Construction industry: Mixed reaction to Sexwale speech

Tokyo Sexwale: “Is it perhaps not time to establish a state-owned construction company?” (Image: GCIS)

Among the items which received the MBAWC's backing were Sexwale's description of the current context in which this year's Human Settlements Budget Vote occurs, "Inflation, which has a direct impact upon construction materials, is according to the Reserve Bank around 6.3%. The Bureau for Economic Research (BER) reported that the building costs are increasing at an alarming rate. BER found that in the fourth quarter of 2011 the Building Cost Index increased by 14.1% compared to the 6.4% recorded for the second quarter of 2011."

He explained, "The essential building materials for housing construction have recorded price increases of above inflation (PPI). For example reinforcing steel recorded a price increase of 38.9%, ceiling material increased by 10.8%; hinges by 9% and bricks by 8.6%. The result is that it will cost more to build the same size of a house today than it did a year ago."

Sexwale highlighted that in addition the increased price of building materials, the building industry has been hit by increases in transportation costs and the price of labour. "For 2012 the BER forecast for building costs is at about 12.1% and 16.3% in 2013."

He also revealed that, "The construction sector, in which the housing property market is key, has shown marginal improvement of about 2.6%."

The budget for 2012/13 has increased from R22bn to R25.2bn. Sexwale says, "This has grown by a mere 10% since last year whilst housing demand has increased."

The MBAWC also agrees with the sentiments Sexwale shared whilst outlining the Human Settlements Vision 2030, "In developing possible strategies, we have to ask ourselves some questions, one of them is: Has the time not arrived to use sizeable established contractors? This question is posed because when large construction projects like harbours and power stations, roads and transportation, stadiums and Gautrains are built the services of large companies with good track records are enlisted. They are also forced to bring along their black economic empowerment partners. Yet when houses are built for our citizens in the government housing programme we rely, by and large, on inexperienced shovel, wheelbarrow-and-bakkie brigades. Many of these discredit the good name of genuine and committed small to medium emerging contractors. Is it perhaps not the reason why the rectification bill continues to grow year after year? This does not take away the fact that some small companies have experience, but a lot of fly-by-nights take the taxpayer to the cleaners for their shoddy workmanship."

State-owned construction company? No!

He also asked "Is it perhaps not time to establish a state-owned construction company?" Johnson and the MBAWC strongly disagree with this proposal, stating, "Having a state body take on construction of housing or anything else will only result in more inefficiency and wasted cost as the state has a very poor record when it comes to appointing competent staff and producing efficient delivery. Delivery is more likely to prevail in the private sector as it is profit driven."

Rob Johnson, executive director of the MBAWC: "No!"

Johnson continues, "The key to delivery is the state remaining the client and properly screening its bidding contractors. Smaller contractors can still be part of the system if well thought out mentorship programmes are introduced into tender documentation. What this would entail is 'emerging' contractors working alongside established contractors and being mentored to enable them to take on their own appropriately sized contracts in future. This would also benefit larger contractors in that it could form part of their Enterprise Development Programmes."

He adds, "A state body could also raise the level of corruption and political interference rather than reduce it as more state employees will be involved in the process."

"On the whole the Minister made a number of excellent points and we hope that our members will be involved in helping to change the residential landscape of our country," Johnson concludes.

For more information, visit www.mbawc.org.za.