1. Portfolio Committee briefing on the challenges faced by Small Businesses and Cooperatives in the construction sector and what strategies are in place to counter the challenges from the CBE and DPW
Ms Priscilla Mdlalose
28 November 2017

2. CBE Delegation Ms Priscilla Mdlalose (CEO)
Mr Isaac Nkosi (Chairperson)

3. Content 1. CBE’s Vision, Mission 2. CBE’s Mandate
3. Legislative Mandate
4. Built Environment Organogram
5. CBE Strategic Goals and Programmes
6. Alignment Minister’s Priorities
7. Challenges of Small Businesses and Cooperatives
8. Strategies in place to counter challenges

4. An environment built to meet people’s needs and aspirations.
CBE Vision and Mission
An environment built to meet people’s needs and aspirations.
Implementing projects and programmes that address built environment issues and add value to the built environment professions, government and the general public.

5. The Mandate of CBE
CBE is established in terms of Act No. 43 of 2000 as a juristic person. It is an Entity of the DPW, with the mandate to:
a) Promote and protect the interest of the public in the built environment;
b) Promote and maintain a sustainable built environment and natural environment;
c) Promote ongoing human resources development in the built environment;
d) Facilitate participation by the built environment professions in integrated development in the context of national goals;
e) Promote appropriate standards of health, safety and environmental protection within the built environment;

6. The Mandate of CBE
f) Promote sound governance of the built environment professions;
g) Promote liaison in the field of training in the Republic and elsewhere and to promote the standards of such training in the Republic;
h) Serve as a forum where the built environment professions may discuss the relevant
i) required qualifications
ii) standards of education
iii) training and competence
iv) promotion of professional status
v) legislation impacting on the built environment; and
i) Ensure uniform application of norms and guidelines are set by the councils for the professions throughout the built environment.

7. Legislative Mandate Republic of South Africa Constitution of 1996
Council for the Built Environment Act, 2000; Architectural Profession Act, 2000; Landscape Architectural Professional Act, 2000; Engineering Profession Act of South Africa, 2000; Project and Construction Management Profession Act, 2000; Quantity Surveying Profession Act, 2000; and Property Valuers Profession Act, 2000
Public Finance Management Act, 1999
Skills Development Act 97, 1998
Employment Equity Act, 1998
Consumer Protection Act, 2011
Construction Industry Development Board Act, 2000

8. Legislative Mandate Promotion of Access to Information Act, 2000
Minimum Information Security Standards, 1996
Occupational Health and Safety Act, 1993
National Treasury Regulations
National Archives of South Africa Act, 1996

9. Built Environment Organogram Structure
DPW Minister
CBE
ECSA
Engineering Council of South Africa
SACLAP
South African Council for the Landscape Architectural Profession
SACAP
South African Council for the Architectural Profession
SACQSP
South African Council for the Quantity Surveying Profession
SACPCMP
South African Council for Project and Construction Management Professions
SACPVP
South African Council for the Property Valuers

10. Strategic Goals and Programmes
NDP Alignment
Provide support to CBE, thus contributing indirectly and indirectly to the delivery of all strategic outcome oriented goals of the CBE
Programme 1: Administration
Outcome 4 – decent employment through inclusive growth (Chapter 3 of the National Development Plan [NDP])
Outcome 6 – an efficient, competitive and responsive economic infrastructure network (Chapter 4 of the NDP) and
Outcome 12 – an efficient, effective and development orientated public service (Chapter 13 of the NDP).
A transformed built environment with appropriate, adequate skills and competencies, responsive to the country’s infrastructure delivery needs.
Programme 2 - Skills for Infrastructure Delivery
An optimally functioning built environment with a responsive and relevant policy and legislative framework based, on informed and researched positions
Programme 3 –Built Environment Research, Information and Advisory
Built Environment Professionals (BEPs) that operate within a regulated policy and legislative framework
Programme 4 - Regulation and Oversight of six BEPCs

11. Strategic Goals and Programmes
NDP Alignment
A BE that is responsive to the developmental and economic priorities of Government
Programme 5: Government Policies and Priorities
Outcome 4 – decent employment through inclusive growth (Chapter 3 of the National Development Plan [NDP])
Outcome 6 – an efficient, competitive and responsive economic infrastructure network (Chapter 4 of the NDP) and
Outcome 12 – an efficient, effective and development orientated public service (Chapter 13 of the NDP).

12. Alignment with Minister’s Strategic Priorities
CBE Strategic Priorities
Transformation of the Construction and Property Sector by Growing and Developing Black Owned Businesses while increasing the supply and availability of Management and Technical Skills
MTSF: Outcome 4:  Decent Employment through Inclusive Growth Outcome 5: Skilled and capable workforce to support an inclusive growth path
A transformed BE with appropriate, adequate skills and competencies, responsive to the country’s infrastructure delivery, operation and maintenance needs.
Building the Capacity of the Department to Deliver through the Creation of Internal Strategic Enablers.
MTSF: Outcome 12: An Effective and Efficient Development Oriented Public Service
An optimally functioning BE, with a responsive and relevant policy and legislative framework, based on informed and researched positions.
Improve Governance of Entities and Professional Councils
BEPs that operate within a regulated policy and legislative framework.

