Progress with construction industry Empowerment Charter: briefing by Department

Meeting report

PUBLIC WORKS PORTFOLIO COMMITTEE
17 November 2004
PROGRESS WITH CONSTRUCTION INDUSTRY EMPOWERMENT CHARTER: DEPARTMENT BRIEFING

Chairperson: Mr F Bengu (ANC)

Documents handed out:
Department PowerPoint presentation on Construction Industry Charter progress
Appendix A: Learnership applications
EPWP Learnership Register
PowerPoint presentation on the Progress Report on the participation of the SETAs in the EPWP
EPWP Contractor Learnership Programme
Alignment of Department procurement policies to requirement of SCMF (see Appendix)

SUMMARY
The Department of Public Works delivered a presentation on progress with the Construction Industry Charter and transformation in the procurement component of construction. Members were critical of the poor response of two provinces for not submitting their yearly reports timeously. Transformation in the construction industry had proceeded too slowly and ineffectively. Advertising of programmes and opportunities were not effective in informing people. Fronting and nepotism still occurred. Major problems for emerging contractors were the lack of funding and skills, and inadequate management expertise. Accurate statistics on construction matters were lacking. Much more had to be done to introduce more opportunities for women.

After adjournment of the meeting, two representatives of Cape Town-based construction forums addressed Members on how they had experienced the empowerment of black people and women in construction.

MINUTES
The Chairperson read a letter from the Managing Editor of the Parliamentary Monitoring Group, which had been circulated to Members of the Committee, in which Ms Gaile Moosmann gave the assurance that a incorrect entry on the PMG website had been corrected.

Ms C Ramotsamai (ANC) proposed that the Committee Report not be delayed by waiting for the report of two provinces which had, in spite of repeated appeals, failed to produce their reports at the stipulated time.

Mr N Gogotya (ANC) pointed to huge problems in capacity and lack of good governance, where numerous telephone calls to MECs elicited no response, and the Auditor-General had had to wait nine weeks for a reply to his queries. Ms T Nwamitwa-Shilubana (ANC) agreed. The Chairperson ruled that the Secretary should make another phone call to them

Department briefing
Mr Maikel Lieu Kie Song (Chief Director: Labour Intensive Works) set out the Department of Public Works (DPW) procurement policies. Mr German Mohohlele (Construction Industry Policy Branch) covered progress with the Construction Industry Charter.

Discussion
Mr J Blanche (DA) cited the case of a bridge that collapsed in Mpumalanga where the engineers were found to have been incompetent. Engineers were trained by Universities and not SETAs. The Chief Director replied that training for engineers by SETAS was like any other top-up course in imparting additional skills to those offered by Universities.

Mr L Maduma (ANC) considered that the advertising for and selection of suitable candidates was a complex process. The Chief Director replied that each municipality had to identify the projects that they had the means to implement over the medium term, and the concomitant levels of SETAs required. Financial and construction track records of applicants were important.

Ms Ramotsamai was concerned about the spread of training to not only the urban, but also the rural parts of all provinces, including the Northern Cape. The Chief Director explained that the existing training providers, mostly in urban areas, were being equipped, and that new training providers would eventually cover all areas in the country. She had found that information was not filtering down and that local government officials were ignorant of the possibilities.

The Chairperson asked about the conditions of the agreement with ABSA Bank and what commitment, if any, they had in outlying areas. The Chief Director explained that ABSA was offering an overall package all ready in place.

Mr Gogotya deplored the vast amount of paperwork that was required and time consumed (150 person-hours per application) before training could commence. The Chief Director replied that they were trying to reduce paperwork and further to do most of it at national level.

Ms Nwamitwa-Shilubana asked about the involvement of NGOs in assisting SETAs and the Department of Education in training. The Chief Director considered the input of NGOs of vital importance, for instance in Early Child Development (ECD).

Mr Maduma was concerned that the same construction companies were being favoured repeatedly and that rotation should be considered. Women should be supported in construction.

Mr S Siboza (ANC) insisted that more women should be drawn into construction. Advertising of available opportunities was not effective in reaching these people.

The Chief Director explained that only 27% of construction workers were women and 77% were youths. More women were not applying. Other criteria also had to be adhered to.

Mr Gogotya asked whether Municipalities or the Department of Public Works paid for the services of consultants. The Chief Director replied that Municipalities of all sizes employed design consultants. These consultants had to attend training to impress on them the importance of maximising job opportunities.

Ms Nwamitwa-Shilubana insisted that the Departments of Labour and Public Works and other Departments should work together. The Chief Director confirmed that these two Departments were complimentary in that the DPW did projects and the DoL training.

