The Construction Conference 2005
The Construction Conference 2005 A vision for the construction industry. How can we make the charter work for us? Presented by: Carl Grim, Chief Executive, Aveng Limited 10 October 2005
A vision for the construction industry and how we can make the charter work for us The role of construction in the economy
Construction industry vision To be an industry that responsibly fulfills its role in society
Two questions arise What is our role in society? How do we fulfill this role responsibly?
Question 1 What is our role in society?
Gross fixed capital formation trend 200,000 Gross Fixed Capital Formation Nominal 180,000 160,000 140,000 120,000 million 100,000 80,000 60,000 40,000 20,000-2004 2002 2000 1998 1996 1994 1992 1990 1988 1986 1984 1982 1980 1978 1976 1974 1972 1970 1968 Total Other Construction EX SARB
2004 2002 2000 EX SARB Construction Works Contribution to Gross Fixed Capital Formation 35% 30% 25% 20% 15% 10% 5% 0% 1998 1996 1994 1992 1990 1988 1986 1984 1982 1980 1978 1976 1974 1972 1970 1968
Gross Fixed Capital Formation as percentage of GDP 35% 30% 25% Assumption: GDP Growth of 4% and GFCF/GDP of 25% in 2014 The construction sector will double in size in the next ten years 20% 15% 10% 5% 0% 1960 1963 1966 1969 1972 1975 1978 1981 1984 1987 1990 1993 1996 1999 2002 2005 2008 2011 2014 EX SARB and LHA
Total investment in construction works Rand million 90000 80000 70000 60000 50000 40000 Long term Growth 2% pa Free State Goldfields Large Dams Sishen-Saldanha Richards Bay Mines Roads Sasol II & III Eskom Power Stations Safari Mossgas Telkom Coega Soccer G Train Eskom Dams Roads 30000 20000 10000 0 46 48 50 52 54 56 58 60 62 64 66 68 70 72 74 76 78 80 82 84 86 88 90 92 94 96 98 00 02 04 06 08 10 12 EX SARB, MFA DATABASE; Constant 2005 prices
Investment in total non-residential building 45000 40000 35000 Long term Growth 2,3% pa 30000 Rand million 25000 20000 15000 10000 5000 0 46 48 50 52 54 56 58 60 62 64 66 68 70 72 74 76 78 80 82 84 86 88 90 92 94 96 98 00 02 04 06 08 10 12 EX SARB, MFA Database; Constant 2005 prices
Investment in total housing 45000 40000 35000 Long term Growth 1.9% pa 30000 Rand million 25000 20000 15000 10000 5000 0 46 48 50 52 54 56 58 60 62 64 66 68 70 72 74 76 78 80 82 84 86 88 90 92 94 96 98 00 02 04 06 08 10 12 EX SARB, MFA Database; Constant 2005 prices
Low income and affordable housing requirements to eliminate backlog by 2014 million m 2 10 9 8 Affordable housing (Government) Low income housing (Financial Services Charter) 7 Housing area 6 5 4 3 2-1 SARB Aveng Forecast 2001 2002 2003 2004 2005 2006 2007 2008 EX SARB, AVENG
15 10 05 EX SARB, Constant 2005 prices Construction works forecast 70 60 50 40 30 Rand Billion 20 10 00 95 90 85 80 75 70 65 60
Role 1 To effectively deliver and maintain the economic infrastructure for long term sustainable growth
Infrastructure lagging economic growth 4 3 GDP/Fixed Capital Asset Base 5 year moving average Percentage Points 2 1 0-1 -2-3 60 65 70 75 80 85 90 95 20 Years EX SARB
Road infrastructure lagging vehicle growth 500 Paved national and provincial roads, passenger vehicles, and commercial vehicles for transport of goods 400 Index (1970 = 100) 300 200 100 0 1940 1950 1960 1970 1980 1990 2000 Paved roads Passenger vehicles Goods vehicles EX Peter Perkins
Additional electricity generation capacity urgently required 65 000 60 000 55 000 Greenfield PS (Fast Track) - Earliest 2013 Greenfield PF (Fast Track) - Earliest 2013 Pumped Storage Braamhoek - Earliest 2011 Greenfield FBC Fast Track - Earliest 2011 Greenfield CCGT Generic - Earliest 2010 Capacity (MW) 50 000 45 000 CCGT 1 - Earliest 2009 Brow nfield PF- Earliest 2009 Komati - Earliest 2010 Open Cycle GT - Earliest 2008 Grootvlei Earliest 2007 40 000 Camden 35 000 30 000 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 Years Total Existing System (Including Decommissioning) Total Imports (MW)Cahora Bassa Hydro firm RTS Simunye Plants Build Pumped Storage Plants (Peaking) Build Open Cycle Gas Turbine plants (Peaking) Build Base Load Plants Forecast peak Demand before DSM Peak Demand after DSM Required Capacity (Approximately 12% RM) Required Capacity at 15% RM EX Eskom, Lead time ref 2004
