Authorisation of the Sector Skills Plan Update

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1 Sector Skills Plan Update: 2013/2014

2 Authorisation of the Sector Skills Plan Update We, the undersigned, hereby endorse and approve, on behalf of the Construction Sector Education and Training Authority (CETA) and Management, the contents of the Sector Skills Plan Update for the year Approved By: Signature.. CETA CHAIRPERSON Date:. Signature.. CETA CEO Date:. 2

3 Table of Contents TABLE OF CONTENTS... 3 LIST OF TABLES... 5 LIST OF FIGURES... 6 ACRONYMS... 7 EXECUTIVE SUMMARY... 9 CHAPTER 1: SECTOR PROFILE INTRODUCTION DEFINING THE CONSTRUCTION SECTOR SIZE AND SHAPE OF THE CONSTRUCTION SECTOR EMPLOYMENT TRENDS EMPLOYMENT CATEGORIES AND REMUNERATION LINKAGES WITH OTHER SECTORS ECONOMICS OF THE SECTOR STAKEHOLDERS IN THE CONSTRUCTION SECTOR CONCLUSION CHAPTER 2: SECTOR ANALYSIS INTRODUCTION ECONOMIC PERFORMANCE AND OUTLOOK EMPLOYER DYNAMICS FACTORS IMPACTING DEVELOPMENT IN THE SECTOR GOVERNMENT INFRASTRUCTURE NEEDS QUALITY STANDARDS CONCLUSION CHAPTER 3: SUPPLY OF SKILLS INTRODUCTION HIGHER EDUCATION PROVISION CETA FUNDED PROGRAMMES EMPLOYER TRAINING ACADEMIES GOVERNMENT PROGRAMMES CONCLUSION CHAPTER 4: DEMAND FOR SKILLS INTRODUCTION LABOUR DEMAND IN THE SECTOR FUTURE PROJECTS AND INVESTMENTS SCARCITY OF SKILLS DEMAND AND SCARCITY STRATEGIC INTEGRATED PROJECTS PIPELINE SKILLS CHAPTER 5: SECTOR DEVELOPMENT STRATEGY INTRODUCTION STRATEGIC GOAL 1: ESTABLISHING A CREDIBLE MECHANISM FOR SKILLS PLANNING STRATEGIC GOAL 2: INCREASING ACCESS TO OCCUPATIONALLY-DIRECTED PROGRAMMES STRATEGIC GOAL 3: PROMOTING THE GROWTH OF A PUBLIC FET COLLEGE SYSTEM THAT IS RESPONSIVE TO SECTOR S SKILLS NEEDS AND PRIORITIES STRATEGIC GOAL 4: ADDRESSING THE LOW LEVEL OF YOUTH AND ADULT LANGUAGE AND NUMERACY SKILLS TO ENABLE ADDITIONAL TRAINING IN CONSTRUCTION STRATEGIC GOAL 5: ENCOURAGING BETTER USE OF CONSTRUCTION WORKPLACES FOR SKILLS DEVELOPMENT 112 3

4 5.7 STRATEGIC GOAL 6: ENCOURAGE AND SUPPORT SMALL ENTERPRISES (INCLUDING NON-PROFIT ORGANISATIONS) COOPERATIVES AND WORKER-INITIATED TRAINING INITIATIVES IN THE CONSTRUCTION SECTOR STRATEGIC GOAL 7: INCREASING, THROUGH CONSTRUCTION-RELATED SKILLS, PUBLIC SECTOR CAPACITY FOR IMPROVED SERVICE DELIVERY AND SUPPORTING THE BUILDING OF A DEVELOPMENTAL STATE STRATEGIC GOAL 8: BUILDING CAREER AND VOCATIONAL GUIDANCE FOR CONSTRUCTION CHAPTER 6: M&E FRAMEWORK REFERENCES

