From bakkies and barrows
Government grading system to uplift skills, management and financial expertise
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