KwaZulu-Natal Master Builders and Allied Industries Association - Annual Report 2010-06-08

As always, it has been an exciting year with its share of challenges, highlights and lowlights.

STATE OF THE ECONOMY

The Economy generally

Against a backdrop of rising GDP numbers for the SA economy in the second half of 2009, driven largely by an increase in manufacturing and exports of commodities, the construction sector showed a decline in growth from 6.1 in the 3rd quarter to 3.6 in the 4th quarter.    The main risk is sluggish household expenditure following widespread job losses and high debt levels. 

However, there appears to be general consensus that there is light at the end of the tunnel. The FNB Building Confidence Index increased from 28 in the 4th quarter of last year to 30 in the 1st quarter of 2010 with Architects indicating that they were getting more work.  The confidence of residential contractors edged up for the third consecutive quarter and this trend bodes well for the future.  It is in the area of non-residential building where 90% of respondents to the BER (Bureau for Economic Research) survey reported a lack of new work.  This is confirmed by the Civil Construction Confidence Index which fell sharply in the 1st quarter of 2010.

Despite all this, the fact that the business confidence index for KZN building contractors increased from 33 to 44 in the 1st quarter of 2010 is a positive sign that the worst is hopefully behind us. We now all watch the volatility in the Euro-Zone markets with bated breath.

Human Settlements

In terms of Human Settlements, or Housing as it was previously known, Minister Tokyo Sexwale unveiled a budget of 16.2 Billion Rand for the current fiscal year. Subsidy housing is understandably the first priority. Despite delivering 220 000 units last year, and 2.3 million units since 1994, the backlog has increased from 1.5 million to 2 million units.  

Minister Sexwale alluded to the tremendous efforts that have gone into ensuring that the 2010 FIFA World Cup will be a success. He goes on to say: “The target for human settlements ought to be nothing less than an enhanced vision driven by a similar energy and passion to World Cup 2010 – this time round, human settlements 2030.

“The current large scale mobilisation of human, capital, financial, logistical, construction, project management and other resources should not dissipate after the final world cup whistle.  The potential exists for the whole country to be turned into one large construction site as we build sustainable human settlements in various localities.”

There is also a lot of development in the so-called gap market. This is housing for those South Africans that typically earn between R3000 and R9000 per month – too much to qualify for a subsidy, and too little to get traditional bank credit. A guaranteed fund of R1 billion has been put up by government as security for 600 000 housing loans.

Human Settlements, both National and Provincial, have declared war on sub standard housing products and there should be more opportunities than ever for professional, skilled contractors to land work with this housing boom that is upon us.

Public Works

Minister Geoff Doidge, in welcoming a R6.4 billion allocation, reiterated this department's strategic imperatives:

• To create decent employment through inclusive economic growth;
• To ensure efficient and effective development-oriented Public Service and an empowered and inclusive citizenship; and
• Sustainable human settlements and an improved quality of household life.

The Expanded Public Work Programme (EPWP) continues to be a strategic intervention to alleviate poverty and unemployment through the creation of labour intensive work opportunities.
At present, 604 000 work opportunities have been created. The target for this current year is set at 642 000 which is to be achieved through labour intensive projects and increasing labour intensity of existing projects and programmes.

Minister Doidge recognizes the problem of the lack of timely payment by government to Small, Medium and Micro Enterprises. The launch of the Re Ya Patala (We Pay) initiative by the Department in 2009 has committed government to ensuring that there is strict adherence to the 30 days payment policy, as provided for in Public Finance Management Act for services rendered.

The CIDB is being directed to sharpen its focus on the developmental agenda and is being expected to facilitate the formulation of certain financing models to assist emerging contractors.

STATE OF THE INDUSTRY

Construction Education and Training Authority
CETA

It has indeed been a tumultuous time at CETA as of late.  I have now been in the chair of CETA for just over a year.  During that time I have focused on our mandate of approving matters of governance and skills development. Matters of governance were the focal point.