13. Challenges of Small Businesses and Cooperatives
PRICING AND COSTING
Construction companies are always responding to tenders advertised where pricing and costing of a project is a key factor on adjudication before a tender is awarded. These small businesses are always struggling to cost accordingly which make them not favourable to win a tender. Either they price themselves out of the market or underquote, and neither situation lands them the business
ACCESS TO PRIVATE SECTOR
A common challenge is the over reliance on government work / tenders while the private sector markets remain largely untapped. Private sector work often comes as longer term contracts, thus sustaining the business

14. Challenges Cont’d COMPETITION FOR SKILLED AND TALENTED LABOUR
Skills follow the money and jobs with perks.
ACCREDITATIONS AND COMPLIANCE
The accreditations like ISO 9001 and or ISO have been identified as required accreditations which most of the private companies always ask for when they try to penetrate the private sector

15. Challenges Cont’d PAYMENT ISSUES
The public sector has been notoriously identified as a reason for small businesses to have bad cashflow as they do not pay on time. Some complained that the projects are completed but they have not been paid for six months

16. Challenges Cont’d… SUB-CONTRACTING ISSUES
There are very few opportunities for small business and coops in the built environment. When these arise, in most cases, small business and coops become sub contracted under main big companies. This results in instability of the small businesses. Most often professionals in these small businesses, revert to government employment because of stability and certainty. 
Small businesses feel that being subcontracted means small profit margins or none at all.
Some of the small contractors face challenges of exploitation by the main contractors. They do not have direct communication with the client as sub-contractors and payments are delayed.

17. Challenges Cont’d… SETTING ASIDE PROJECTS
Small businesses and co-operatives complain that they compete with big businesses, they require a proper system to set aside some of the projects for small businesses, black owned, and women owned, youth owned businesses and people with disabilities
CORRUPTION
According to the article shared by “khplant blog”, the other issue around construction is corruption with companies paying governmental departments to have their tenders fast-tracked, and cartels that limit healthy competition on the scene. Collusive tendering in the public sector prevents consideration of competitively priced bids from various players and undermines the reputation of the industry

18. Challenges Cont’d… FINANCES AND CASH FLOW
When small businesses and coops get opportunities, either as subcontracts or directly from government, the major difficulty is the period of payment and consistency of payments. Government pays largely after days, which then makes subcontractors to be paid after days, and therefore straining the cash flow. This results in high staff turnover.
Most SMMEs and Coops do not have qualified book keepers or Finance Managers resulting in poor financial management, thus threatening the existence of the business. 
Most established banks, do not assist SMMEs financially and thus SMMEs resort to private lenders with high interest.  

19. Challenges Cont’d… LEGALITIES
SARS - the biggest challenge facing small businesses, is compliance with SARS and other legal frameworks including compliance with professional bodies. Whilst the government does not pay on time, SARS which is part of government expects and demand tax to be paid on time. If tax is not paid on time, SARS impose penalties, and these deplete the very small profit that the small business earn from the opportunities they get. Moreover SARS actions sometime force businesses to seek legal advice which in turn add more financial burden to the business.  
Accounting firms that are supposed to assist these small businesses are usually very expensive and never finish their audits or financial statements on time and further give SARS an opportunity to charge more interest on outstanding penalties, and further an opportunity to charge more VAT returns or any payments due to SARS. This puts a strain on the companies’ cash flow.

20. Challenges Cont’d… DIVERSITY AND BUSINESS GROWTH
Most big companies are sustainable because they have capital, and are easily assisted financially by established banks. In some instances, they are able to diversify their products which enables them to cushion challenges by one product at a certain period of time. Small business however are not able to diversify largely because of financial incapacity and also because of lack of opportunities. Business growth therefore becomes an illusion coupled with lack of resources and professional growth within the company.

21. Challenges Cont’d… EXPOSURE TO BUSINESS WORLD FOR SKILLS TRANSFER
Mentorship and training is appreciated by many new businesses but exposure to practical work is much needed by some of these businesses who are struggling to expand their markets

22. Challenges Cont’d… SUSTAINABILITY
All the above challenges, make small businesses and coops not to have sustainable businesses beyond 24 months. This is why most black professionals in the built environment for example prefer to be employees than business owners. 
This sometimes stifles innovation by these professionals.

23. Strategies in place to counter the challenges
Government’s policies are in place to support procurement opportunities for small businesses and co-operatives.
Department of Public Works is enforcing the 30 days payment policy.
Minister’s stakeholder engagements to create platforms for small businesses to report on their challenges.
Business Chambers facilitate networking platforms.
Cidb’s contractor development programme

24. Strategies in place to counter the challenges
There are areas that still require much focus, and these are as follows:
Encourage shared services for small businesses such as financial management
Business matching to encourage profit sharing of tenders
Professionalization and Upskilling the business owners (some through Recognition of Prior Learning initiatives)
South Africa to invest in Research and Development to inform entrepreneurs what the country needs and to support innovations

25. Conclusion
Small businesses and Co-operatives are still struggling to grow their business, but there is government support to enable these companies to make meaningful economic contribution to the country.
Research is required to assist these business to understand economic trends and to access information on the needs of their clients.
Business matching needs to be facilitated through Business Chambers to assist these businesses to develop their own skills.
Payments of the small businesses need to be prioritised by clients.
Political Heads to monitor how procurement policies are implemented by departments.
Strengthening of Public-Private-Partnerships to ensure skills transfer and collaborations

26. Thank You