Report by the President of SAFCEC 2007/2008
Mr Glenville Cullum
During this auspicious period of growth in the construction industry, I need to congratulate the industry for standing up to the challenge. The ongoing investment in the sector spearheaded by key multibillion rand projects such as the 2010 Soccer World Cup, Gautrain as well as the increased infrastructure investment by Government (Gauteng Freeway projects, Harbour and Airport development, Eskom power stations, etc) kept the growth rate of the sector at levels not seen for the last 25 years.
The opportunities that this growth in infrastructure investment has brought are not without challenges for the construction industry.
· The contracting capacity remains a challenge.
· The employment levels have increased continuously since 2000 from 57 000 to 118 000 (2007) to 130 000 (2008) is evidence of the growth that has taken place but the skills level remains a major concern.
· Material shortages will remain a focus point
A further challenge is the balance of the economy between major contracts and smaller contracts. The growth in the industry is driven by major multibillion rand contracts and established grade 8 & 9 contractors. On the other end, the small and medium contractors are not experiencing the boom in the industry; in fact for some of them it’s a challenge to survive, escalated by the slump in the housing market. The Reserve Bank has increased its benchmark interest rate 6 times since June 2007 followed by all Major Banks, resulting in:
· private developments slumping to alarmingly low levels
· a sharp slowdown in residential township development
Other important factors that have influenced the performance of the small and medium contractors:
· Incapacity of local government and municipalities to deliver projects.
· Slow payment by public sector departments and municipalities which often lead to severe cash flow problems for companies.
· Political infighting in the Western Cape which constrained the flow of new work.
· Delays in environmental approvals for new developments.
· The physical constraint of an electricity embargo on new developments, and the
· Unforeseen increase in the oil price
Transformation Charter / Scorecard
Progress regarding the Section 9 Code of Good Practice submission to DTI has been very slow. More and more major clients want to adopt the broad based principals but are waiting for the finalisation of the amended PPPFA-Act.
Sadly, the spirit of co-operation created during the Charter negotiations is dampened by the red tape that we encounter to finalise our application to obtain Section 9 Code of Good Practise status. Ironically, the initiative by Government to transform and ensure a broad based black economy is now hampered by themselves. Hopefully, this conundrum will be sorted our by the end of the year to ensure a level and fair playing field for participants to ensure transformation in the construction industry. As an organisation, we are proud of the contributions made by Mike Wylie, Hylton MacDonald and Pierre Blaauw in this process and we are confident that they will achieve their objectives in this process.
Everyone involved in the Charter process thought that the goodwill generated during the negotiations needed to be explored further. The Sector needs a forum where we could engage with Government as a single voice but sadly Construction South Africa (CSA) did not materialize.
CIDB
The CIDB register is growing at an alarming pace, from 42 000 in June 2007 to 71 500 in June 2008 of which 60 000 (± 85%) are registered in grade 1. The exponential growth in applications to the CIDB and their initiative to promote training and to focus on business development to improve the quality of contractors at the lower grades remains a challenge. The establishment of their regional offices will improve their service qualify. The work of the CIBD is critical to improve performance of the construction industry and its ability to respond to demand.
CETA
Restoring or replacing the training pipelines that have produced the range of skills needed by the construction industry presents a huge challenge. Companies training for the industry at own cost must continue to ensure a constant flow of new entrants to the industry.
Despite various interventions by SAFCEC, the CETA operation remains a major concern. CETA has received qualified audits for a third year in a row without any intervention by the authorities. A groundswell of resistance is building amongst SAFCEC members to withdraw from CETA governance and effectiveness improves. This is not an easy decision. SAFCEC had frank and open discussions with the new CEO regarding our concerns about CETA. We agreed to give the new management 3 months to clean up their act, failing this SAFCEC will have to reconsider its position. SAFCEC reiterated its support for the CETA operations. An efficient and functioning CETA is a crucial element in the success of the challenging growing market.
SANRAL
The performance of the SANRAL needs to be applauded. The Gauteng Freeway Improvement Projects is a role model for procurement, client efficiency and speedy awards. The award of R11 billion worth of work during May for tenders closing on 15th April 2008 speaks for itself. Imagine the progress should the Housing Department adopt a similar strategy to address the housing shortage or the Municipalities performing in this manner.
Enterprise Developments
SAFCEC enterprise development programme is running strongly and more than 25 developing contractors are mentored on the programme.
We have also launched an industry marketing and guidance CD & DVD which is distributed free of charge to all nominated schools. These career DVD’s will consist of presentations targeting 3 levels of learners, Grade 8, 9 & 10, giving them wide knowledge regarding the Construction Industry careers.
Health & Safety
Safety on site remains a major concern. Management of health and safety can make a significant contribution to the performance of a business by reducing injuries and ill health and helping to minimize losses and liabilities; therefore the maintenance and the continuing development of health and safety management systems are a priority for any business. Every effort must be made to provide the required training to all staff members. Our people are our greatest asset and we owe it to them to be more health and safety conscious. The same goes for the treatment and education regarding HIV/AIDS, if not morally then simply economically.
The spate of holidays during March to May remains a concern for the industry, escalated by the declaration of 02nd May as an additional public holiday. We would hope that Government realise the impact on the economy. We need to address it at every possible forum where we can make an impact.
SAFCEC Headquarters in Bedfordview
The CEITS Board has accepted our R6 million offer to purchase the building in Bedfordview. SAFCEC is the proud new owner of the building which has been revamped in to a modern office and conference centre.
SAFCEC as THE Voice of Civil Engineering
SAFCEC thrives because we stay close to members and their companies through facilitation at high level committees / think tanks where we combine your knowledge and wisdom with the expertise of or technical staff to seek solutions and formulate policies.
During the last couple of years due to the explosive growth with both turnover and employment numbers just about doubling, enormous pressure was experienced by our Senior Staff, which is well appreciated. Senior Staff also needed to be relocated to where the projects are. All these factors led to our committees and think tanks being starved of high level people to formulate policies and seek solutions for industry-wide problems.
These issues have been addressed at a wide and high level and I trust that the co-operation that kept SAFCEC together will be strengthen and that members unite and vigorously interact and support agreed policies and views.
In conclusion I would say that the positives outweigh the negatives. We should enjoy the improved economic climate, but not be misled into thinking that it will last forever. History has proven that for every up there is a down. All that is unknown is the timing. I wish you all great luck in managing this new environment.
Operating from Cape Town with a Head Office in Johannesburg has not always been easy and I sincerely thank the staff and especially Henk for their support and help over the two years.
I would also like to extend appreciation to the Deputy and Vice President and the council members for their contributions during this period. Similarly the input of members and office bearers in all the regions has been invaluable. Special thanks to Daan Hurter, who has finally retired from the industry. We wish him well.
Finally a special word of thanks to my fellow directors and staff at Power Construction, who supported me during my term of office.
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