The Construction Industry Development Board (CIDB) would, within the next six weeks, form a task team to develop frameworks for encouraging local construction companies to enter Africa’s developing markets and to seek further growth through the possible establishment of an export council.

With Africa facing a huge infrastructure backlog that required about $90-billion a year to reverse, there were endless opportunities, a new CIDB survey, titled ‘Export of South Africa Contract Services’ found.

It noted that the continuing growth and prosperity of the continent would swell the demand for infrastructure and that South African contractors were well positioned to contribute to the development of such infrastructure.

The survey also determined that South African contractors had notable competitive advantages in providing basic infrastructure on the continent and that expanding into international and cross-border construction markets was an essential growth strategy for many South African construction companies.

Speaking at the launch of the report in Midrand, CIDB construction industry performance project manager Pumelele Qongqo noted that local companies could enter international markets through a high degree of control, either wholly-owned or acquisition-based; through a medium degree of cost and control, such as joint ventures; or a low cost of control strategy, including franchise arrangements.

The survey further noted that market entry strategies used, or being considered, by South African contractors in assessing cross-border work opportunities were dependent on whether the entry was going to be on an ad hoc basis to undertake one project or a sustainable entry into the country.

The survey revealed a range of market entry strategies including competitive tendering and traditional contract procurement methods, which required somewhat lower resources than other entry strategies; tendering invitations; unsolicited proposals; and public–private partnerships (PPPs) and concessions.

Several respondents were exploring this method of procurement wherein they prepared the designs and provided, or facilitated, the finance and, by so doing, negotiated with the client body or government. Some respondents pointed out that this is where Chinese construction companies had an advantage because, “the Chinese companies come with the government’s backing, money and mandates”.

However, facilitating PPPs and concessions required significant resources and could only be undertaken by the larger contractors.

RECOMMENDATIONS
A key recommendation arising from the study was that the CIDB should assist the Built Environment Professions Export Council (Bepec), which was a Department of Trade and Industry- (DTI-) recognised export council, in broadening its mandate and membership to include the contracting sector – drawing from established industry associations such as the Black Business Council in the Built Environment, Master Builders South Africa and South African Forum of Civil Engineering Contractors.

It further recommended that the CIDB support Bepec through the establishment of a CIDB information centre on cross-border opportunities, including providing access to information, and high-level country reports; provide export business advisory and/or capability building services to emerging contractors, where possible in partnership with established contractors; and participate in Bepec business delegations and trade shows, to build and maintain its capacity in export promotion to the benefit of the construction industry.

It suggested that specific consideration be given to capacity building services to emerging contractors that could provide access to subsidised services to improve the skills needed for cross-border activities.

In addition, the study recommended that the CIDB focus specifically on facilitating access for emerging contractors in cross-border activities, by providing advice and by supporting the DTI in its goal of enhancing black participation in its export marketing and investment assistance scheme and its capital projects feasibility programme.

DOING BUSINESS IN AFRICA
CIDB construction industry performance programme manager Dr Rodney Milford highlighted that the industry body was not there to convey a message on how to do business in Africa, as most companies were far better equipped, but it was aiming to create context from the report.

CIDB deputy chairperson Chris Jiyane added, however, that there were some guidelines to doing business on the continent. He said that local companies needed to “lose their fears and superiority complex”, needed to partner with governments and “not connected crooks” and that companies should not budget for bribes, as this “is not sustainable”.

He further stated that companies also needed to think regional and speak the language when venturing into business on the continent.

Qongqo stressed that this would not be without challenges, stating that there were substantial obstacles and constraints to entering these markets. These included unstable governments, as was emphasised by the recent coup in Burundi, red tape, payment risks, threats of terrorism and policy instability.