• CETA, for the first time has an inventory of assets.
• Payment parameters to employers have been formalized.
• Procurement policies have been tightened up.
• Bookkeeping and accounting methodologies have been substantially improved together with internal audit procedures put in place.
• IT systems and software have been addressed.
• Accountability of board members, management, staff, and personnel has been entrenched and people are now responsible for their actions. 
• The platform for fraud and corruption has been diminished and hopefully removed.
• On the other hand however, mistrust and discord amongst board members remain and is still very evident.  The baggage from the Industrial Council’s of yesteryear has unfortunately come onto the CETA board and plagues the board at every given occasion.  This mistrust effectively becomes a hurdle, despite the needs of both sides being virtually identical from the employee and employers sides.
• Education and training strategies from employers have been found to be wanting and this also must be seen as a hurdle in skills development where we have often looked for batting material from the employers to go and achieve what the employers want and we battle to get that information.  
• Currently the Minister has ring fenced the Construction CETA as one of the 4 troubled SETA’s, whom over the past couple years have received qualified audits and disclaimers and because of that he is desirous of placing the 4 SETA’s, including the Construction CETA under administration.  We support that CETA be placed under administration, however not for the reasons that he wants to but for the reasons of this disunited board that cant seem to get anywhere fast.

Construction Industry Development Board

The CIDB has made a recent announcement which we see as watershed moment in that body’s evolution.  The CIDB is now, having set up and refined its systems, regulations and policies, has now given an undertaking that it will actively start policing and enforcing its regulations. This commitment is welcomed by the Association and the industry. We continue to have tremendous difficulties with many of the clients of our members relating to tendering and procurement as well as payment issues. 

National Home Builders’ Registration Council

The NHBRC has recently appointed a new CEO, Mr Sipho Mashinini.  Our interactions with Mr Mashinini have indicated that he is hands-on and highly knowledgeable, and we wish him luck with his new role and trust that his leadership will give the NHBRC a solid lift towards increased professionalism and efficiency.

Minimum Wage

The building industry continues to remain under pressure with regard to wages. There are certain public sector clients who are imposing the civil engineering sectors wage rates on building projects. This is causing instability in terms of labour relations and can create havoc with our sector. We are continuing to canvass members with regard to initiating a minimum wage which will be market related and help level the playing fields for members to compete more equitably without exploiting labour.

Green Building and the Environment
 
Interest in this field continues to grow tremendously and members, role-players and the public appear to be seeking more information than is readily available. We are gearing up to become an authoritative source of this information and our green building centre, opening in August, should become well recognised as a source of objective and practical information. The National Building Regulations are for the first time going to incorporate an energy efficiency standard marking the first step towards making green building compulsory.

STATE OF THE ASSOCIATION

Membership

We currently have 650 registered members in good standing. Every year we strike off approximately 10% of our members for non-payment. Last year we struck off 50 members, which was less than 10%, which is noteworthy considering the state of the economy. We therefore gained 100 members in the past year, which is a considerable improvement when compared to previous years.
 
Transformation

The Executive Council has ensured that transformation remains a top priority agenda item.  According to our current records, some 25% of the membership has a majority Black ownership.  Whilst this is not too bad given where we have come from, this is in no way acceptable and we need to continue to make all efforts to ensure that we are representative of the broader building contracting industry. We have a targeted recruitment campaign on the go, and are pursuing various strategic partnerships which will support this drive.

Best Practice

We are continuing with our process of ensuring that full members are working to the necessary standards to uphold the reputation of the Association and its membership collectively.  To date we have Safety – Checked 60 odd members.  We still have a considerable way to go and we would like to once again reassure the members that this intervention is a friendly one and we will assist members to become capacitated to obtain reasonable compliance with Health & Safety legislation.  We can all be fairly certain that Construction Health & Safety is going to become enforced far more than it currently is, not only by the Department of Labour but also such bodies as the CIDB, NHBRC and various other market related mechanisms.

The upside of having the safety check completed is that Full Members will have their status confirmed and secure their place on our Find-A-Builder membership promotion tool.  We are getting positive reports on the response to Find-A-Builder and have committed significant budget and resources to pushing the use of our members amongst clients and the public.