Role 2 To proactively assist government to redress the country s social infrastructure backlog brought about by rapid population growth and decades of neglect
Social infrastructure lagging population growth 2 Growth in population vs Stock of Social infrastructure Percentage Point 1 0-1 -2-3 -4 1985 1990 1995 2000 Year EX SARB and ASSA
The role of construction Category Type of Investment Impact on Society/Economy Social infrastructure Economic infrastructure Housing Schools Hospitals Water and Sanitation Telecommunications Electricity Roads, rail, ports, airports Pipelines Manufacturing & Mining Health Education Welfare Productivity Human Dignity Economic growth National competitiveness Job creation Tax generation Foreign direct investment
Question 2 How do we fulfill this role responsibly? Transforming our industry
Black contracting participation 70.00% 60.00% 50.00% 40.00% 30.00% 20.00% 10.00% 0.00% 2002 2001 2000 1999 1999 1998 1997 1996 1996 1995 1994 1993 1993 1992 1991 1990 1990 emerging (%of Value) emerging (% of Number) 5 qrt ma (%value) EX SAFCEC Percentage of Total on Database
Current status of transformation in the contracting industry Ownership 10%-14% Senior management All 6% Women - 0% Middle management All -15% Women 1% Junior Management All 56% Women - 2% EX IMC
Construction Management Graduations 75 Universities Technikons 300 50 200 25 100 0 0 1986 1988 1990 1992 1994 1996 1998 2000 2002 1986 1988 1990 1992 1994 1996 1998 2000 2002 White Black 75 300 White Black 50 200 25 100 0 0 1986 1988 1990 1992 1994 1996 1998 2000 2002 1986 1988 1990 1992 1994 1996 1998 2000 2002 Male Female Male Female EX Allyson Lawless
Civil Engineering Engineers & Technologists 69 64 Black White 59 54 Age 49 44 39 34 29 24 0 50 100 150 200 250 300 Number per age group June 2004 EX Allyson Lawless, June 2004
Business/Enterprise Development Number of companies per size category 1-5 6-10 11-20 21-30 31-50 51-75 76-100 101-250 251-500 501-1000 1000+ EX Allyson Lawless
Business/Enterprise Development Demographic distribution and size of companies in the construction sector 90,000 Staff in Total of 11441 Black Companies Staff in Total of 8412 White Companies 60,000 Number of staff 30,000-1-5 6-10 11-20 21-30 31-50 51-75 76-100 101-250 251-500 501-1000 1000+ Size category Ex Allyson Lawless
Question 2 How do we fulfill this role responsibly? Transforming our industry Building skills
Civil engineering employment 140,000 Number of Employees 120,000 100,000 80,000 60,000 40,000 73 78 83 88 93 98 03 Years EX SAFCEC
Dramatic drop in artisan registrations 2000 1500 1000 500 0 64 68 72 76 80 84 88 92 96 00 Artisans Registered Building Industry Artisans Registered EX Allyson Lawless
Civil engineering graduates down 500 400 300 200 100 0 1960 1965 1970 1975 1980 1985 1990 1995 2000 Number of graduates Civil spending (Rbillion) 40 35 30 25 20 15 10 5 Year Civil engineering graduations Civil spending EX Allyson Lawless, Inflation adjusted base 2000
Training and Education 70,000 Extra Engineers & Employees needed to cater for anticipated growth 6,000 Employees 60,000 50,000 40,000 30,000 20,000 10,000 5,000 4,000 3,000 2,000 1,000 Civil Engineers 0 0 2016 2015 2014 2013 2012 2011 2010 2009 2008 2007 2006 2005 EX SAFCEC
Question 2 How do we fulfill this role responsibly? Transforming our industry Building skills Creating jobs
Workload GDP and Construction Growth 20 15 GDP growth Construction growth Percentage (%) 10 5 0-5 -10-15 60 65 70 75 80 85 90 95 00 Year EX SARB
