Transformation in the Construction Industry in South Africa
In South Africa, the term transformation is primarily viewed as the catalyst to address the country’s socio-economic problems and history of exclusion. Not only is it a way to help build a more equitable South Africa, but it’s essential from both a social and business growth perspective.
However, the construction industry in South Africa has been relatively slow in the uptake of transformation. We’ll discuss the state of transformation in the construction industry in South Africa, along with B-BBEE’s role in transformation and the fundamental building blocks of sustainable transformation in the construction industry.
The state of transformation in the construction industry in South Africa
Growth and inclusion for small to medium-sized contractors, women contractors, black contractors and other underprivileged groups have been identified as key to driving transformation within the construction industry.
CIDB’s Construction Monitor – Transformation 2019 presents an assessment of the state of transformation of the construction industry, focusing on the consulting engineering (or professional service providers) and contracting sectors.
Their transformation target is for 90% or more of the capacity of the construction industry to be 90% or more black-owned and deliver 90% or more of construction contracts. A few of their latest findings include:
- Black-owned Qualifying Small Enterprises (QSEs) has increased from around 30% to 36%
- Black-owned exempted Micro Enterprises (EMEs) has increased slightly from 50% to 51%
- Black-owned large enterprises have decreased from 20% to 13%
The concern here is that, while black ownership representation has increased overall, it has not increased significantly. There have also been no significant increases in women-ownership within the South African construction industry.
How B-BBEE is pushing transformation forward
B-BBEE, South Africa’s legislative and regulatory framework, intended to ensure economic empowerment, fuels transformation in the South African construction industry.
The B-BBEE Commission is working towards “An inclusive economy for all, together.” This promise is achieved by:
- Promoting equal participation and equitable opportunities for all South Africans.
- Encouraging the growth of the country’s economy through internal production and distribution of goods locally and internationally.
- Forging and forming relations across industries, including working together across the private sector, government, labour and civil societies—leaving no one behind as we strive for an inclusive economy.
While B-BBEE policies and frameworks ensure that companies within the construction industry comply, mere “box-ticking” of these requirements is not what will produce an inclusive, thriving economy with sustainable empowerment.
Real transformation requires us to think in a completely different way. Rather than looking at transformation as an event or series of requirements to follow, it should be viewed as a lengthy change process. And that process of change needs a strong foundation.
Five fundamental building blocks of sustainable transformation in the construction industry
According to the National Treasury, economic transformation, inclusive growth, and competitiveness in the construction industry can’t be achieved without the below five fundamental building blocks:
1. Modernising network industries
Modernising network industries such as transport, energy, water, and communications can promote competitiveness and inclusive growth. Since these industries are the backbone of the South African economy, they are key for long-term growth and global competitiveness.
Apart from modernising these industries, other factors that can support transformation include increased regulation, regularly maintained infrastructure, and better managed state-owned companies.
2. Lowering barriers of entry
Lowering entry barriers includes encouraging the growth of smaller firms, the entry of new firms, and an increase in innovation and productivity.
Around 70 to 80% of SMMEs in South Africa fail in the first year, and only about half of those last for the next five years. Increased competition with an increased rivalry among construction companies can assist in generating inclusive growth benefits in the short term and, in turn, promote economic transformation.
3. Prioritising labour-intensive growth
South Africa’s unemployment rate hit a new record high of 34.4% in the second quarter of 2021. One way to tackle the increasing unemployment rate is to promote labour-intensive growth. Along with agriculture, the construction industry is a key labour-intensive industry. This sector offers great scope to support inclusive growth by absorbing the youth─of which the unemployment rate continues to rise.
4. Updating construction policy to promote skill development
The last decade has seen a significant brain drain in South Africa’s construction sector, with hoards of skilled people migrating abroad. Unfortunately, the development of new skills is not keeping up with the loss of skills.
According to Aadil Cajee, head of infrastructure for Standard Bank Group, “the lack of focused and structured infrastructure spend and policy has created little market or appetite to acquire, develop or retain these skills.”
South African policymakers are uniquely positioned to encourage growth in the construction sector by rebuilding skills while also driving transformation by empowering emerging black-owned construction companies.
5. Promoting export competitiveness and harnessing regional growth opportunities
Promoting export competitiveness involves:
- Improving the quality and access to infrastructure.
- Implementing new agreements with growing markets.
- Improving market access requirements.
- Increasing awareness of South African products abroad and improving access to export credit and insurance.
How BopCons is contributing to transformation in the construction industry
At BopCons, we deliver construction projects in both the private and public sectors in South Africa. As a company, we are committed to transformation within the construction industry and do what we can to encourage more equal opportunities.
We strive to empower previously disadvantaged people through our employment practices and the sharing of skills and expertise.
We are a B-BBEE contributor and employ more than 150 people permanently and more on a contract basis. The majority of our black employees own a significant amount of shares in our business via our subsidiary Uphondo Employee Investments.
Many of our previously disadvantaged youth employees started working with us as frontline workers but now hold positions of trust and authority after nurturing and promoting their skills. We ensure to provide career opportunities for women in the construction industry, with key positions on our projects and positions from our head office.
We also actively support the development of local SMMEs on all projects that we work on, along with undergoing stringent vendor screening to ensure that we maximise our procurement from B-BBEE compliant entities, with preference given to Level 1 suppliers. We’ve developed long-standing relationships with wholly black-owned businesses that we have mentored during our many years in business.