20th Anniversary of the Power Group

SAFCEC’s involvement

The government is not the only body that is trying to facilitate the entry and growth of emerging contractors. Recognising that emerging contractors have struggled to enter the industry and that the majority of those that do enter, have a very short lifespan, the South African Federation of Civil Engineering Contractors (SAFCEC) has embarked on a development programme for them. As part of the programme, SAFCEC has put in place a mentorship scheme. Under this scheme, an emerging contractor will be put under the mentorship of an established company.

Michele Gilbert, acting mentor programme director, said with regards to the mentor programme, their plan is that the relationship between an emerging contractor and established contractor will last between three to five years. She said, “the big company will act as a big brother to the emerging company, but the idea is to develop the emerging company and not for them to remain as a sub contractor. During the relationship with the big contractor, the emerging contractor will be supervised and after a while, the emerging contractor will gradually withdraw and work on his or her own.”
She said the benefit to the established contractor will be that this partnership will add value to the company in that if they are looking for a joint partner venture they can source from the emerging contractors they already know. She also added that: “there isn’t enough capacity for government projects and this capacity needs to be grown and that is why it is important to have more contractors entering the industry.” Training of emerging contractors under this scheme is facilitated by the Construction Industry Education and Training Services (CIETS)

Contractors

Emerging contractors tend to have the same views about the challenges that they face, the main one being the lack of capital. Nic Grobler, contracts director of Sakhizwe Con Roux, said the main challenges they have faced in entering the industry have been: “the lack of management and technical skills and the absence of suitable finances for emerging contractors in an industry known as being capital intensive”. Sakhizwe is one of three empowerment firms working on the construction of the Port of Ngqura at Coega.