5 List of Tables TABLE 1 SIC CODES IN THE CONSTRUCTION SECTOR...22 TABLE 2 GRADE 1-9 CONTRACTOR REGISTRATIONS BY CLASS OF WORKS...26 TABLE 3 CLASSIFICATION OF EMPLOYERS BY SUB-SECTOR AND SIZE...28 TABLE 4 LOCATING THE REGISTERED EMPLOYERS...30 TABLE 5 EMPLOYMENT BY INDUSTRY, TABLE 6 DEMOGRAPHIC PROFILE OF REGISTERED PROFESSIONALS PER COUNCIL...33 TABLE 7 DISTRIBUTION OF CONSTRUCTION EMPLOYMENT...33 TABLE 8 DISTRIBUTION OF EMPLOYEES IN LEVY PAYING COMPANIES...34 TABLE 9 EXAMPLE OCCUPATIONS IN THE SECTOR...35 TABLE 10 PAY SCALES FOR QUANTITY SURVEYING PROFESSIONS...36 TABLE 11 SECTOR LINKS...37 TABLE 12 STAKEHOLDERS IN THE CONSTRUCTION SECTOR...40 TABLE 13 REPORT CARD ON SOUTH AFRICA S ROAD INFRASTRUCTURE...48 TABLE 14 FINANCIAL SITUATION OF MAJOR CONSTRUCTION COMPANIES...49 TABLE 15 TURNOVER DISTRIBUTION BY SUB-DISCIPLINE IN Q1: TABLE 16 TURNOVER DISTRIBUTION BY CLIENT IN Q1: TABLE 17 PROVINCIAL DISTRIBUTION OF CIVIL CONTRACTS AWARDED, BY VALUE, BY QUARTER, TABLE 18 DPW MEDIUM TERM EXPENDITURE BUDGET FOR INFRASTRUCTURE...56 TABLE 19 PUBLIC SERVICE INFRASTRUCTURE REQUIREMENTS...63 TABLE 20 EDUCATION & TRAINING PROVISION IN THE CONSTRUCTION SECTOR...71 TABLE 21 NUMBER OF LEARNERS THAT THE CETA HAS FUNDED ACROSS THE VARIOUS SUB-SECTORS...79 TABLE 22 THE TOP 20 OCCUPATIONS ON WHICH TRAINING WAS CONDUCTED ACROSS ALL SUBSECTORS...80 TABLE 23 TOP 15 OCCUPATIONS WHERE TRAINING WAS CONDUCTED AMONG BUILDING CONTRACTORS...80 TABLE 24 TRAINING CONDUCTED IN THE BUILT ENVIRONMENT SUB-SECTOR...81 TABLE 25 TRAINING CONDUCTED IN THE CONSTRUCTION SUB-SECTOR...81 TABLE 26 TRAINING CONDUCTED IN THE ELECTRICAL CONTRACTORS SUB-SECTOR...82 TABLE 27 TRAINING CONDUCTED IN THE MATERIALS MANUFACTURING SUB-SECTOR...82 TABLE 28 UPGRADES FROM GRADES 1 TO 8 IN GB AND CE FROM Q2: 2012 TO Q1: TABLE 29 NUMBER OF SUCCESSFUL RPL CASES 2008 TO TABLE 30 HIGH DEMAND SKILLS...98 TABLE 31 DEMAND FOR SKILLS IN THE CONSTRUCTION SECTOR TABLE 32 CONSTRUCTION SUB-SECTOR SKILLS DEMAND TABLE 33 MATERIALS MANUFACTURE SKILLS DEMAND TABLE 34 ELECTRICAL CONTRACTORS SUB-SECTOR SKILLS DEMAND TABLE 35 SKILLS DEMAND IN THE BUILDING SUB-SECTOR TABLE 36 BUILT ENVIRONMENT PROFESSIONS SKILLS DEMAND TABLE 37 SKILLS DEMAND FOR SIPS

