The construction industry is grappling with competition from China and other foreign contractors and is working on plans to “ring-fence South African companies” as a buffer from international competition.
Gregory Mofokeng, vice-chairman of the South African Construction Alliance (Casa) and vice-chairman of the Black Business Council, said the construction industry was concerned about international competition that had already begun in South Africa.
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“The Chinese are here. You saw it in Sanral. [South African National Roads Agency] Bidding at the end of last year. There was a huge uproar,” said Mr Mofokeng, who spoke at a construction conference organized by MDA Construction Lawyers last week.
“You see them everywhere, whether you’re bidding with Eskom or bidding with Sanral.
“We have to find the right policy response to China and make sure we ring-fence for South African businesses and work on plans to counter this international competition that is already here. “I'm happy to say that I am,” he said.
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His reference to Sanral's bid relates to the Chinese company winning the majority of four contracts worth R17.4 billion in November 2022 that were canceled by Sanral earlier that year.
Investor confidence 'could hit us like a tsunami'
Elsie Snyman, founder and CEO of construction market information company Industry Insight, also touched on the threat to the domestic construction industry from foreign competition.
Snyman said Industry Insight believes that once a framework for implementing privatization at a broad level is established, investor confidence will be restored and “could hit us like a tsunami. '' he has always insisted.
He cited the success of renewable energy projects and said that privatization is beginning to take place in the transport sector, as well as power grid capacity.
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Mr Snyman said South Africa was a great country for investment, but there were questions about how much of that investment was “sacrificed for foreign capital”.
“We don't know. That's probably the biggest threat with privatization. We need foreign participation in terms of investors, ownership and, of course, contractors,” she said.
Mr Mofokeng said he was cautiously excited as Casa members agreed that there was a tsunami of jobs in the industry.
He said a number of large-scale projects from major state-owned enterprises (SOEs) such as Rand Water, the Transcaledon Tunnel Authority, Eskom and Sanral were underway, but the industry was struggling with capacity issues for non-SOE projects. He said he was concerned. .
Concerns about local government infrastructure spending
Ms Snyman said one of her biggest concerns about the recently tabled 2024 budget is that a larger portion of government infrastructure spending is allocated to local governments, and that a larger portion of the government's infrastructure spending is allocated to local governments. He said the allocation for infrastructure spending is expected to increase from 40% in 2010. By 2026/27 she will be 50%.
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He said problems in management, performance and project delivery in local governments are known, with a case study by the Auditor General of 137 projects showing that 70% were delayed and more than 50% had cost overruns. was shown.
“Are local governments prepared to deal with more money being moved through local government when they can’t even spend the budget they have?
“The Treasury only receives [the money] return. Who would win in that scenario? Treasury, because they just take the money back.
“We don’t know where that money will then be allocated, but services will not be delivered and municipalities will be left with the same problem.
“We have to put capacity into local government and support local government. We can't just throw money at institutions that aren't running efficiently,” she said.
Mr Mofokeng hopes that councils such as the SA Project and Construction Management Professions Council (SACPCMP) and the Engineering Council of South Africa (Ecsa) will eventually take action on local government capacity, adding that the construction industry suggested the need to promote professionalism, especially in local government. .
He said there was already good work being done to tell local government managers that if they didn't get the minimum qualifications, “you're out” and the same thing was being done for chief financial officers. He also said that this is happening.
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Mr Mofokeng expressed concern about the production capacity the construction industry has lost over the past decade and the vulnerability of its ability to execute all pending projects.
“We look forward to the industry working together to ensure that it rebuilds its production capacity in the shortest possible time to carry out future projects,” he said.
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“The administrator is running an infrastructure project”
South African Institute of Quantity Surveyors president Newton Baloi said it was a liability for managers to run infrastructure projects while infrastructure professionals were excluded.
“This is an endemic problem in this country. We need professional action. That's the only way we can solve it,” he said.
Baloi said the fact that a large portion of infrastructure spending allocations goes to local governments is “a crisis.”
“We definitely need to act proactively. Put structures in place to monitor the pipeline and put pressure on the system to hold it accountable.
“We can only regulate what is registered.
“The government is appointing people who are not registered, so we need to work with the police to prosecute people who are doing work that is certified as professional but outside of that.” Baloi said.
Dr Alison Anthony, a researcher in public procurement law, says infrastructure is the foundation of any country's economy as it has a huge impact on efficiency and service delivery, but one of the big challenges is that legal rules are not absolute. He said it was too much.
Mr Anthony said Parliament and the Treasury were very serious about enacting the new Public Procurement Bill and that the definition of procurement in the 2023 version of the Bill included construction, which automatically extended the entire law to construction procurement. He said that it would also apply.
He emphasized that one of the construction procurement issues from a legal perspective that needs to be addressed urgently is that “too many cooks ruin the soup.”
“So the National Treasury has a very large involvement, which in my view is not really justified, because CIDB is legally [Construction Industry Development Board] I am a construction procurement manager… [through] “The level of teaching notes, practice notes etc. issued by the National Treasury is problematic,” she said.
business forum
Mr Mofokeng criticized the need for realism on how communities are involved in projects and the issue of local business forums “undermining development and capacity building”.
He said if contractors trained people in Soweto, they could not take these trained people to another project in Tembisa, meaning training would be lost to the industry.
“Until we nip that in the bud and find a solution, we will just keep throwing money away… because you can't invest R1 million in Soweto and you can't take that resource to Tembisa. We will have to make new investments when we get to Tembisa,” he said.
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Mr Mofokeng said that although large sums of money were being spent on training, CIDB stopped “counting” registered subscribers once the number of subscribers exceeded 130,000.
“There are too many players anyway. It doesn't matter what you do, you're not going to touch everyone,” he said.
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