Sakhizwe is in partnership with Con Roux Ltd. Asked if he feels Sakhizwe would be able to sustain itself were it not for Con Roux, Grobler said, “no it would not, the requirement for technical skills and management experience, track record of contracts completed, financial demands and support services are necessary when competing for larger contracts.” He also added, “to survive in a highly competitive industry like ours, one must do everything right the first time. The risks are great, the demands are tough and the banks are ruthless, therefore ones chance will be better to succeed if going into partnership with more established companies and gain the required muscle needed.”
Many other emerging contractors have entered into joint ventures with more established companies to remain sustainable. Richard Arnott, site manager for Chavani Civils, which is one of the emerging companies working on the upgrading of roads in Soweto, said what has helped them has been their partnership with Black Top Surfaces. He said, “we don’t have enough finances to purchase materials and we use Black Top’s buying power and credit facilities.”
Another company that feels that it is better to work in partnership with a more established company is Motsweding Civils, they are less than a two years old and are currently working on their first 2 projects, a sewer pipe line in Thokoza and laying raft foundations at a school in Vosloorus. They have been sub-contracted on both projects by two established black empowerment companies. Paul Mofokeng, director of the company said that cash flow is the main problem faced by emerging contractors. He added that, “as a sub-contractor you have to deliver the product to the client and contractor, otherwise if you don’t they won’t use you again and as a new company it is sometimes difficult to get equipment and other resources that you need to do the job.” He added that because they are a new company they would not be able to survive if they were working on their own.
Zomba Constructions is an emerging company that has had a number of success stories; they are currently working on eight projects, mostly for Spoornet. Managing director, Charles Modise, said what they have found most challenging, is the capital outlay for rail maintenance machinery. He also said: “the normal five year contracts awarded by Spoornet do not permit sufficient time to repay capital outlay in view of the low tender rates paid for maintenance work and unaffordable security to access higher purchase facilities for equipment and machinery and performance guarantees for maintenance contracts.” He added that the combination of all these factors result in low profitability and losses in many instances, making rail maintenance unsustainable for emerging contractors.
Percy Tloubatla, director of Tloubatla Civils was very critical of how tenders are awarded to contractors. He said the current environment does not allow emerging contractors to grow and that it is extremely difficult for them to penetrate the market. The main reason for this is that emerging companies have to compete with bigger, well-established companies who have the finances and equipment to get contracts. He also said that consulting firms are also to blame as they always use the same, established contractors and feel it would be a risk to award contracts to emerging contractors.
Tloubatla also said that there is still a lot of corruption with regards to the awarding of tenders. He said “to get a contract you need to have connections either in government or with consulting firms, the bottom line is, if you do not have connections, you don’t get a job.”
He added that consulting firms already know which contractors they have in mind when contracts are to be awarded and they can sometimes manipulate decisions. Either by making recommendations to a client about using certain contractors instead of others and because the client might not know which is the best contractor to use, they take the consultants recommendations. He also said the client sometimes also tells the consultant which contractor they prefer.
With regards to the government’s Emerging Contractors Development Programme, he does not feel that their plans have been implement properly and that Government is not doing enough to sustain it’s BEE initiatives. He also feels that they are also contributing to contractors failures, he said their policies should be in tender documents. He said that with contracts under R1 million contractors do not require surety, whereas with regards to contracts R10 million or more they do require surety. He said “where are you supposed to get surety if you are given small tenders, banks see emerging companies as risk, this sometimes forces them to go into joint ventures with bigger companies as they often cannot survive as stand alone contractors.
He stressed again that; “emerging contractors don’t grow, I also don’t think that going into a joint venture with a bigger company will help, because the emerging company is not growing on its own.” He did acknowledge however, that there are some organisations that assist emerging civil engineering companies, he mentioned SAFCEC as one of them and said they assisted him when he entered the civil engineering industry. He reiterated that the main challenge for emerging contractors is trying to find work. The company is currently working on a water reticulation project in Kuruman.
Sibakhulu, which means ‘we are great’, is quite a fitting name for one of the Eastern Cape’s most successful emerging civil engineering companies, the company, which celebrated its fifth anniversary late last year is currently involved in one of South Africa’s largest civil projects - the development of the R2, 65 billion Port of Ngqura, Sibakhulu is carrying out the bulk excavation of five million cubic metres to the harbour basin at Coega. It is also busy constructing Neptune Road, a major access road into the Industrial Development Zone (IDZ) from Coega, and Fairview, a major township in Port Elizabeth.
With regards to them achieving what they have Mcetywa said “there are qualities that have helped us with their achievements; patience and determination. You can’t go into the construction industry hoping to make a quick buck. Our links with Power Construction have also helped us, as they are a well established company, they have assisted us financially and also in the training of up and coming engineers. Sibakhulu has had their fair of challenges like other emerging contractors, Mcetywa says when they entered the industry, they entered at the wrong time because the economy was not doing very well, but added that “ based on our determination, we had to work hard and try to keep the people who worked for the company motivated and reassure them that things will improve. Mcetywa also added that in terms of equity there still aren’t enough black people in the industry, many of them are still at tertiary institutions or have recently completed their studies and it will take a several years for them to be trained.

With regards to the company’s achievements, Sibakhulu’s managing director Dumisa Mcetywa said: “Our patience and determination have contributed to our achievements. You can’t go into the construction industry hoping to make a quick buck. Our links to Power Construction have also helped in the sense that it is a well established company, especially in terms of financial assistance and helping to train young engineers.” Sibakhulu has faced its fair share of challenges, as has been the case for other emerging contractors. Mcetywa commented that Sibakhulu entered the industry in an unfavourable time. “The economy was sluggish but based on our determination we worked hard to keep our staff motivated, reassuring them that things would improve. However, now that the economy has started picking up we are facing a new problem: some staff members have left for higher salaries elsewhere.” This problem could negatively impact on a lot of emerging companies. Mcetywa added that, in terms of equity, there still aren’t enough black people in the industry. “Most of them are still at tertiary institutions or have only recently completed their studies and it will take several years before they are fully trained.”