The construction industry has set itself the task of drafting a black economic empowerment charter — amid sharp differences over ownership targets and skills development.
Mike Wylie, co-chairperson of the charter work group, told the Mail & Guardian last week that the sector should not be trapped by a “fixation on ownership”. Wylie said the best approach was to build “a solid base” in areas such as procurement, enterprise development and skills transfer.
But Narius Moloto, general secretary of the Building Construction and Allied Workers Union, argued that as a significant portion of the industry’s workforce had accumulated long service, allocating a stake to workers was “a bare minimum”. Moloto confirmed that workers would demand at least a 10% transfer of ownership.
He said the union would call for a mandatory charter that was vigorously monitored. Although the government is a driver of change through affirmative tender allocation, the private sector “must also come to the party” when handing out tenders, he said.
Moloto is not optimistic about the prospects for change, noting that “in the past 10 years the industry has done very little to transform and empower”. Wylie conceded that the industry had “not done as well as it should have” on the transformation front.
The charter is due to be delivered within a year and has the highest ownership targets of all industry documents, as well as being the most sensitive to the practice of fronting — using black tokens to win government work.
The charter seeks to transfer 30% ownership to black hands by 2008, and 45% thereafter. The drafting process was launched this week by Minister of Public Works Stella Sigcau at a drab affair marked by stern warnings delivered in a monotone. At one point, Sigcau indicated she would prefer to bring the delivery deadline forward from September to June next year.
Explaining the targets, Sigcau said they were higher than in other sectors because there was anecdotal evidence of a higher uptake of government building contracts by black builders and other entrepreneurs.
Black participation is is also facilitated by private support, including Absa’s R15-billion public works support programme, which gives contractors access to funds with nothing to back them but a contract.
Wylie noted that the low barrier to entry into the industry was an advantage. However, he added that the industry had to reduce the high failure rate of emerging contractors, 80% of whom fold in the first year of operation.
One way of doing this was to introduce a registrar of contractors, which Department of Public Works spokesperson Thami Ngidi confirmed was under way.
Sigcau displayed sensitivity to the issue of fronting, referring to it on three occasions and describing it as “a scourge”. Moloto sees employee ownership as a way of reducing the practice.
One area where the contruction sector had the edge over other industries was in skills development, Wylie said. This was because it offered training that was “relevant and practical”.
But Moloto argued that industry training efforts were particularly deficient in middle management and the building professions. As chairperson of the Construction and Engineering Training Authority, he said he was able to see that employers did not follow through on their training plans.
Transfer of ownership will be complicated by the fragmented character of construction, which includes five listed groups that are believed to account for about 20% of the industry. The balance is made up of a multitude of smaller players.
Wylie also pointed out that the listed groups were owned by institutions. “Transferring 45% of that is a bit ambitious.”
One positive factor that could boost empowerment efforts, however, is the fact that construction appears to be recovering from years of decline.
In the year to June, according to the Survey of Earnings and Employment by Statistics SA, it lost 9% of its labour force. But Wylie said business was now picking up, buoyed by a low interest rate environment and positive sentiment.
He hoped the upswing could be sustained until 2010, when South Africa hosts the Soccer World Cup.
On the labour front, Moloto said the industry was plagued by casualisation and the subcontracting of labour, which allowed employers to sidestep a R9-an-hour wage determination.
Wylie disagreed, arguing that a large proportion of the labour force was in full-time employment.
He cited his company, WBHL, which had employed 3 000 workers to build the Clear Water shopping centre in Roodepoort. Of these, 400 were permanent members of a “core team” that included everyone from foremen to scaffold erectors. Another 400 limited-duration contract workers were drawn from the area, while the rest were subcontracted, but were permanent employees of their companies.
It is unclear how the charter will deal with suppliers to the construction trade, which some stakeholders believe should be included. However, Wylie said brick and cement suppliers were covered by the mining charter.
One of the country’s biggest employers
Despite its relative decline over three decades, the construction industry remains one of South Africa’s major employers because of its relative labour intensity, writes Thebe Mabanga
According to Statistics South Africa’s latest labour force survey, the industry employed 674 000 people in March this year.
Stats SA’s survey of employment and earnings indicates that the sector shed 9% of its workforce between June 2003 and June this year.
The Building Trade Index shows a rise in building tenders since 1999, peaking in November last year, declining for nine months and beginning to pick up again in July. According to Stats SA, construction contributes 2,9% to gross domestic product.
On the JSE Securities Exchange, the five listed construction companies have a total market capitalisatiion of R9,5-billion, with Murray & Roberts the largest in terms of market cap (R4-billion), followed by Aveng (R3,7-billion ), WBHL (R1,2-billion), Concor (R117-million) and Basil Read (R43-million).
In terms of the charter, Minister of Public Works Stella Sicgau wants 30% of ownership to be transferred to previously disadvantaged people in three years, rising to 45% thereafter.