The construction industry, which has been considered by some as having a poor record of transformation and plagued by fronting, is the first sector to have its charter become law.

The Construction Industry Charter, which focuses on sustainable transformation through the seven elements of ownership: management control, employment equity, enterprise and skills development, corporate social development and procurement, was gazetted on June 5.

“This sector-specific charter is the culmination of five years of negotiations of all the sector bodies within our industry,” says Consulting Engineers South Africa (Cesa) president Felix Fongoqa.

Cesa reports that the past five years of negotiations have been good for the industry. “It has allowed all the different sectors within the construction industry to collaborate as a unified industry to draw up a road map of where the industry should be going. It also created a common understanding and Cesa hopes that the industry can create an ongoing vehicle to act as a caucus to respond to the needs of the Charter Council and debate industry issues,” says Cesa CEO Graham Pirie.

Fongoqa adds that the construction industry has made significant progress in terms of some of the targets that have been set by the charter. “Our management information survey indicates that we are on track towards meeting some of the targets.

“We have an average of about 25% black ownership within member firms and on average 40% black staff across the industry. We have not tracked procurement and the other elements of the charter as an organisation, so it is difficult to establish how industry is doing on those elements,” says Fongoqa.

However, he adds that the built environment sector has placed significant emphasis on the skills development element. “We are a knowledge-based industry and it is imperative that we grow the profession with home-grown talent. We have one of the lowest engineer-to-population ratios in the world,” says Pirie.

Fongoqa adds that last year the construction industry invested over R100-million on training, excluding Contruction Engineering Training Authority contributions. This was over and above what the industry paid for as part of its skills development levy. This demonstrates the industry’s commitment to ensuring that it has the right skills at the right level.

The charter’s seven elements are much broader than the previously narrow-based black economic empowerment (BEE), which only dealt with ownership and this, in Cesa’s view, will tackle the issue of fronting in the industry. “The charter is quite prescriptive in terms of how transformation is to be carried out. Companies will now have seven areas in which to transform their business, which will effectively reduce the possibility of fronting,” says Fongoqa.

Pirie adds that the Construction Industry Development Board is currently constructing a register of professional service pro- viders. This will also eliminate the possibility of fronting. “When a client entity appoints a professional, it will be required to appoint someone from the register. All companies registered will automatically have BEE certification,” says Pirie. The register is expected to come into effect in early 2010.

The 14 organisations, including labour and government, which drew up the charter, are currently finalising the constitution for the Charter Council, which will track the progress made in terms of the sector code.

“The sector code is a living document that will respond to industry’s needs and progress over time. The council will track progress made on the four-year and seven-year targets and, if necessary, modify the targets of the score card,” says Pirie.

Another important function of the Charter Council will be the development of a corporate social investment strategy that will determine which projects or initiatives could be supported by the construction industry as a collective, reports Fongoqa.

Pirie says that the challenge ahead is how the council will be funded. “The construction industry is currently in discussions with government as to how the funding process should occur. The council needs to be self-sustainable and self-funded in the long term and we need to determine how that will take place,” he adds.

Fongoqa adds that the procurement element of the code is also a challenge, given that it will be difficult to implement, as a company’s suppliers’ accreditation scores will affect its own accreditation scores.

“With the charter now gazetted, all sector employees are now required to use the charter as a measurement of the BEE component in procurement but harmonisation is still required between the Broad-Based Black Economic-Empowerment Act and the Preferential Procurement Act,” says Pirie – this amendment is expected shortly from the National Treasury. He adds that this is advantageous as it provides predictability, a greater sense of certainty and uniformity in the industry.

Pirie explains that getting clients to understand this new legislation and that it must be implemented as part of the procurement process will also be a challenge. As a result, the construction industry will be shortly embarking on a roadshow to educate its members on the charter.

“Despite these and other challenges facing the implementation of the scorecard, our sector has indicated that it is ready to abide by the codes of the charter for the good of the industry,” concludes Fongoqa.