N Kganyago: Eastern Cape Construction conference

27 September 2006

The MEC for Public Works Mr Christian Martins
Members of the Provincial Legislature
Senior government officials
Our partners from the private sector
Representatives from various construction and building federations
Distinguished guests
Ladies and gentlemen

It is an honour to stand in front of this conference and make a contribution
towards the deliberations and other significant resolutions that will surely
flow from this association.

As a developing country, South Africa continues to grapple with misery
indices such as unemployment, poverty, illiteracy and underdevelopment. This
situation stands in direct contrast to the prosperity and other gains that the
country has been recording since 1994. Initiatives such as the Accelerated and
Shared growth Initiative for South Africa (AsgiSA) reflect the government's
concern with jobless economic growth and are intended to mobilise all sectors
of the South African society in working together to create wealth that will
benefit all South Africans.

At a glance, the construction industry as part of the built environment
faces major challenges calculated to address problems of poverty and
underdevelopment. Chief, among these is the provision of infrastructure. Proper
houses with sanitation, water and electricity as well as decent roads will
fulfil a basic need to provide housing and accommodation, while facilitating
access to the community. These will need to be supplemented with essential
public infrastructure in the form of schools, police stations, hospitals and
clinics to create a well-resourced community. Since the awarding of the 2010
World Cup Soccer Tournament to South Africa, the construction of sporting
facilities and concomitant hospitality industry infrastructure has become a
special priority.

Our focus as a sector is to build a requisite capacity to expedite the
delivery of the above using sound business principles to ensure that we do not
compromise on quality.

The effort will require a major reorganisation of the construction industry.
The process to realign the construction industry behind the reconstruction and
development goals of the nation began in earnest with the White Paper in the
late 1990's to "create an enabling environment for reconstruction, growth and
development in the construction industry." Major milestones have been achieved
and significant institutions put in place to drive the industry's
transformation and development agenda. The Construction Industry Development
Board and the Council for the Built Environment (CIDB) are classical
examples.

As part of its delivery trail the CIDB is expected to deliver on the
following objectives, among others:

* to promote the contribution of the construction industry in meeting
national construction demand while advancing national, social, and economic
development objectives and improved value to clients
* to improve industry stability, performance, efficiency, effectiveness and
public sector delivery management.

The growth and development of the emerging sector was also specifically
highlighted in the CIDB legislation. Challenges notwithstanding, the recent
rollout of registers for contractors and projects is an important
intervention.

As a department, we believe that the registers bring with them benefits for
both contractors and clients, not least of which is risk management. However,
the prevalence of the registers does not relieve clients of the responsibility
to continuously seek strategic interventions to ensure the accelerated growth
of emerging contractors into big time contractors. The Public Works Contractor
Incubator Programme is a fitting example.

As a Department we learnt hard lessons through experimenting with earlier
versions of Contractor Incubation. This should not however, be the reason to be
deterred. If anything, the 1998/99 Strategic Project Initiative of the
department taught us a lesson about the dangers of "over-feeding" where instead
of fattening the gold fish, many were killed. As it turned out, many of our
emerging sector was awarded projects way out of their capability and the
results were artificial joint ventures characterised by fronting, project
delivery delays, liquidations, contractor and client dissatisfactions, which
led to strained relationships.

Our registers should avoid this repeat and despite these harsh experiences,
others proved to be resilient and many a project was competitively delivered by
these small contractors. The late Minister of Public Works went to inspect a
R24 million project undertaken under the Strategic Project Initiative by a
small contractor here in the Eastern Cape and the results were awe-inspiring.
This project was not only magnificent to behold but despite earlier snags
caused by lack of access to finance, the contractor managed to finish the
project ahead of schedule. This is the potential we hope to build upon with our
Contractor Incubator Programme.

Such success stories tell us that concepts such as the registers need to be
read and understood in conjunction with the transformation language found in
the Transformation Charter. Among others, the provisions of the Charter seek to
strengthen the weak without weakening the strong. Therefore, there is a room
for joint-ventures and other strategic collaborations that will ensure that the
sector and the country achieve goals of transformation through exercise of
ownership, control and employment equity that is reflective of the society and
its demographics.

Central to the improved capacity of the industry to deliver, is the question
of skills. For the emerging contractors, the flair for technical skills needs
to be matched by equal flair for business management skills including
budgeting, business planning, cash-flow management, financial management and
bookkeeping. The cardinal rule of business is survival, growth is secondary and
many of our emerging contractors would be well advised to avoid pitfalls
associated with trying to grow too big too soon, thereby exposing themselves to
any fluctuations in the industry, no matter how minor.

Financial institutions should be accentuating their role in this area,
ensuring that the number of ventures that die prematurely are kept to the
minimum. The next two days are imperative. Let us discuss and debate issues
openly and frankly, always showing willingness to acknowledge our deficiencies.
From Government's side, much effort will be made to create an environment which
will render any suggestions or recommendations valuable as we forge ahead. The
challenges of service delivery cannot be camouflaged, wished away or denied.
True leadership dictates of us to own up, recommit and continue to seek best
solutions to our problems. Again I wish you a successful conference.

Thank you.

Issued by: Department of Public Works
27 September 2006
Source: Department of Public Works (http://www.publicworks.gov.za)