Trust to develop construction sector allocates less to industry, more to state projects

Business development programs targeting black entrepreneurs received less than a quarter of funds committed to a government-established trust and seven listed construction companies between August 2017 and March 2021.

At just 23.8%, this allocation from the Tirisano Construction Fund (TCF) stands in stark contrast to the 51.36% – or just over R148 million of the total R288.25 million – of the fund allocated to construction programs. social infrastructure.

About 11% was allocated to the engineering scholarship program, about 9% to construction professional development, and about 5% to basic education.

Lily:

Industry bodies including Master Builders South Africa (MBSA) and the Black Business Council for the Built Environment (BBCBE) have questioned the allocations made by the fund and the limited benefits given to black contractors by the regulation of the voluntary reconstruction program (VRP). OK.

The VRP agreement settled all civil claims for damages against the seven construction companies – Aveng, Basil Read, Group Five, Murray & Roberts, Raubex, Stefanutti Stocks and WBHO – from government and public entities arising from admissions collusion and bid-rigging. in their settlement agreements with the Competition Commission.

Lily:

Each of the seven companies has agreed to contribute R1.25 billion over 12 years to the fund and undertake other transformational initiatives, including mentoring up to three emerging black-owned entrepreneurs.

(Basil Read and Group Five are both in business bailouts while Aveng and Murray & Roberts sold their South African construction companies to black contractors.)

Allocation imbalance

The Business Development Program aims to modernize Black-owned and operated construction businesses, and help build capacity and sustainability through direct assistance to emerging entrepreneurs.

The stated aims of the TCF are to promote the development and improvement of the construction industry and to promote social infrastructure for all South Africans.

Social infrastructure project allocations include:

  • R7.65 million for the construction of Maserunyane Secondary School in Limpopo;
  • R14.75 million for Nelson Mandela Children’s Hospital facilities;
  • R60 million for a Safe Ablutions for Education (SAFE) project involving 15 Department of Basic Education sites; and
  • R33 million for a municipal borehole program which will benefit 11 municipalities in four provinces.

An industry association leader who declined to be named said the TCF was not created to supplement the budgets of national and provincial departments and municipalities.

Delay in allocation to sector

The fund was established in August 2017 – and beneficiaries of the business development program were selected and engaged for the first time in its 2020/21 financial year.

A total of 15 companies have received 68.63 million rand in the form of a loan, according to the TCF’s annual report for the year to the end of March 2021, its most recent.

Last month, the BBCBE expressed extreme dissatisfaction with the way the settlement agreement was being implemented, with its chairman Danny Masimene saying the board wanted to re-engage the government on the deal because companies in construction owned by blacks had not benefited.

Masimene also demanded that the seven JSE-listed companies that are signatories to the settlement agreement be blacklisted by the National Treasury and delisted by the Construction Industry Development Board (CIDB).

Read: BBCBE wants seven listed construction companies to be blacklisted

He indicated that the BBCBE also withdrew its representative from the TCF.

Industry-wide benefits required

MBSA chief executive Roy Mnisi voiced similar concerns last month, saying MBSA had emerging contractors among its members and believed they should benefit from the VRP.

He said the program must provide industry-wide benefits to people regardless of which construction organization they belong to and should be able to understand what is going on because all construction organizations industry share members who are expected to benefit from the program.

TCF chairman Mahomed Vawda said he was unable to comment on the BBCBE allegations.

“We manage the fund and have the money in the fund and […] distribute funds under the indenture,” Vawda said.

He pointed out that the VRP deal had been negotiated and suggested that the BBCBE’s comments and allegations had “political undertones”.

“We have nothing to do with it. We simply manage the trust based on the mandates we have. We have to spend the money on the basis of this deed of trust.

Progress

TCF’s latest annual report indicates that out of its seven programs (Business Development, Social Infrastructure, Engineering Scholarships, Construction Trades Development, Basic Education, Technical Capability and Professionalization of Engineers), five are currently under development. Implementation.

The technical capacity and professionalization programs for engineering practitioners had not yet been implemented as of end-March 2021.

WBHO Group CEO Wolfgang Neff said last week during a presentation on the company’s latest results that the group was doing well in terms of what it had to deliver in terms of VRP and that he was “definitely on the right track”.

Raubex indicates in its 2022 annual report that as part of the VRP agreement, it has committed to developing and mentoring two emerging entrepreneurs – Enza Construction and Umso Construction. It aims to provide them within seven years with the skills and the amount of work necessary to generate a cumulative annual turnover equal to at least 25% of the group’s annual civil engineering and general construction SA work. Fixed intermediate period objectives as well as sanctions in the event of non-compliance with these objectives are aligned with these objectives.

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