The Western Cape Property Development Forum (WCPDF) says that, while the “robust infrastructure pipeline” is supposed to set South Africa’s economy back on track and kickstart the flailing property development and construction industries, it remains to be seen if the culture of change around procurement will become a reality and if projects will go to tender.
The forum’s statement follows after President Cyril Ramaphosa's address at an Infrastructure South Africa roundtable earlier this month.
Public Works and Infrastructure Minister Patricia De Lille had previously announced 276 projects aimed at fast-tracking a pipeline of projects to set South Africa on a growth trajectory.
WCPDF had delivered comment on behalf of the industry for the Draft Public Procurement Bill when the National Treasury published the Bill for public comment in June.
While the organisation believes the Bill is a valiant attempt at ensuring that procurement becomes more transparent and uniform across the country, it remains to be seen if the culture of change proposed in the Bill will filter down to municipal level – where the biggest problems lie.
WCPDF chairperson Deon van Zyl believes there is a great deal of expectation on this very pipeline to help resurrect the private sector within the property development and construction industry.
“Ironically, it is to a large extent the way in which the public sector had tied up our industry in red tape and legislation for years that had led to the critical situation we are in now. Especially when it comes to procurement, which includes tendering, as well as planning and building approval processes.”
Civil engineering and construction company Civils 2000 COO Chris Botha agrees. The company has been in operation since 1992 in both construction as well as plant and machinery hire to the local construction sector.
With tendering for projects in both the civil and private space being a very resource-intensive process at the best of times in terms of estimating and pricing, he notes that most contractors hope to have a funnel of work and to convert at least 10% of projects tendered into awarded projects.
However, a huge frustration in terms of government projects is the withdrawal of tenders, resulting in no awards being made at all, and Botha says this is something that he had seen increase substantially over the past 12 to 18 months.
Van Zyl comments that, with government’s own inability to get its projects to market, the construction industry is desperate for private sector projects to come to the market.
“Yet applications by the private sector are also severely hindered by government red tape and ineffective bureaucracies, with statutory approvals required just being too slow for projects to remain economically viable.
“This means that private projects stagnate due to rising costs even before a shovel hits the ground, and thousands of planned jobs for construction workers in the most vulnerable of communities never materialise,” Van Zyl explains.
“So the contracting industry is being penalised on both public and private sector projects. Government is not spending money on its projects and is also actively delaying the spending by private sector clients on their own projects due to delays in processing applications,” adds Van Zyl.
On the hopes of achieving stability in the industry through the President’s proposed Sustainable Infrastructure Development Symposium projects, Botha notes that any information that comes to the market and promises work is obviously good news for the construction industry.
However, with the pain that the industry has had with the closure of many of the larger construction companies, we now need to see what the actual timelines will be of those promises unfolding.
“After all, we have had the National Development Plan that has been around since 2012 and how much of that have we seen?” Botha questions.
While Civils 2000 is in a position to enjoy a 50:50 balance between work for the public versus the private sector, Botha admits that, on the public sector side, it is extremely competitive and has become a very costly process just to tender.
He cites the example of a recent large public sector project the company tendered for in East London and explains that in terms of manpower hours and out-of-pocket expenses, the tender process alone cost the company about R400 000.
However, at the end of the day, the local authority decided to go with a lower-priced win, which saw the technical aspects of the project slip substantially – a common occurrence among numerous municipalities.
“That is extremely frustrating because you hope most of your clients have the technical interests of a project at heart when they consider what they are buying. But, unfortunately, in the Western Cape, at municipality and sometimes even at provincial level, there seem to be different motivators to awarding projects,” Botha states.
Van Zyl believes that trying to do work for government is becoming too costly for the private property industry and adds that the process is too risky, often leading to expenditure on the part of the tenderer that will never be recouped.
“The very process of government trying to limit its own exposure to frivolous and wasteful expenditure, is causing the private sector to incur frivolous and wasteful expenditure on its part.”
These are among the many concerns that the WCPDF has also noted in its response to the Procurement Bill, says Van Zyl, explaining that procurement procedures in the past have also been unable to distinguish between the procurement of day-to-day commodities versus the procurement of fixed capital investment assets and associated services.
“It may be fair to procure the lowest prices on consumables, but to consider only the lowest prices on tenders aimed at building fixed capital assets, which are meant to serve the country for decades to come, should carry a strong weighting towards being ‘fit for purpose’ rather than just about price.
“If this is not acknowledged by the new Bill, then the government will continue to be guilty of not only wasting taxpayers’ money, but even putting the wellbeing of citizens at risk when the cheapest builds result in unsound structures. Something we are now seeing increasingly, particularly in the affordable housing market,” Van Zyl says.