Occupational Health & Safety remains one of the prize offerings in the Association’s bouquet of services and activities.  Last year we scooped 9/10 of the National Building Safety Awards.  We offer a comprehensive array of free services as well as paid consulting services and information dissemination mechanisms.

In terms of legal matters, we continue to assist members who have difficulties with contractual matters. Our information offerings continue to improve with new content being added to our website, forum and blog on an ongoing basis.  In addition we are delivering two e-newsletters and one hard copy newsletter to our members and subscribers every month and trust that the information being provided is of tangible benefit to members.

On the Training side we have once again had a successful round of assisting members with WSPs in order for them to receive the mandatory grants due to them from CETA.  

Commercial Activities

The Association continues to successfully administer the KZN Provident and KZN Pension Funds.  The Provident Fund is in the process of paying out the long awaited surplus apportionment claims.  The surplus apportionment scheme is still being questioned by the Financial Services Board with regard to the KZN Pension Fund and we have a considerable legal and employee benefits consulting team working hard to resolve this. 

The Association also continues to run the outsourced inspectorate for the NHBRC.  The contract had officially come to an end at October but it remains to be seen whether the work will continue thereafter.  The Association has in the interim been appointed to perform inspection work on subsidy housing in the Free State and Northern Cape and it is hoped that KwaZulu-Natal will follow soon. If this doesn’t transpire, we will remain involved in this activity and continue to deploy our highly trained and much praised inspectorates. 

We continue to leverage our position as a hub in the industry and are increasingly generating more revenue from advertising and sponsorship.  An evolution of this process is the launch of our Find-A-Supplier module which will afford an opportunity for all suppliers of products and services to the building industry to be listed with the Association.  Not only is this an obvious opportunity for generating revenue it also will become a valuable resource for members and the public to obtain information which is often quiet scattered and disorganised.

We are virtually moments away from launching our SafeBuild OHS DVD.  The DVD has taken a year to produce and is of an exceptional standard and quality.  It has been endorsed by the Department of Labour and we see this as a huge opportunity to increase health and safety awareness in the building and construction industry.  FEM has been a partner with us from the marketing side and this is strengthening our relationship with the insurer and assisting them in achieving their aims of reducing claims.

The conference activity is going to be augmented with a virtual doubling in capacity and we are confident that our facilities will be in the premier league of conference venues in Durban. 

There are a number of other opportunities that are currently being looked at and we will keep the membership advised as to how these develop.  

Finances

The Association continues to remain in a strong financial position.  The investment portfolio has recovered remarkably in the last six months and we continue to monitor the situation.  In terms of our activities, we are investing in the enhancement of membership services as well as start up costs for our various commercial activities.  It is noteworthy that the budget attributable to direct member services and benefits for this current year is in the order of R11.2 million.

Properties

We have, in the last two weeks, taken transfer of two units in an office park in the Lower South Coast Town of Shelly Beach.  This will allow us to adequately service our members from that area and either realise some income from renting out a section of the property, or alternatively, if the demand proves to be sufficient, run training courses and operate a small conference facility from the property.  We now own 4 (four) properties throughout KwaZulu Natal and all of our operations are now taking place from the properties we own.  We have found that this not only seems to be a prudent diversification of our investment risk, but also allows us, through these properties, to create the correct image of professionalism that we are seeking to promote in our broader branding efforts.

Our renovations here in Westville are on track and we should be fully up and running by the end of July. A lot has been said about the project, but as a reminder, once the project is completed, we will be proud to present:

• A much greener building that will be more energy and water efficient with a renewable parallel electricity supply. The greening interventions will be showcased as a source of information and inspiration, not only furthering and promoting environmentally sustainable building practices, but also enhancing our brand and creating greater awareness of the Association and its members.
• A much expanded and improved conference centre, not only optimally harnessing this profitable resource, but also creating excellent training venues at the same time.
• A streamlined supplier platform allowing associate members to make their products and services known to members and the public.
• Enhanced catering and function facilities
• A green building exhibition coupled with a marketing platform for suppliers and green goods and services
• MORE PARKING!

We wish you all of the very best and trust that you will be able to ride out the tough times and harness the opportunities that are out there.

Thanking you

Gavin Strydom | Association President