common focus, joint action Infrastructure for South Africa’s economic and social growth Parliamentary Portfolio Committee on Public Works Cape Town 19 October 2005 cidb – 2005 Annual Report construction industry development Construction Industry Development Board

Government policy & legislation The Construction Industry Development Board is a statutory body appointed by the Minister of Public Works to provide leadership for industry growth, reform and improvement (CIDB Act 38 of 2000) Represents a public/ private partnership for delivery and development [PMG note: graphics not included, please email info@pmg.org.za]

cidb team today Ebrahim Moola - Registers Gladness Moorosi – Finance Nomophoso Mkhonza – Roll-out Kotli Molise – Communication Spencer Hodgson - CEO

Construction - key to South Africa’s growth strategy SOUTH AFRICA GFCF as a % of GDP 10.0% 12.0% 14.0% 16.0% 18.0% 20.0% 22.0% 24.0% 26.0% 28.0% 30.0% 1947 1950 1953 1956 1959 1962 1965 1968 1971 1974 1977 1980 1983 1986 1989 1992 1995 1998 2001 2004 2007 2010 2013 GFCF % GDP Construction - key to South Africa’s growth strategy Rise in fixed investment is key to achieving economic growth of 6% Investment and industry growth evident (45 000 jobs – Stats SA) Need to double construction output over next decade

SA Backlogs - progress Construction Estimates in 1994 Progress by 2004 Housing – 1.4 to 3 million units Houses built for the poor – 1.6 million Electricity – 60% had no access 70% of households have been electrified Clean water – 16 million with no access Clean water – 9 million people got access Adequate sewerage – 22 mil without access 63% of households now have sanitation 70% secondary school enrolment 85% enrolment by 2002 Construction 2004 State of the Nation Address by President Thabo Mbeki

sustainable industry development cidb aim An enabling regulatory and development framework that builds A total industry delivery capability to achieve South Africa’s economic and social growth Empowerment of those historically marginalised Improved industry standards of performance (quality, employment, skills, safety, health) sustainable industry development

Sustainable industry development Construction Registers Service - Role and Challenges The Growth Challenge! SA Construction must double its output over the next decade! Sustainable industry development Construction Industry Development Board

a call to leadership progress challenges Construction Industry Indicators a call to leadership progress challenges

Our Strategic Challenge Status report – executive conclusion Empowerment Growth “A key development constraint lies in the dispersed nature of the industry and its clients – cidb has developed a range of instruments & programmes that will drive convergence in development focus” Capability Delivery Status report – executive conclusion Performance

Our Strategic Challenge Double output – 10 years Empowerment Growth convergence in focus Capability Delivery Performance

SOUTH AFRICAN CONSTRUCTION ECONOMY THE MARKET SOUTH AFRICAN CONSTRUCTION ECONOMY SOUTH AFRICA GFCF as a % of GDP 10.0% 12.0% 14.0% 16.0% 18.0% 20.0% 22.0% 24.0% 26.0% 28.0% 30.0% 1947 1950 1953 1956 1959 1962 1965 1968 1971 1974 1977 1980 1983 1986 1989 1992 1995 1998 2001 2004 2007 2010 2013 GFCF % GDP

Our Strategic Challenge Double output – 10 years Empowerment Growth Sustainable enterprises and emergence into mainstream economy convergence in focus Capability Delivery Skills & systems efficiency Consistent procurement & delivery environment Performance Quality, safety, health and environment, employment

Our Strategic Challenge Empowerment Growth enabling regulatory & Capability Delivery development environment impact Performance to drive improved value to clients and society!

Meeting the challenge Effective and efficient delivery & procurement Procurement best practice guidelines (CD and website) Standard for uniformity in construction procurement Systems for sustainable industry development

Meeting the challenge Effective and efficient delivery & procurement Toolkit – infrastructure delivery management system for the public sector (supporting tool) - a basis for IDIP (capacity building) [PMG note: graphics not included, please email info@pmg.org.za] Systems for sustainable industry development

A culture of respect for people Labour based best practice guidelines – resource to stakeholders in job creation goals of Expanded Public Works Programme

Meeting the challenge Empowerment Introduction to contracts – Know your rights, responsibilities and risks (Supporting tool) – empowering SME contractors [PMG note: graphics not included, please email info@pmg.org.za] Systems for sustainable industry development

Systematic approach to progressive improvement! cidb All about a systems approach to industry development Facilitate Systematic approach to progressive improvement!

Key role of the Registers Sustainable delivery and empowerment

Meeting the Challenge Construction Registers Service National Register of Contractors To drive improving performance of contractors National Register of Projects Promote client practices that shape a transforming, healthy and sustainable industry Roll-out Through Standard for Procurement Uniformity in Construction

Register of Contractors CIDB Act 38 of 2000…mandates the CIDB to establish the National Register of Contractors: Facilitates public sector procurement, delivery and risk Supports contractor development Promotes better performance - improved quality, safety, health and environment. to categorise contractors in accordance with their capability: Purpose

2. Grading Criteria CLASS OF WORKS General Building Civil Engineering Electrical Engineering Mechanical Engineering Specialist Works Background

2. Grading Criteria Tender Value Ranges Background

What the register tells us so far?

