Civil engineering body expects election hiatus, works to mend competition fences

5th February 2014

By: Irma Venter

Creamer Media Senior Deputy Editor

  

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Government’s two infrastructure priorities for the year will be the Medupi and Kusile coal-fired power stations, says South African Federation of Civil Engineering Contractors (Safcec) president Norman Milne.

“The deadline is for Medupi to deliver power from the first unit by the end of 2014 and South Africa desperately needs the power station to come on line.”

The forthcoming national elections are, however, likely to delay other large infrastructure developments in 2014.

Milne says Safcec normally sees a hiatus in infrastructure spend from government before and after elections, and “we do not see this year being any different”.

Outgoing politicians and civil servants are reluctant to take long-term decisions, as policies may change. New Cabinet Ministers and directors-general, likely to be appointed after the elections, face a learning curve in their new positions, which further delays big infrastructure decisions.

“We hope to see a couple of government’s 18 strategic infrastructure projects develop further in 2014, creating some turnover for the industry,” notes Milne. “As you know, the civil engineering sector is largely dependent on government for its workload.”

He says Transnet is likely to put some large contracts out to tender as part of its ongoing capital expansion programme. The parastatal is scheduled to meet with industry to see how the local civil engineering sector can best deliver on its needs.

Milne says there are lessons to be learnt from the much delayed, over-budget, problem-fraught Medupi and Kusile projects.

“The more time you spend planning the project upfront, the more defined the scope, and the more detailed the drawings, the better the chance of delivering the project on time and within budget.

“Perhaps this is also in Transnet’s thinking. Also, industry can definitely refine its planning and preparation if it better understands the project pipeline.”

Milne, however, defends the power station projects, noting that the skills to build large coal-fired power stations have all but disappeared within Eskom and local contractors, as it has been decades since South Africa built a new coal power station.

“We basically had to start the industry from scratch.”

In his outlook for the year, Milne is not optimistic that the local mining industry will contribute significantly to the 2014 civil engineering order book.

“They have their own problems and labour is not making it easy.”

Africa does hold some opportunities, especially the oil and gas sector in East Africa.

In South Africa the first two rounds of renewable-energy projects have been a “great success”, and more rounds are on their way, adds Milne.

However, he cautions, if there is no work forthcoming after Medupi and Kusile, the local civil engineering sector will again contract as was the case when work on the 2010 FIFA World Cup was concluded.

Employment in the sector dropped from 196 000 people in 2008, to 101 000 in 2011, recuperating slightly to 105 000 in 2013.

All these figures exclude subcontractors.

Milne expects turnover for Safcec members (including their subcontractors) to increase to around R45-billion in 2013, up from R40-billion in 2012.

“If you look at cost escalations, however, this is only 1% growth.”

COMPETITION COMMISSION FALLOUT
The Competition Commission in 2013 imposed R1.46-billion in penalties on 15 companies in the construction industry for collusive tendering related to projects concluded between 2006 and 2011.

This has soured relationships between the industry and government, as well as emerging contractors.

“Clearly there are some major bridges to be rebuilt,” concedes Milne.

“We are talking to government on different levels to achieve this.”

Milne adds that it has become apparent that the civil engineering sector “has a fair way to go” before its demographics are representative of South Africa’s population.

“I think one way we can start building bridges is to really understand and address government’s goals of employment creation, equality and transformation. We can give emerging contractors a far bigger role in contracts, and not just work as subcontractors. We need to train and treat these contractors as partners.”

Safcec already runs an enterprise development programme where it assesses emerging contractors in terms of the skills and competencies they require to grow. These contractors then partner with established contractors, who ensure the skills transfer, with a third party verifying the results.

“What we hope to do is to roll out a similar programme,” says Milne. “We are busy putting up a portal where emerging and established contractors can find each other to partner on projects.” 

Safcec has 418 members, of which 207 are emerging contractors.

Milne emphasises that Safcec “is clean”.

“We are conscious of what happened in the industry in the past. We can certainly see how an employer’s body could be construed as a place for possible collusion. This is why we adhere to a code of conduct, ensure we have a written record of every meeting and encourage our members to immediately raise their concerns should they consider the discussion to be anti-competitive.”

Edited by Creamer Media Reporter

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