6 List of Figures FIGURE 1 ALL EMPLOYERS REGISTERED WITH CETA BY SIZE...27 FIGURE 2 UNALLOCATED SUB-SECTORS...28 FIGURE 3 DISTRIBUTION OF SUB-SECTORS...29 FIGURE 4 DISTRIBUTION OF EMPLOYERS ACCORDING TO SUB-SECTOR...29 FIGURE 5 PROVINCIAL BREAKDOWN OF REGISTERED COMPANIES WITH SIC CODES...30 FIGURE 6 COMPARISON OF LEVY PAYING AND NON-LEVY PAYING MEMBERS...31 FIGURE 7 EMPLOYMENT IN THE CONSTRUCTION SECTOR BY GENDER...32 FIGURE 8 COMPARISON OF FORMAL AND INFORMAL EMPLOYMENT IN THE CONSTRUCTION SECTOR...34 FIGURE 9 GOVERNMENT S INFRASTRUCTURE EXPENDITURE, 2010/ FIGURE 10 ACTUAL INFRASTRUCTURE EXPENDITURE AS A % OF BUDGET, 2010/ FIGURE 11 GROWTH IN GDP Y/Y AND Q/Q SEASONALLY ADJUSTED AND ANNUALIZED FIGURE 12 CONSTRUCTION SECTOR AND THE SOUTH AFRICAN ECONOMY, FIGURE 13 GROWTH IN BUILDING ACTIVITY (NET BALANCE)...44 FIGURE 14 GROSS FIXED CAPITAL FORMATION Q4: FIGURE 15 COMPOSITE BUILDING CONFIDENCE INDEX...46 FIGURE 16 INVESTMENT IN THE DIFFERENT SUBSECTORS OF THE CONSTRUCTION INDUSTRY FIGURE 17 EMPLOYEE ACCESS TO BENEFITS BY INDUSTRY...53 FIGURE 18 NATURE OF EMPLOYMENT CONTRACT OR AGREEMENT BY INDUSTRY...54 FIGURE 19 COLLECTIVE BARGAINING AMONG SECTORS...54 FIGURE 20 % OF GB AND CE BLACK-OWNED CONTRACTORS IN SOUTH AFRICA BY GRADE IN Q1: FIGURE 21 BLACK OWNERSHIP IN GB AND CE IN SOUTH AFRICA Q1: FIGURE 22 WOMEN OWNERSHIP IN GB AND CE IN SOUTH AFRICA IN Q1: FIGURE 23 GRADUATE OUTPUT FOR STUDENTS IN ARCHITECTURE AND THE BUILT ENVIRONMENT FIELD...75 FIGURE 24 GRADUATE OUTPUT FOR STUDENTS IN THE ENGINEERING FIELD...76 FIGURE 25 UPGRADES PER QUARTER Q2: 2009 Q1: FIGURE 26 HIGHEST EDUCATION QUALIFICATIONS IN THE CONSTRUCTION INDUSTRY, GRADES 2 TO FIGURE 27 TOTAL EMPLOYMENT IN THE CONSTRUCTION SECTOR BETWEEN JAN 2012 AND JUN FIGURE 28 COMPARISON OF FORMAL AND INFORMAL EMPLOYMENT IN THE CONSTRUCTION SECTOR...96 FIGURE 29 OCCUPATIONAL PROFILE OF EMPLOYEES IN THE CONSTRUCTION SECTOR...96 FIGURE 30 AGE OF EMPLOYEES

7 Acronyms Abbreviation ATR BER BIBC BRIC CBE CE CETA CHE CIDB CPDs DHET DHS DoL DPW EB ECSA EP EPW GB HEQC JIPSA MBA MBSA ME MoU MTEF NCDP NHBRC NQF NSF OFO PPP QCTO RPL SACAP SACLAP SACPVP SAFCEC SACPCMP SARS SACQSP SARB StatsSA SETA SIC Description Annual Training Report Bureau for Economic Research Building Industry Bargaining Council Brazil, Russia, India and China Council for Built Environment Civil engineering Construction Sector Education and Training Authority Council for Higher Education Construction Industry Development Board Contractor Development Programmes Department of Higher Education and Training Department of Human Settlements Department of Labour Department of Public Works Electrical engineering (building) Engineering Council of South Africa Electrical engineering (infrastructure) Expanded Public Works General building Higher Education Qualifications Committee Joint Initiative for Priority Skills Acquisition Master Builders Association Master Builders South Africa Mechanical engineering Memorandum of understanding Mid-term expenditure framework National Contractor Development Programme National Home Builders Registration Council National Qualifications Framework National Skills Fund Organising Framework for Occupations Public Private Partnerships Quality Council for Trades and Occupations Recognition of Prior Learning South African Council for the Architectural Profession South African Council for the Landscape Architectural Profession South African Council for the Property Valuers Profession South African Federation of Civil Engineering Contractors South African Council for the Project and Construction Management Professions South African Revenue Service South African Council for the Quantity Surveying Profession South African Reserve Bank Statistics South Africa Sector Education and Training Authority Standard Industry Classification 7

