From bakkies and bar­rows

Gov­ern­ment grad­ing sys­tem to up­lift skills, man­age­ment and fi­nan­cial ex­per­tise

Finweek English Edition - - Economic trends & analysis - TROYE LUND

JUST 175 – THAT’S 0,7% – OF THE 25 000 con­trac­tors in­cluded in Gov­ern­ment’s new reg­is­ter of the in­dus­try has the abil­ity to tackle a high school or 100-bed hospi­tal, let alone a soc­cer sta­dium. That’s based on the grad­ings given to com­pa­nies want­ing in on Gov­ern­ment con­struc­tion con­tracts. To as­sess South Africa’s ca­pac­ity to meet the am­bi­tious in­fra­struc­ture ex­pan­sion plans as­so­ci­ated with its Ac­cel­er­ated & Shared Growth Ini­tia­tive (As­gisa) and the 2010 Soc­cer World Cup, Gov­ern­ment now re­quires all com­pa­nies to reg­is­ter and be rated.

The Na­tional Reg­is­ter of Con­trac­tors is also be­ing billed as a “toolkit” to erad­i­cate fronting and purge fly-by-night con­trac­tors, whose fail­ure rate has so far, says Min­is­ter of Pub­lic En­ter­prises Thoko Didiza, “un­der­mined” Gov­ern­ment’s ser­vice de­liv­ery. “The in­tro­duc­tion of the reg­is­ter hasn’t been a smooth and easy process. But we’ve re­mained firm in our re­solve to reg­u­late the sec­tor for im­proved eq­uity and qual­ity and to cre­ate a firm foun­da­tion for de­vel­op­ment and trans­for­ma­tion of the in­dus­try,” says Didiza.

Only com­pa­nies on the reg­is­ter are con­sid­ered for Gov­ern­ment con­tracts. Those are graded one to nine, de­pend­ing on their track records and fi­nances. Apart from their av­er­age turnover, credit and bank rat­ings are key to the as­sess­ment and rat­ing con­ducted by the Con­struc­tion In­dus­try De­vel­op­ment Board (CIDB).

Con­struc­tion firms in the higher grades have wel­comed the reg­u­la­tion. For ex­am­ple, Mike Cawse, of Gor­don Ver­hoef & Krause’s GVK-Siya Zama, a grade eight com­pany, says it en­sures the ap­point­ment of rep­utable con­trac­tors with the fi­nan­cial mus­cle and tech­ni­cal abil­ity to com­plete con­tracts in time. It also al­lows con­trac­tors of sim­i­lar ca­pac­ity to ten­der against each an­other on a “level play­ing field”.

Says Cawse: “That’s es­pe­cially true at the higher lev­els, where the top three grades don’t have to ten­der against con­trac­tors that may not have a sim­i­lar over­head ca­pac­ity and con­se­quently have the re­sources to com­plete the work.”

How­ever, when it comes to com­pa­nies in the higher grades, the names on the reg­is­ter are few and far be­tween. For ex­am­ple, there are only 10 grade nine con­trac­tors on the reg­is­ter (ca­pa­ble of han­dling projects with no limit to the cost of the con­tract, as op­posed to a grade eight, which has a limit of R100m).

Ac­cord­ing to CIDB CEO Ron­nie Khoza, 77% of the con­trac­tors cur­rently on the reg­is­ter are clas­si­fied as grade one (en­try level, which can un­der­take jobs un­der R200 000). Many of those first grade reg­is­tra­tions have no as­sets or ex­pe­ri­ence. As Didiza says, they’re a “rep­re­sen­ta­tion of in­ter­est”.

Khoza says plans to train grade ones are in place. “The Reg­is­ter of Con­trac­tors is swelling at such a rate with grade ones that in or­der to re­duce the risk to clients – as well as to make those busi­nesses sus­tain­able – Gov­ern­ment has agreed to train them through its Na­tional Con­trac­tor De­vel­op­ment Pro­gramme as well as Gov­ern­ment’s Na­tional In­fra­struc­ture Main­te­nance Pro­gramme (which Cabi­net has just ap­proved).”

Khoza adds that grade ones will have to un­der­take a manda­tory 24-month train­ing scheme. Train­ing is also be­ing aimed at up­grad­ing small to medium play­ers. Over the past year, 1 000 SME con­trac­tors man­aged to im­prove their grad­ing sta­tus. Of those, 80% were black-owned.

But over the short term, in­ter­na­tional in­ter­est will fo­cus on the reg­is­ter – pri­mar­ily Chi­nese and Ja­panese firms, but also some Ital­ian and French – as it looks set to spice up com­pe­ti­tion in the big­ger league. The same checks will be con­ducted in grad­ing over­seas com­pa­nies, says the CIDB.

Com­ment­ing on the fact that SA has only a hand­ful of ma­jor con­struc­tion play­ers and a myr­iad of SMEs, CSIR build­ing and con­struc­tion ex­pert Llewellyn van Wyk says that’s con­sis­tent with the trend world­wide – the dif­fer­ence be­ing that SA’s SMEs lack sig­nif­i­cant tech­ni­cal and man­age­rial ex­per­tise.

Van Wyk agrees with Didiza that SA’s top con­struc­tion firms are ca­pa­ble of meet­ing the As­gisa and Soc­cer World Cup in­fra­struc­ture re­quire­ments. “Th­ese com­pa­nies (grade nine) are pro­fes­sional con­trac­tors. When they ten­der for a job they as­sem­ble ex­per­tise from all over the world.” Van Wyk also says that due to the time con­straints on ma­jor Soc­cer World Cup projects, the big con­trac­tors will have lit­tle

The big con­trac­tors will have lit­tle choice but to pull in off­shore

ex­perts in­stead of us­ing and ex­tend­ing South African firms.

choice (in most cases) but to pull in off­shore ex­perts in­stead of us­ing and ex­tend­ing South African firms.

Even if all Gov­ern­ment’s train­ing and up­lift­ment plans go as planned it will take time to swell the ranks of com­pa­nies graded five and above. The test will be whether the num­ber of com­pa­nies cash­ing in on Gov­ern­ment con­tracts in­creases over time and, if so, by how many.

Photo: Trevor Sam­son Firm in her re­solve to reg­u­late the sec­tor. Thoko Didiza

Newspapers in English

Newspapers from South Africa

© PressReader. All rights reserved.