Distribution/Class of Works Expect to register 6000 contractors by year end. Useful to note the concentrations in general building and the gaps in other classes of works where greater specialisation and capital resources are necessary.

Distribution/Class of Works Note: At the higher grades numbers reflect registrations in different classes of work eg civils, building, electrical – so at grade 9 there are about 8 contractors registered and a similar number in grade 8 Grade 8 and 9 – Large nationals/ internationals

Distribution/Class of Works 1147 Real capacity and significant development potential from grades 2 (classroom blocks) to grade 6 (R10 million) – Also using the PE (potentially emerging) status contractors at a lower grade can be targeted – including grade 1 contractors Grades 2 – 6, largely provincial & significant black participation

Distribution black owned 652 570 88% Reflects significant transformation achieved to date. Medium sized contractors = 88% black ownership

Distribution youth owned

Distribution women owned The high percentage (about 65% in Limpopo) reflects the impact of preferencing and the fact that at provincial level, competition is largely between black owned enterprises. Therefore preference points for women ownership make a huge competitive difference.

Average processing time When documentation is complete

Progress and dealing with unintended consequences Regulatory Changes

Proposed changed to CI Regulations Replacement of the current Register of Projects with electronic registration which incorporates the system

- Register of Projects Linking demand and supply Client tender adverts – automatically alert tenders Logging award of tender (or cancellation) - automatically updates contractor’s record Phase 2 will place best practice requirements on clients

Revision of Implementation dates Client Previous implementation date Revised implementation date Limpopo DPW. 15 Oct 2004 eThekwini 14 Jan 2004 NDPW and all provinces 16 May 2005 15 Aug 2005 30 Aug 2005 Other national departments 30 Sept 2005 Public entities 30 Nov 2005 Metros 15 Mar 2006; high capacity municipalities 14 Nov 2005 30 Apr 2006 Medium capacity municipalities 30 Jul 2006 Low capacity municipalities 30 Nov 2006 Private sector – Reg of Projs Revision of Implementation dates

Changes to Regulations 200 000 500 000 1 500 000 Changed – enabling greater access

Changes to Regulations Distinguish at grade 1 those contractors that have track record from those that do not Improvement to the JV calculator Clarify – labour-only contractors and those contractors who are issued with the bulk of construction materials are exempt from registration

Changes to Regulations Extending time for the requirements for registered professionals Criteria for determining an applicant’s contractor grading designation Track record 2 – 5 years Financial capability – modify annual turnover and employable capital

Greater emphasis on development programmes Client use of the Register for both delivery & development Target contracts at different grades Provide more work for Grade 1 Put in place development programmes for different grades using PE status Use affirmative procurement – smaller and larger contracts! Proper use of the Registers by Clients!

Registers and Development Programmes Delivery Demand side access Supply side support Targeted Procurement (APP) = ACCESS TO WORK OPPORTUNITIES Emerging Contractor Development Programme = ACCESS TO SUPPORT Registers support development targeting information & advice training & mentoring finance & credit Registers support procurement targeting Client targeting of procurement & development!

Registers and Development Programmes Delivery Demand side access Supply side support Affirmative Procurement (APP) = ACCESS TO WORK OPPORTUNITIES Emerging Contractor Development Programme = ACCESS TO SUPPORT Registers support development targeting information & advice training & mentoring finance & credit Registers support procurement targeting Delivery Empowerment, transformation Consolidation, emergence So that contractors emerge into the mainstream!

Registers and Development Programmes EPWP Learnerships Public Works Incubator Programme Vukuzakhe, Sakhasonke Several provinces – using Registers Nurcha – finance to registered contractors DTI

Challenges ahead

Carry forward Seven Strategic Projects Registers Roll-out (Phase 1) Toolkit/ IDIP Roll-out Registers (Phase 2 – Best Practice) - development Procurement Roll-out & development CII’s – Expand and Roll-out for impact Contractor Development – Empowerment Stakeholder Engagement to support our aims, strategy and projects Delivery TO DRIVE Growth, Delivery, Performance, Empowerment

Organisational Challenges Outreach Revenue Compliance issues

Joint leadership challenges Enable capacity building of client procurement and project teams to apply & improve the systems: Register of contractors Register of projects Standard for Uniformity & empowerment models Use the Registers to develop SA Construction Appropriate development programmes Set the standard for a transformed industry! Enable leadership in all sectors!

INFRASTRUCTURE FOR SOUTH AFRICA’S ECONOMIC AND SOCIAL GROWTH Strategic Outcomes A total delivery capability A proudly South African construction industry An industry that delivers to globally competitive standards INFRASTRUCTURE FOR SOUTH AFRICA’S ECONOMIC AND SOCIAL GROWTH

Thank You Joint Leadership Infrastructure for South Africa’s economic and social growth Thank You Construction Industry Development Board

Budget This year – totally committed (no reserve) Registers revenue to-date approx R2.5 mil 2004/05 – R26 mil (R900 000 registers) 2005/06 – R35 mil (R4 500 000 registers) 2006/07 – R41 mil (R6 000 000 registers) 2005/06 and 2006/07 inclusive of VAT!