-profile global precedents.

However, right now, one of the biggest stumbling blocks to the health of the building industry in South Africa (among the other industries servicing the private and public sector) is the less than prompt payment for work done. As I have discussed in earlier Comments, 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.

One can be encouraged by Mr Ramaphosa’s strongly-articulated intention to create an ethical government – which can only in practice imply that the State will, among others, meet its commitments to contracts with service providers, that include timeous payments for work done.

Another perennial preoccupation for the industry is Health and Safety, the major emphasis on which dates back to 1964, when regions first took part in a national competition and it was extended to two categories – Building and Allied Trades.

Today it remains one of the big events on our calendar and is competed in 10 different categories with up to 50 regional Association winners entered into the national competition. Independent auditors have just been appointed for this year and the list of all entries from the regions has been finalised. The outcomes will be interesting and vitally important to this aspect of our industry

We have much on our minds at the moment and notwithstanding the lofty dreams of our country’s leader, we remain in a state of uncertainty.

John

HIGH ANXIETY

HIGH ANXIETY

As an indicator of how statistics can create either joy or despair and be wrong either way, take the first three months of 2019 when, the record shows, South Africa’s economy shrank by 3.2% – the largest drop since the notorious 2008 market crash. But as a reliable gauge of whether our country’s economy is in a terminal state, that statistic is questionable.

John Matthews, President, Master Builders South Africa

Given the levels of uncertainty throughout 2018 about the succession of our political leaders, the first quarter of 2019 in South Africa was never going to be an economic recovery blockbuster. And there was the small matter, in the fourth month of the year, of a General Election, the outcome of which was unpredictable on several levels. We were a nation in a state of high anxiety.

We took comfort in an orderly election with few surprises and a generally unchallenged outcome. The difference in mood, at the end, came from the heightened expectation of improved trade, a stronger currency and all the good things that go with responsible governance.

And to be honest, there is cause for hope that the shrinking economy has reached its low point and that a strong hand on the wheel could steer us into better times. But internecine battles within the ruling party mean that there’s still some sorting out of reporting lines to do. And that’s the tipping point on which South Africa balances, and where the real test of moral strength lies.

What it means for us, in a country that has had to wait too long for a stable political platform, is realising that, as individuals and collectives representing the foundation of our healthy economy in vital industries, we have to set an example by taking responsibility for ensuring the maintenance of standards. This means that both in our work performance and business dealings, we have to be seen as leaders and standard-bearers for excellence and integrity.

When it comes to contractual matters, we must adhere strictly to agreed conditions and demand that those conditions are met by our clients, staff and sub-contractors. Particularly in the payment for work done, we must hold debtors accountable on due dates even if it means pursuing them more vigorously than we find comfortable, to ensure that our creditors are able to be paid timeously. The consequences of non-payment are dire, especially to the smaller contractors who live from hand to mouth to survive in these difficult circumstances.

Just how vital this is comes home to us in the continued evidence that non-payment on contracts has sent too many of our colleagues in the building and allied industries to the wall.

If those around us shirk their obligations to good business practice, it is our responsibility, as honest tradesmen and professionals to take over, and re-set the course by impeccable example.

It is tough when the foundations that one relies on are rocking, and recovery is slow, but it just means that our efforts have to be redoubled in areas over which we maintain some control, rather than allow disorder to become the new normal.

John

THE BIGGER PICTURE

THE BIGGER PICTURE

As MBSA members attending our Congress last month in Port Elizabeth will recall, an item of particular interest was raised by Paul Dhlamini, Levies and Grants Manager at the Services Sector Education and Training Authority (SETA) who told delegates that artisan development had become a national priority.

John Matthews, President, Master Builders South Africa

He said that government recognition of the country’s enormous shortage of artisans had resulted in the Minister of Higher Education signing an agreement to produce 30 000 skilled artisans by the end of 2030.

It was, he said, necessary to make artisan development non-sector based so that all the SETAs could contribute funds and ensure that we train artisans and reduce unemployment.

This is of course a positive step but there remain numerous hurdles to jump before that full complement of artisans is delivered, more than ten years from now.

And then, those many years on, will the young people trained by standards set here in 2018, be up to the mark dictated by the onset of the fourth industrial revolution? This phenomenon has, in the current and developing environment, spawned revolutionary technologies like robotics, the Internet of Things and other trends that are changing the way we live and work.

The World Economic Forum has been quoted as estimating that 65 per cent of children today will end up in careers that don’t even exist yet.

The foundation, while citing literacy, numeracy and scientific knowledge as critical, revealed that when top executives from leading world companies were asked what they thought the most important job skills would be in 2020, they all quoted “complex problem solving”. Other skills on their top ten list included critical thinking, creativity, collaboration and emotional intelligence.

Will our young South African artisans who now find themselves the beneficiaries of this government-driven renewed training initiative meet the challenges of a work environment set to change, in some ways, beyond recognition?

To ensure they will be able to, a great deal more than government grants will have to be applied to artisan training over the next decade and more. Particularly in our industry, where those who have chosen construction as their career will have to go far beyond the “bricks and mortar” of their trades and embrace the almost unimaginable changes that this phase of our world industrial development will throw at them.

It’s hugely exciting if approached with the right attitude, not only by the apprentices, but more critically by the responsible government departments, employers, industry leaders – and essentially, their teachers, instructors and mentors. The need to instil a culture of broad-thinking, and a holistic approach to the industry at all levels, including financial management, is essential to its on-going health.