The Chairperson suggested that dissemination of information had to be more effective by making use of flyers, radio, TV and the offices of Members. Criticism by Members was intended to be constructive. Tendering had to be made easier by more user-friendly documentation.

The Chairperson questioned the need for the process of producing the Construction Industry Charter stretching to as late as July 2005.

Ms Nwamitwa-Shilubana was unsure about the meaning of A and B ratings for procurement companies.

Mr Maduma questioned the need for the IMC (Integrated Management Committee) to have a workshop during November as well as an indaba in early 2005.

Mr Mphohlele mentioned that amendments to the Regulations of the Preferential Procurement Policy Framework Act were being prepared in order to align this Act with the Broad-Based Black Economic Empowerment Act and Strategy.

Mr Blanche was concerned that there was a danger of neglecting the real needs of black people and women by disregarding the need that transformation had to be effective at all levels of employees, not just the owner/director level. It could be that White-owned companies employed many more Blacks and women at all levels.

Ms Ramotsamai deplored the fact that many white-owned construction companies had adopted fashionable Black-sounding names. Ownership was important to break the present state of two economies, otherwise Blacks would remain only employees The major problem was lack of collateral which forced Black-owned building firms to turn to well-established contractors who then took over. The black-owned company was then relegated to the status of a sub-contractor to the other. Fronting was encouraged in this way. In contracts for the Navy, one firm, Siyazama, was getting all the contracts.

Mr Mphohlele announced that an officially accredited verifier who specialised in verification was producing a Supply Register. It was found that a paper assessment was inadequate, but the cost of effective verification could be too high. It was hoped that financial institutions like the IDC would be prepared to accept a signed contract as collateral. This had been tried with eight cases of which only one had succeeded. They were also negotiating with FNB and with ABSA for extension of its present arrangement. Back in 1994, only 4% of DPW contracts were with Black companies.

Ms Ramotsamai found the status quo deplorable in that the same persons repeatedly were given contracts when they were friends and families.
Mr Maduma raised the issue of access to building materials where the big suppliers were not much affected by transformation.

Mr Mphohlele announced that mentorship support was considered because there was a legitimate dearth of management competence. A piloted session of the procurement component of payment by the employer directly to suppliers was under scrutiny. A register of contractors was being prepared.

The Chairperson announced that BEE legislation was being prepared. R1 billion and R5 billion over the following five years had been voted for BEE including for women and people with disabilities. Effective Interdepartmental relationships were vital.

The meeting was officially adjourned.

Ms Pinky Guyana, representing various construction forums in the Cape Town area, then recounted her experiences. She reported that empowerment criteria were not helping them at all; the incubator programme was incomprehensible; tender documents were too complex; quantity surveyors were of little assistance as they also had interests in the contracts; only English and Afrikaans were used and none of the nine other official languages; with no job experience it was difficult to register; fronting resulted in gardeners and domestic workers becoming so-called directors; women had a passion for construction but they were new in the field and wanted to learn as sub-contractors; the ABSA criteria were too difficult and all the money seemed to be going to the bank; and that they had no knowledge of the SETAs.

Mr Khan from ABATA recounted how, upon the request of the Minister two-and-a-half years before, they had organised themselves. Three issues were important: Access to finance; Opportunities; and Upgrading of skills. Of the enormous budgets for emerging contractors and women in infrastructure development none seemed to manifest in the Western Cape. Officials were overly risk- or failure-averse and actually reduced the list of contractors. It did not make sense that for the Incubator programme an emerging contractor had to have completed R3 million worth of work, at which stage he was already knowledgeable. The application forms covered 70 pages and were far too complex.

The gathering dispersed.

Appendix: Alignment of Department procurement policies to the requirement of the SCMF

ALIGNMENT OF DPW PROCUREMENT POLICIES TO THE REQUIREMENT OF THE SCMF

Opportunities
The introduction of the SCMF afford us opportunity to:
Develop a sing policy that respond to various reform requirements
Set consistent framework for monitoring and reporting
Enforce preferences point to meet socio-economic objectives
Entrench a code of conduct
Improve financial governance
Stamp out fraud and corruption

Black Economic Empowerment

DPW BEE Strategies
DPW strategies to ensure empowerment of black & women enterprise include the following:
Emerging Contractor Development Programme
Target procurement policies
Professional Consultant Roster
Strategic project initiative
The Incubator programme

Shortcomings of strategies
Absence of comprehensive BEE strategy
No reliable data and statistics on performance towards achieving empowerment objectives
No verification of data


Response
Verification of BEE status (ownership equity) of firms that have clamed preferences points and awarded contracts for last 3 years
Analysis of contracts to determine DPW’s standing in empowering black enterprise


BEE Awards