8 Abbreviation SIPs SSP SW WBHO WSP Description Strategic Integrated Projects Sector Skills Plan Special works Wilson Bayly Holmes-Ovcon Workplace Skills Plan 8

9 Executive Summary Introduction The purpose of this Sector Skills Plan (SSP) is to provide an update on the size and shape of the construction sector and analyse current trends impacting the sector so as to inform skills development interventions that can lead to sector growth and development. The information used to inform this sector skills plan was sourced through desk research, which involved a review of reports and data from Statistics South Africa (StatsSA), the South African Revenue Service (SARS), the South African Reserve Bank (SARB), and the Bureau for Economic Research (BER). Research reports and annual reports by industry councils, associations and boards, for example, the Council for the Built Environment (CBE); Construction Industry Development Board (CIBD), the South African Federation of Civil Engineering Contractors (SAFCEC); and Master Builders South Africa were also reviewed. Information from websites and annual reports as well as commissioned research by government departments including Department of Human Settlements (DHS), Department of Public Works (DPW), and Department of Labour (DoL) also informed the profile. Industry research and insight reports from KPMG, Creamer Media, Deloitte, Ernst & Young, and PriceWaterhouseCoopers were also consulted. Data from desk research was triangulated with data from a CETA database of levy and non-levy paying members. Data gathered from two surveys administered to CETA members also augmented the desk research. Further, 47 interviews were conducted with various stakeholders in the construction industry including training providers government departments, industry bodies, and contractors/employers that include the built environment, electrical, materials manufacturing and building sub-sectors. These interviews were aimed at investigating the sector context, including factors impacting growth and development, scarce and critical skills, as well as supply of and demand for skills. Inputs from a stakeholder workshop, conducted on 5 th November 2013 and attended by CETA stakeholders from 16 different organisations, was also considered in the preparation of the SSP. Sector Overview The construction sector is diverse, with five key sub-sectors comprising 70 different sector activities. The materials manufacturing sub-sector has 15 sector industry codes, and activities include manufacturing of various wooden fixtures, tiles, sanitary ware, ceramic products, concrete and cement products, tombstones, and roof trusses. This sub-sector plays a key role as construction projects needmaterials to be completed. With 25 sector industry codes, the construction sub-sector is the largest in the sector, and it includes civil engineering contractors, steel, structural, mechanical contractors, residential and non-residential contractors. There are four types of contractors in the construction sub-sector: Civil engineering (CE) contractors, who deal with water, sewerage, roads, railways, harbours and transport, urban development & municipal services, treatment, sanitation or soil conservation works; General building (GB) contractors, focusing all building processes such as renovation, maintenance or removal of permanent building structures. GB contractors construct buildings for domestic, industrial, institutional or commercial use, handle car ports, masonry, concrete walls and timber fences, stores, and walls; Mechanical engineering (ME) contractors deal with engineering infrastructure for gas transmission and distribution, solid waste disposal, heating, ventilation and cooling, chemical works, metallurgical works, manufacturing, food processing and materials handling. 9

10 Special Works (SW) contractors are broken down into a large number of different specializations. Among them would be areas such as the maintenance or renewal or removal of asphalt, shaft sinking and lateral earth support, corrosion protection systems, the demolition of buildings, drencher and sprinkler systems, landscaping, irrigation and horticultural works, installing escalators, constructing specialised foundations, installing or removing road markings and signage, installing or dismantling structural steelwork and scaffolding, the waterproofing of basements, the demolition of water installations, soil and waste water drainage, or steel and precast concrete palisade fencing, to mention just a few of their possible activities. The electrical sub-sector is the most contained, with only one sector industry code. Until 2011 electrical contractors used to fall under the energy sector, then they moved to the construction sector, which seemed a natural move as they were part of the building industry training board, and they carry outa lot of work in the construction industry. There are two groupings of electrical contractors: electrical contractors for infrastructure (EP) and electrical contractors for building (EB). The building sub-sector has 13 sector industry codes and covers all activities that pertain to the construction of buildings including plumbing, shop fitting, bricklaying, roofing, glazing, and fencing. This sub-sector is often sub-contracted to do work by large contractors, so there are inter-dependencies between the building and construction sub-sectors. Many of the building businesses are owner employed, and they have a short life span as they depend on large contractor projects to survive. Most of them are in the informal sector. The built environment professions sub-sector has 16 sector industry codes, and includes architects, engineers, quantity surveyors, landscape architects, land surveyors, town and regional planners, property valuers, project and construction managers.this sub-sector comprises the professionals governed by the Built Environment Professions Act, who are members of the six councils that fall under this sub-sector: Architects - South African Council for the Architectural Profession (SACAP; Engineers - Engineering Council of South Africa (ECSA); Quantity surveyors - South African Council for the Quantity Surveying Profession(SACQSP); Landscape architects - South African Council for the Landscape Architectural Profession (SACLAP); Project and construction managers - South African Council for the Project and Construction Management Professions (SACPCMP); and Property valuers - South African Council for the Property Valuers Profession (SACPVP). The councils provide up to date information on this sector through annual research and they also conduct commissioned research. The classification of work in the construction and electrical sub-sectors is used by the Construction Industry Development Board (CIDB) to classify businesses in the sector. Data from the CIDB register of contractors shows that in November 2013, there were 115,161 contractors of classes 1-9 distributed as shown in the following table. 10