Nominal & Inflation adjusted interest rate Percentage (%) 30 25 20 15 10 5 0-5 -10 Nom Infl Adj 80 82 84 86 89 91 93 95 97 99 01 03 05 Year EX SARB
EPWP Support Programme EPWP s goal is to create 1 million short-term work opportunities for unskilled, marginalised, unemployed people over the next 5 years EPWP will provide poverty and income relief through temporary work to carry out socially useful activities EPWP will seek to equip these people, with a modicum of training and work experience, which should enhance their ability to earn a living in the future The focus is on four sectors
Targets for first five years of EPWP Sector Work opportunities (average duration) Person-years Infrastructure 900 000 (four months) 300 000 Environmental and cultural Social (excluding home-based care) 200 000 (one year) 200 000 20 000 (two years) 40 000 Economic 3 000 venture learnerships (18 months) 9 000 employees 18 000 Total 1 million plus 500 000 plus
Question 2 How do we fulfill this role responsibly? Transforming our industry Building skills Creating jobs Assist in building institutional capacity
Building public sector institutional capacity Civil/Roads/Transport 24% Infrastructure maintenance 19% Low cost housing 13% Building 24% Residential services 13% Provincial infrastructure 7% Government infrastructure spending - 2005 to 2008 R167 billion
Building institutional capacity for Soccer World Cup Award of 2010 World Cup Establishment of L.O.C 2004 2005 2006 2007 2008 2009 Initial delivery Adjusted delayed delivery Unchanged delivery Government enabling legislation 2010 Audit of provinces & stadia Design, build and upgrade stadia SAFA infrastructure completion FIFA final inspection Gautrain award Gautrain Airports Roads & stadium precincts Hotels & private developments CAF VP Soccer Tournament Soccer World Cup
Private/Public sector institutional capacity The institutional complexities in the sector are reflected by: Great number of public sector clients 6 National departments 9 Provincial departments: transport, roads, works 240 Local authorities a number of public corporations Myriad of private sector clients 13 Private sector bodies representing service providers
Question 2 How do we fulfill this role responsibly? Transforming our industry Building skills Creating jobs Assist in building institutional capacity Assist in streamlining the regulatory environment
Streamlining regulatory environments In excess of 120 pieces of legislation are impacting on the Construction Sector Confusion around and lack of consistency with regard procurement rule applications, PPPFA CIDB register PLUS local registers PLUS Professional Council registrations: duplications Regulatory Impact Assessments needed Cost of compliance and lack of consistency in the application of the legislation Inhibiting impact of legislation on company development and growth etc
How do we make the charter work for us?
How do we make the charter work for us? Targets for Change Training Costs 1.0 1.5 Learnerships 1.0 2.5 Bursaries 0.3 0.2 CSI 0.25 0.0 Status Quo Targets 0 0.5 1 1.5 2 2.5 3 Percentage EX Charter Draft 4 & IMC
How do we make the charter work for us? Targets for Change Ownership 30 14 Status Quo Targets Control: Board 40 26 Control: Exec Man 40 6 Senior Management 40 6 Middle Management 40 15 Junior Management 65 56 Procurement 70 12 0 10 20 30 40 50 60 70 80 Percentage EX Charter Draft4 & IMC
Challenges Adopt a growth mentality Development of people and enterprises Development of technical and administrative capacity of the state at all levels to execute the works Investment in infrastructure to be planned to reduce the cyclical nature of the industry to underpin more consistent employment growth Streamlined and consistent application of the regulatory framework Construction Sector to develop co-ordinated approach for all role players
Thank you Questions www.aveng.co.za