T Didiza: Construction Industry Stakeholder Forum

1 June 2007

Chairperson, Pepi Silinga
Deputy Minister, Ntopile Kganyago
MECs
Members of the Construction Industry Development Board (CIDB) and its
executive
Leaders of the construction industry and organised labour
Director-General and heads of departments
Industry stakeholders and distinguished guests

1. Introduction

Today's meeting brings together significant formations of the South African
construction industry together with public and private sector stakeholders. I
thank the CIDB and its Chief Executive Officer (CEO), Mr Ronnie Khoza, for
convening such a widely representative forum.

We are assembled together as employers and labour, as established and
emerging sectors, as constructors and materials suppliers, as clients and
financiers, as contractors and subcontractors, as designers, professionals and
teachers. I thank all of you for taking time out of your busy schedules to
contribute to the development of this industry that is centrally positioned in
the Accelerated and Shared Growth Initiative for South Africa (AsgiSA).

2. Context of our challenge

To achieve economic growth of 6% by 2014 Gross Fixed Capital Formation
(GFCF) must rise from 16% in 2004 to 25% of gross domestic product (GDP). This
means that construction investment must rise to about 8% of GDP. Government has
therefore reaffirmed its commitment to a massive infrastructure programme to
address economic growth, social development and transformation of the built
environment. With GFCF currently at 18,4% and construction at about 6%, we are
on track to achieving these objectives.

With growth rates in construction spend of around 10% per annum, the highest
that it has been in the last 30 years, construction spend is in fact growing at
a higher rate than GDP.

However, there are many challenges that need to be tackled in a range of
public and private sector partnerships to further unlock infrastructure
bottlenecks, to create capacity and skills, to promote the small medium
enterprise (SME) business sector, broad-based black economic empowerment
(BBBEE), improved employment conditions and the role of women in the delivery
process.

When we speak of shared growth, these are some of the central challenges
that should inform the deliberations of this forum meeting.

3. Progress and challenges

Ladies and gentlemen, government remains unwavering in its commitment to
address these challenges and to consolidate an enabling environment for
industry growth and transformation. Together with the CIDB, my Department has
established a regulatory platform and a range of interventions and partnerships
to address delivery constraints.

Under the impact of streamlined procurement and government's Infrastructure
Delivery Improvement Programme (IDIP), we have collectively improved provincial
infrastructure spend by 29% between 2005 and 2006. My Department will continue
to partner with the National Treasury, the Development Bank of Southern Africa
(DBSA) and the CIDB in the further roll out of this programme to build the
capacity, skills and management systems at provincial level.

Our strategic interventions further include establishment of the register of
contractors and register of projects together with streamlined procurement
regulation. In the roll out of these interventions, over 2 000 officials and
built environment professionals were trained over the last year.

We are continuing to expand the expert support provided to organs of State,
particularly municipalities in the procurement and delivery of critical
infrastructure including the 2010 World Cup.

Establishment of the national register of contractors has not been a smooth
and easy process, but we have 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. Over 30 000 contractors are now
registered in all provinces and receive cellphone and e-mail notification of
all public sector tenders.

It is significant that over 1 500 contractors have improved their grading
status and 85% of these are black owned small and medium sized enterprises.
This is because these contractors are now tendering in a regulated and enabling
environment and are not competing with "fly by night" players, whose failure
rate has undermined delivery and some of our development objectives such as
quality, safety and accessible finance for real industry players.

Now that it is established, the register of contractors forms a valuable
development instrument because we are now able to identify clearly the capacity
and empowerment gaps across the different classes and grades of contractors
registered. Importantly, this provides the opportunity to target specific
development interventions to address these gaps.

Therefore, we are preparing to launch a National Contractor Development
Programme (NCDP) that will be led in partnership between CIDB, national and
provincial public works departments whom I am pleased to note are well
represented here today. Our focus is on sustainable enterprises. Sustainable
enterprises perform better. They are better employers and contribute to skills
development.

This programme will build on the stakeholder commitments of the Construction
Charter and other sector Charters. I therefore call on all stakeholders
present, particularly the financial services sector and the materials sector to
explore their potential to contribute concretely and to give impetus to this
national initiative. To facilitate programme implementation, public works and
the CIDB are establishing construction contact centres at provincial level. The
first of these centres will commence operation next month in KwaZulu-Natal and
the Western Cape, followed by Gauteng and the Eastern Cape.

One of the objectives of these centres is to provide an improved and
accessible registration service for contractors around the country. The CIDB
has experienced challenges relating to contractor registration given the
unprecedented surge in contractor applications over the past 18 months. In
order to streamline processes relating to contractor registration, I will be
promulgating amendments to the construction regulations later in the year to
help ease this situation.

Ladies and gentlemen, we cannot speak of contractor development without
addressing the issue of industry skills. Without the necessary skills at all
levels, professional and artisan, our industry will not be able to meet the
growing demand. We must therefore ask ourselves at this forum, whether we as
stakeholders are doing enough to unlock the bottlenecks in the skills
pipeline.

In this regard, I am aware that there are several positive initiatives by
the private sector the Joint Initiative on Priority Skills Acquisition (Jipsa)
and the CIDB. But the industry as a whole is still not collectively engaged
behind this critical challenge. With respect to artisan and supervisory skills,
the industry as a whole is not training.

In this regard, I wish to assure you, that public works, at national and
provincial level is committed to support concrete action emanating from
stakeholders. Through the National Youth Service (NYS) we have committed to
enrolling, training and developing 10 000 young people in built environment
skills. We would like to integrate this initiative with the commitments of
others. Through the Council for the Built Environment my Department has also
initiated a process to address professional skills.

I am pleased that a special presentation is on today's agenda that I hope
will create the focus necessary for concerted action by all stakeholders. There
is an urgent need for us to work together to understand the skills status,
existing training initiatives and absorption capacity.

Skills are critical to industry performance issues such as quality, safety
and health. In the context of contractor development, performance improvement
will be a key focus for my Department and the CIDB over the next few years.
Linked to this focus is the need to ramp up issues of compliance.

4. CIDB

Ladies and gentlemen, the three-year term of office of the current CIDB is
drawing to an end. I will soon be calling for nominations in terms of the
legislation. We will of course seek to ensure continuity so that the current
pace and direction of industry development is maintained. I urge all
stakeholders to take the nomination process seriously and to nominate people of
a high calibre so that we achieve the level of expertise and commitment
demonstrated by the current leadership.

The CIDB has accomplished much over the past five years in implementing its
legislated mandate. It has put in place the building blocks for greater levels
of sustainability and is expanding its developmental focus. I have confidence
that the CIDB will continue to enhance its role and to impact meaningfully on
industry growth, delivery and empowerment.

5. Stakeholders and conclusion

However, the CIDB cannot fulfil its role in isolation and can only achieve
impact in partnership with stakeholders. This Stakeholder Forum is one example
of partnership and we look forward to your contribution and ongoing
commitment.

Today's forum meeting enables us to take full ownership of the challenges
facing industry growth and transformation. All of us have the opportunity to
exchange our experiences and to develop a shared perspective.

It is important that we use this opportunity responsibly to identify the
possible action that each stakeholder can take to contribute to the overall
strategy for industry development.

You all have a pivotal role to play in shaping the industry to the benefit
of the South African people, who are the ultimate stakeholders in our
development agenda.

The industry has the full support of government and we will continue to
value its contribution to the development of our people and our democracy.

I thank you!

Issued by: Department of Public Works
1 June 2007