11 Construction businesses by class of work and grading, November 2013 Designation CE EB EP GB ME SW Total Total Source: CIDB website The lower the grade the smaller the contractor and the limited potential for big tenders. The CETA database of levy paying employers indicates that there are 44,865 employers registered with CETA. About 95% of these employers are small, employing less than 50 employees. Most of the registered members are in Gauteng, the Western Cape, and KwaZulu Natal as highlighted in the following table. Members registered with CETA by levy paying status Levy Paying Non Levy Paying 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% Eastern Cape Source: CETA database Freestat e Gauteng KwaZulu -Natal Limpopo Mpumal anga North West Norther n Cape Western Cape Non Levy Paying Levy Paying The construction sector is one of the top 10 large employers in South Africa. Data from StatsSA shows that there was a steady employment growth in the sector from April 2012 June A comparison of how the construction sector fares on employment compared to the other sectors is presented below. 11

12 Sector employment data from StatsSA Apr- Jun 2012 Jun- Mar 2013 Apr- Jun 2013 Qtr to Qtr change Yr on Yr change Qtr to Qtr change Industry % % Yr on Yr change Total* ,7 2,0 Agriculture ,6 11,6 Mining ,4 4,5 Manufacturing ,0 3,4 Utilities ,7 16,6 Construction ,1 7,0 Trade ,8-2,0 Transport ,3 5,1 Finance and ,1 4,7 other business services Community ,7 1,3 and social services Private households ,1-5,2 The sector has always been dominated by male employees, and the perception is that this is as a result of the physical nature of the work. However, this is not necessarily the case with some built environment professions, where there are also a limited number of women employees. The following table shows the stark contrast between male and female employment in the sector. Employment figures in the sector by gender Gender dynamics of employment in the sector Women Men Source: StatsSA 12

13 The sector has a large informal sector which offers employment to thousands of people. The following table gives a comparison of formal and informal employment in the sector. Formal and informal employment Comparing formal and informal employment Formal Informal Apr-Jun 2011 Apr-Jun 2012 Apr-Jun 2013 Source: StatsSA The construction sector has upstream and downstream linkages with a vast number of other sectors. For example, the mining industry requires machinery, chemicals, wooden structures, cranes, provided by the materials manufacturing sub-sector, and home owners require building materials. The manufacturing sector requires raw materials. Housing, property, conservation, safety, public works, human settlements, tourism and leisure, public works, banking, marketing and sales, consumer satisfaction, environment, health and sanitation all require building services from the building subsector. The construction stakeholders include both the national government and industry stakeholders, who must play their part in ensuring the growth and success of the construction industry. Communication and cooperation with the CETA is crucial to promote, develop and support the construction sector. The CETA must make efforts to nature relationships with all stakeholders for mutually beneficial relationships for the growth of the sector. Sector analysis The construction sector has a very strong research culture, with industry updates being produced quarterly. This research is significant for the sector as it is useful to understand trends for planning of work programmes. This research is also important for the CETA to inform skills development interventions. Sector growth and development is very much influenced by economic trends. When there are economic hardships, demand for construction activities are put on hold, particularly in the private household sector. As such, when the economy is depressed, those working in the building subsector particularly, including builders, electrical contractors and materials suppliers are negatively affected. The impact of economic depression on large and small firms is different and so are their operations. Large firms operate nationally and internationally and there are opportunities in the rest of Africa while small firms are dependent on provincial and local government projects. 13

