The Civil Engineering Contractor May 2018 | Page 40

BUSINESS INTELLIGENCE
C
yril Ramaphosa’s new dawn, as
articulated in his inaugural State
of the Nation Address (SONA)
on 15 February 2018, engenders the
spirit of patriotism, nationhood, unity,
and optimism. This, after almost a
decade of misrule (notwithstanding
some notable successes) under the
Zuma administration, which marked
a departure from Mandela’s vision of
building a fair, just, and decent society.
A new dawn will be birthed by the
citizens’ leap of faith for better things
to come, as it will be counterproductive
for South Africans to continue closing
their eyes while a new beginning is
now glimmering on the horizon. But
Ramaphosa, as a new torch bearer,
must demonstrate his promises of the
new dawn by shining the light for all
to see that a new era has indeed begun,
by acting swiftly on his undertakings to
the nation. Even Ramaphosa’s known
vociferous critics have suddenly aligned
themselves with him as they could not
withstand the rising tsunami of cautious
optimism among the majority of South
Africans, across the racial divide.
During the South African Forum
of Civil Engineering Contractors
(SAFCEC) Annual Gala Dinner on 16
October 2017, at which Ramaphosa,
then deputy president, delivered a
keynote address, I implored him and
the government to address what I
saw as the triple challenges to South
African state institutions: juniorisation,
mediocritisation, and capture of state
institutions — I also refer to them as the
JMC factor. And indeed, as he is now the
new president, he has started dealing
effectively with some of the issues at
Eskom and SARS and reshuffling the
cabinet — although, some who do not
inspire confidence remain.
If the JMC factor is effectively dealt
with, this will, among other things,
boost confidence in our economy. The
construction industry plays a pivotal role
in South Africa’s economic and social
development. It provides the physical
infrastructure that is the backbone of
economic activity. It is also a large-scale
provider of employment. According to
a 2016 PwC report, the construction
industry adds significant value to South
Africa and its people. The monetary
value received by various stakeholders is
often summarised by companies in their
value-added statements.
Heavy construction employees
represented 77% (2015: 83%) of the
value created, while, according to the
PwC report, the construction sector
employs 1.38-million people, either on
a contract or permanent basis.
The state received 11% (2015: 9%)
of value created in the form of direct
taxes. However, the reality is that the
state receives significantly more, if one
considers PAYE and net indirect taxes
like VAT.
According to the Construction
Industry Development Board (cidb)
Construction Monitor – Transformation:
January 2017 report, there have been
Cyril Ramaphosa delivering his first SONA, promising South Africa
the start of a new dawn.
38 - CEC May 2018
significant strides in the transformation
of the South African construction
industry. Details of black ownership of
cidb-registered contractors (defined as
ownership control of 50% or more) for
South Africa are as follows: Around 97%
of cidb-registered Grade 2 to 4 General
Building (GB) and Civil Engineering
(CE) contractors are black owned.
Furthermore, an average of 88% of all
Grade 5 and 6 GB and CE contractors
and around 75% of all Grade 7 and
8 GB and CE contractors are black
owned. Black ownership of Grade 9
contractors has improved in GB from
40% to 44%, and in CE from 33% to
37% over the past four quarters.
Of concern, however, is that while
black ownership representation shows
improvement over time, overall,
representation has not increased
significantly over the past three
years in the higher-level grades. The
VRP Agreement between the seven
construction industry participants
and the South African government
— as initiated by SAFCEC — aims
to accelerate bridging the last gap, at
Grade 9 level in particular, over and
above the Construction Sector Charter
Code, which in itself is progressive.
However, black ownership at Grade
9 level in the construction industry is
within reach in the new dawn, even within
a shorter period than anticipated, if only
the VRP Agreement is complemented
with the reliable and sustainable roll-out
of public infrastructure projects. If we
are to learn anything from our BRICS
counterparts, it is that their economies
grew at higher rates, driven by a strong
focus on infrastructure development.
At times, the Chinese economy was
growing faster, at 10%. It was driven,
among other things, by huge investment
in infrastructure development.
According to the 2012 World Bank Report
data, fixed investment as a percentage
of some of the BRICS countries’ GDP
is as follows: China 47% and India
30%, while South Africa is currently
around 20%, which makes it difficult to
reach the NDP target of 30% by 2030,
without private sector investment. But
policy uncertainty, driven by divergent
procurement rules by various state