John

Sink or swim – it’s your call

Sink or swim – it’s your call

Well, the headlines haven’t really changed – not enough to make us feel that the economic tide has actually turned. Donald Trump sent a ripple through global markets with a hell-bent withdrawal of his country from the multilateral nuclear non-proliferation accord with Iran, sending the rand, for one, into another, predictable, tailspin and his international allies into tooth-grinding frustration. And here at home a day after our new President held his second Q&A in Parliament, the biggest news for a country, hungry for plans to revive the economy, was his spat with the opposition chief whip, whom he told to shut up. And then had to retract what was deemed an ‘unparliamentary’ remark.

John Matthews, President – Master Builders South Africa

Not helpful, when BusinessReport, on May 9 said “South African business confidence has declined to levels last seen when Jacob Zuma was still the president.” They backed this up with news that the BCI had dropped to 96 in April from 97.6 the previous month, according to the South African Chamber of Commerce and Industry. That’s the lowest since November last year. Five of the 13 sub-indexes that make up the gauge declined from a month earlier, said BusinessReport.

For the building and construction industry, this uncertainty and downright pessimism means that there’s a continued hiatus in in the supply of contracts for large-scale projects, which extend beyond private or government big-scale building, to the largely State-driven hard infrastructural and essential requirements such as roads and bridges. This is notwithstanding a mooted R940 billion in government funding for big ticket items that remain as yet, to be fed into the industry.

Long periods of low energy in any industry are discouraging and in the building and construction industry, there are many highly-skilled operators with their lines in the same dwindling pond of opportunities. It’s a testing time for everyone and those with the longest experience and unwavering tenacity are the survivors.

But it must remain top of mind that the building and construction industry has proved itself to be relentlessly cyclical, over many fallow and boom seasons. Mostly one can ascribe conditions to influences from the overall economy, both domestic and foreign. And there is no doubt that currently we are under enormous pressure from almost every quarter.

However, the situation is never completely out of our hands and playing it smart can mean the difference between sinking or swimming. The same cycles that affect the entire industry also influence the sectors within it.

While the market for major retail and industrial projects flattens, opportunities can arise in the various niches of the residential market and commercial and industrial SME accommodation. The secret is in remaining flexible and capable across a wide spectrum of construction needs. Right now, analysts are recommending affordable housing as a focus that is offering the best ROI. Even if you don’t agree, be open to new opportunities to exploit your skills and those of your workforce.

It’s all about survival.

John

Construction Sector Codes Finally Gazetted

Construction Sector Codes Finally Gazetted

Compliments of the New Season to all our members and readers. We trust you all had a safe and restful Festive Season; and that you are ready with renewed vigour and energy to deal with the head winds that we foresee will still be with us for the foreseeable future in line with the ‘new normal’ VUCA (Volatile, Uncertain, Complex, and Ambiguous) world we are now living in as alluded to in my President’s Comment in the December 2017 edition of SA Builder.

Bafikile Bonke Simelane, President, Master Builders South Africa

Notwithstanding the above, it is with great relief and excitement that we welcome the gazetting of the Construction Sector Charter by the Minister of Trade and Industry. Our Sector Charter was gazetted on 01 December 2017. We at Master Builders South Africa, as a strong supportive partner of the Construction Sector Charter Council (CSSC), truly believe that this heralds a new era for transformation and empowerment.

We urge all our members as well as all other interested and affected parties to familiarise themselves with the new Codes which are very different from the preceding Generic Codes in many ways – with specific reference to the treatment of Exempt Micro enterprises (EMEs), Qualifying Small Enterprises (QSEs), Black-Owned and Black-Woman Owned businesses, amongst other salient features, including elements of Skills Development and Management Control.

It is also very important to note the interpretation and definition of Empowering Supplier with specific reference to full and complete compliance with the prevailing provisions of the Employment Equity Act including accurate and timeous submission to the Department of Labour, before the end this month, of Workplace Skills Plans (WSPs) and Annual Training Reports (ATR’s) by designated Employers. Non-compliance with Empowering Supplier provisions will have disastrous consequences for your BBBEE.

We are also encouraged to read that Business Confidence in South Africa was up slightly in November 2017, reflecting an anticipation of more conducive economic conditions according to a report by the South African Chamber of Commerce and Industry (SACCI). The report states that South African businesses have taken heart from the fact that the country still had an investment grade sovereign credit rating from Moody’s, despite falling into “junk” status with its peers S&P Global and Fitch.

According to Stats SA, South Africa’s economy grew more than expected in the third quarter as the agricultural sector continued to recover from a severe drought while mining and finance also improved, lifting hopes the country may avoid further credit downgrades. Whereas the Absa Purchasing Managers’ Index (PMI) still trended below the neutral level of 50 for the sixth consecutive month during November, it has consistently shown improvement for four successive months from August to November.

Whilst “one swallow does not make a summer,” it is nevertheless a source of encouragement and optimism for the metals and engineering sector since the index, which is a lead indicator, provides insight into the views and sentiments of producers and relevant stakeholders in the manufacturing sector. This is a key component of the construction economy value-chain especially against the background of Quarter 3 job losses of around 145 000 by the construction sector as reported by the Construction Industry Development Board (CIDB).

Tough trading conditions exacerbated by macro-economic conditions, sluggish growth, lack of continuity of work, margin pressure continue to cause the sector and our members much distress despite some of the good news referred to above. It is impossible to see how further job losses are going to be avoided.

We therefore look forward once again to next month’s State of the Nation Address (SoNA) by the State President and subsequent Budget Speech by the Minister of Finance for a package of specific and targeted measures designed to kick-start and stimulate the economy to stave off the risk of further ratings downgrades; and build confidence in the resilience of our economy to attract Foreign Direct Investment through infrastructure investment amongst other considerations despite other fiscal constraints brought about by below-target revenue collections by SARS.

Bafikile Bonke Simelane

President, Master Builders South Africa