I am of the view that one of the reasons we are not seeing more SMME’s in the construction industry progress beyond being emerging contractors is due to the current training material not fully equipping them with the right tools to set them up for success. As a Construction Quantity Surveyor I have been employed by several of the larger and more established Civil Engineering Contractors within the South African Construction Industry. I am highly concerned with the current state as it pertains to the development and empowerment of Emerging Civil Engineering Contractors.
My exposure and experience within the industry has been predominantly as a representative for the Main Contractor. I have found that nearly without exception most awarded contracts have a targeted minimum percentage spend intended to be utilized on historically disadvantaged business entities (BBBEE, SMME and EME). The intended goal of these targeted spends are the addressing and correcting of economic imbalances representing a legacy of the previous political regime of our nation.
These targets are strictly enforced with severe penalties imposed on Main Contractors who fail to achieve the prescribed targets. It must be noted that most entities falling within the qualifying parameters tend to be business entities that a Main Contractor would utilize as either subcontractors or suppliers of bulk materials for any given project. Even with an available database and availability of these entities, many times due to the nature of the work within a construction project these targets are not close to being realistic or achievable.
In this current spend only system there are many loopholes that would allow any savvy Main Contractor to achieve these targets without compromising on either business ethics or integrity, while minimizing risk and exposure. This is purely a product of the desired outcome wanted being a spend percentage on certain entities without any tangible measure in terms of empowerment or development of these aforementioned entities.
In our current environment (target spend and prescribed percentages required) true empowerment of these entities are neglected in pursuit of the targeted spend percentage and a pure focus on achieving these spend targets to avoid penalties. With the focus on a targeted spend instead of empowerment, there is little tangible change to the status quo.
In fact the mortality rate among the majority of these entities is extremely and alarmingly high. Most of these entities in fact fail to exist beyond the initial contract where they had been employed as a subcontractor. This high mortality rate stifles economic and personal growth as the owners of these companies would then either launch a new company within the industry (while hoping for a better outcome this time around), or they will launch another company in another field, or as a last resort would join the workforce of any other company to remain financially afloat.
There are many factors that contribute to and influence this high mortality rate. These range from an incorrect approach by the owners, owners having monetary influence and connections to secure the work, but ultimately lacking in experience and understanding of the environment which they will be operating. This is further influenced by a lack of skills to track, monitor and foresee the progress and state of the project they are involved in.
Another factor contributing to this mortality rate is the fact that no additional personnel has been introduced into the equation to assist and mentor these emerging business entities. While it is indeed a noble quest and desire to want to correct historic imbalances there has been little change in the approaches to ensure the survival of these emerging entities. Contractors, Consulting Engineers and Clients tend to operate with reduced budgets and team sizes in order to ensure their own economic viability and do not have the capacity or resources who can be dedicated to guide, coach and mentor these emerging entities.
There is a grave concern that the current trend of imposing and publicizing target spend values on any project results in an entitlement mentality where selected groups demand their share of the money (stated percentage spend) and threaten to disrupt any work on the project until their demands have been met. There have been documented cases on a number of recent projects where the projects had been held ransom until these demands had been met. This approach boils down to little more than an entitlement mentality and would negate many attempts to empower entities who legitimately want to grow and be able to properly contribute to the growth of our wonderful nation.
It would take a concerted effort by all role players to ensure that effective empowerment does occur and that entities are allowed to develop and grow. Ultimately a total paradigm shift would be required to minimize the current mortality rate among these emerging entities and also to ensure that they will continue to experience sustainable growth while contributing to the growth of our wonderful nation.
In my opinion the aim of any empowerment model should be to enable any emerging business entity (or even an established entity) to grow by achieving steady growth. With this sustained growth they will be actively contributing to the financial health of our great nation. Contributing to our nation entails amongst others the ability to provide sustained employment, supporting local industries in procurement of materials and equipment, and paying of the respective taxes.
One factor that is required in obtaining these goals is to obtain an empowerment model that invests in these entities and provides them with skills and tools specific for them to track and monitor their projects within the context of their environment. There is no more powerful investment in their future than provision of mentoring.
All clients allocate substantial sums of money toward a training budget per project. A personal observation is that there is a lot of coalface skills being presented (skills specific to the direct work related to the finished product) and then training on basic business and management principles. These “business skills” tend to be lectured to the participants and would in most occasions be representative of a condensed content from curriculums at various institutes of further education.
It is time that the owners and managers of these business entities are empowered with a skill set that is readily applicable in the environment which are operate in. They need to be equipped with practical skills that will immediately assist them in managing and maintaining their projects and companies. The type of practical skills that would assist them include proper methods of tendering, preparation of budgets, resource allocation, financial and project forecasting, progress tracking, etc.
These are vital skills that will make an immediate impact on the ability to determine the state of a project and allow remedial measures where required.
Also these are skills that will assist in the compilation of realistic tender prices and not simply accepting an allowable value that is often a reduced rate previously calculated by a Main Contractor.
When these skills are applied properly, they will assist in the management of the business, and greatly assist in increasing the survival rates of these companies.
The transfer and presentation of these skills need not be limited to construction projects that have already commenced. It could be and should be made available to communities that fall within a geographic area of an intended project prior to the project going out for tender. This will allow local entities to receive the required skills prior to them being approached by Main Contractors to submit their prices for work. Also it ensures that a pool of available local entities are already on a database prior to the tender process. Mentoring during the process of these entities preparing their tender submissions will ensure that their pricing is done on correct and established guidelines, rather than a local subcontractor simply accepting the (often reduced) allowable presented to him by a tendering contractor.
Anybody and everybody who has been exposed to the Construction Industry is well aware that it is a demanding environment to work in and there is no room to hide. Small mistakes can lead to big losses, and these losses contribute to the mortality rate among many emerging companies as well as taking a toll on the established and long standing larger companies. If the mortality rate is allowed to continue as is, then the cycle will not change. Companies will start up, companies will close down. People will be employed, people will be retrenched.
We are all aware that time and money determines the success of any project. Whether it is a mega project, or a small project this fact will always stand. We need to empower our emerging Civil Engineering Contractors with practical skills that they can utilize in order to ensure they remain sustainable and continue to contribute to the economic health of South Africa.
What I have listed above is achievable. The requirements are twofold. Firstly empower the entities with the tools. Secondly spend time with them showing them how best to use the tools.
Historically our training methods covered the first part in simply giving these entities the tools. I am not convinced that our emerging entities being equipped with the correct tools of the environment (skills and knowledge specific to the construction environment). Have we been providing the correct tools, or simply something that fills the generic role of a tool to meet a targeted training budget?
Historically we have definitely fallen short in not showing them how to effectively use the tools through mentoring. Our sink or swim approach and methods have resulted in more corpses than swimmers.
Many of our historically biggest and until recently most successful Civil Engineering Contractors started with little more than a dream, a few workers, and a bakkie or TLB. How much more successful can our emerging Civil Engineering Contractors be with the correctly applicable training being provided along with the incorporation of hands on guidance and mentoring?
I for one am making myself available to not only train and equip, but to walk with these entities until they are flying.
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