LITERATURE REVIEW ON EMPOWERMENT
2.5 Empowerment in the South African Construction Industry
shareholders and previously disadvantaged management are present. They do concede, though, that most bids are weak on at least one of these aspects of empowerment (Sikhakhane, 1998).
2.4.9 Minority enrichment
The unstated objectives of black economic empowerment have changed over time. Before 1990, the aim was to try and give disadvantaged people an opportunity to participate in the mainstream economic activities of South Africa, albeit under very repressive and restrictive political circumstances. From the unbanning of the African National Congress in 1990 leading up to the General Elections in 1994 and afterwards, black empowerment took on a strong ideological flavour.
It was seen as a vehicle of wealth redistribution to the previously disadvantaged masses. It was envisaged that the active participation of blacks in the economy would create value with a commitment to assist in the social upliftment of the poor by creating jobs and contributing to programs of social development and sustainability.
Ten years later, the emerging portrait is that of a very few rich black business people who have created a disappointingly small number of jobs for their compatriots and worse, who do not seem to be about to change course. In some quarters, disillusionment has set in (Estehuyse, 1996). The NAIL case recounted earlier did not help to alter this view. One of the questions that the Black Economic Empowerment Commission has been asked to answer in its assessment of the process to date is whether what has been seen up to now is true empowerment or just enrichment (Shubane et al., 1999).
CIDB chairperson Brian Bruce sees BEE in the construction industry happening on three levels - internal quality, strategic partnerships and services procurement. At the moment procurement is a "Iow-hanging fruit" in terms of driving the empowerment process. However, the procurement policy is hampering empowerment progress, and the Department of Public Services' current review of government policy is a positive sign (Bruce, 2003).
A root cause of some empowerment failures in the sector is the use of the archaic British system of separating the 'design' and 'build' phases of construction management. There are indications that throughout the world, governments are shelving technical and project management capacity and focussing more on policy development. This has resulted in a greater degree of project management expertise being used to integrate management of the two phases. In South Africa, the private sector is following the best practice, as is the State's privatisation process. However, much of public sector design falls within the roster system whilst building or construction falls within the competitive tender process where lowest price is the main consideration.
Procurement initiatives are based on lowest price and empowerment participation. This means a black entrepreneur with little expertise in construction could potentially win a tender if he/she submits a low-priced bid, while other more skilled empowerment participants with more realistically priced bids would fail to benefit from the opportunity.
The SA Federation of Civil Engineering Contractors (Safecs) estimates empowerment participation in the civil engineering industry at about 28 percent. This is based on BEE enterprise activity at project level, with these enterprises not necessarily wholly owned by black people, which mean that actual black beneficial participation could be less than 28 percent. Also, empowerment mainly occurs in the value-add component of construction, which is about 20 percent of the costs of construction (that is, the high risk area of construction and project management). However with the 60 to 80 percent of the cost of construction in material and services, the significant contributor to such costs is largely un-empowered. For example, the cement aggregate and brick businesses are major suppliers to the construction industry but lack a significant empowerment arm.
Recently, there has been a greater empowerment focus on contractors and less on material and services, mainly because the barriers to entry for black people to become contractors are low relative to the high capital and market sustainability requirements to manufacture cement, bricks or steel.
Empowerment contractors often risk late payments due to poor financial administration procedures at local government level, which means small empowerment contractors frequently go out of business. The failure rate amongst small black businesses in this sector is high. Improvement of the public sector's capacity should be added to the empowerment objectives set out for the private sector to increase its commitment. Industry participants anticipate a partnering approach in which the private sector engages empowerment activity whilst the state initiates proper processes in order
to enable competent empowerment implementation. For example, municipalities could build empowerment criteria into the application process for building permits. Another example is that of Blue IQ projects like the Mandela Bridge completed in July 2003.
James Mbentse, chairman of the National African Federation Building Industry (Nafbi), notes that there is R35-billion worth of turnover in the industry, but it is difficult to assess what percentage is black because of the common partnerships of convenience.
In terms of empowerment in the future, Nafbi sees the industry as composed of a range of equal- opportunity companies if the concept of partnering is to be explored and implemented effectively.
The organisation also envisages black ownership of the construction industry as a harder target to achieve than black participation through suppliers of goods and services to the industry. Nafbi agrees that an increase in partnerships with major industry players who have the capacity for development is required if it is to reach its empowerment goals. It also acknowledges that the Public Private Partnership models as well as the SETAs1are useful in the development of capacity amongst black people. Nafbi's long-term goal is to move black people up the pyramid shown below, from construction workers to professional managers of large corporates, with competency to deliver value to stakeholders.
Corporate
Large Black Construction Companies
Black SMME's
Black construction workers
Figure 3 - Nafbi long-term envisaged pyramid for black construction companies
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Setas - Sectorial Education and Training Authorities previously known as Training Boards Page - 53-