14 The sector is dominated by a large contingent of small employers. There are eight large companies with a high grading, a wider geographic reach and diversification of activities. These characteristics earn them huge incomes as they manage large projects. The eightlarge companies in the SA construction industry areaveng, Basil Read, Esorfranki, Group Five, Murray & Roberts, Raubex, Stefanutti Stocks and Wilson Bayly Holmes-Ovcon (WBHO). They employ large workforces. Because of the contract based nature of work, the sector has limited employment benefits like medical aid, leave and pension schemes. There is also limited labour organisation. The fact that companies are largely small means that most people work for themselves, and this condition is not conducive for labour organisation. Government macro strategies, including The New Growth Path, The National Development Plan, Industrial Development Zone, Strategic Integrated Projects(SIPs), and the Comprehensive Rural Development Programme, are all supportive of sector growth. The SIPs particularly envisage government spending of R4 trillion over the next 15 years, with about R823 billion of this funding targeted for spending within the next three years. If the SIPs are implemented successfully, they will inject some growth into a sector that is slowly recovering from the global economic downturn. Besides the big infrastructure and other projects that earn the sector income from government, government s own infrastructure needs provide work and income; all government departments have a need for repairs of their buildings. Further, as part of their service delivery programmes, government departments also have projects that require input from the construction sector, for example dam building for the departments of Water Affairs, expansion of prison buildings for the Department of Correctional Services, and the erection of fish processing facilities and aquaculture facilities for the Department of Agriculture, Forestry and Fisheries. Although the prospects of growth for the sector are possible, the sector has to improve on its strengths, acknowledge its weaknesses, to explore how they can be strengthened, seize opportunities for growth, and manage potential threats. The following SWOT analysis highlights these aspects. Strengths Industry is recovering well from economic recession Business have received a lifeline from the business rescue plan Industry bodies conduct useful research Large companies depend on small companies and sustain them Opportunities Government plans to spend R4 trillion on SIPS over the next 15 years Poor maintenance culture in government creates work for the sector Large companies have international and regional presence 14 Weaknesses Government is greatest client, but government has poor spending record Only a few companies pay levies so resources for skills development stretched Before construction starts, money has to be invested in materials Small companies operating in the informal sector may miss skills development opportunities Work is project based so there are periods where there is no work. Threats Economic recession affects the industry negatively Lack of material will affect completion of projects Any budget cuts will affect the industry negatively

15 Contractor development programmes will develop small and rural contractors for SIPs readiness Corruption in tendering Local government, which supplies work to small contractors, has a poor spending record Supply of skills The supply of skills training in the construction sector is varied and located at different institutions. Formal training consists of short learning programmes, certificates, diplomas, degrees and postgraduate degrees. Such training includes CETA funded and non-ceta funded training and is located largely in higher education institutions as well as at FET colleges and private providers (including employer training academies). Informal training consists of on-the-job training, coaching and mentorship. There are vast differences in the training and education required for the five sub-sectors of the construction industry. Electrical contracting, Construction and the Built Environment sub-sectors involve university education whilst Materials Supply requires either university or some other tertiary education from FET institutions. Training for the Building sub-sector can be obtained via an FET college or through an apprenticeship. The CETA has been involved in some degree of training but the decline in the number of employers submitting Workplace Skills Plans (WSPs) and Annual Training Reports (ATRs) and a failure to disburse CETA funds has reduced this portion of training significantly. Given the skills shortages within the construction sector, an in-depth assessment of current training provision is worth pursuing. As it stands, existing data collected on the supply of skills in the sector, based on the desk review conducted, the data that emerged from stakeholder interviews, the online survey and the WSP and ATR analysis, points to a number of key issues. Despite national increases in the number of science, engineering and technology (SET) enrolments from in 2000 to in 2011 and a 2% rise in the graduation rate from 27% to 29%, South Africa still does not produce enough skills in SET to meet its developmental objectives and continues to lag behind fellow BRIC countries (Brazil, Russia, India and China)such as India and Brazil in the production, for example, of qualified engineers. The development of artisans nationally has only just begun to increase again in recent years after having fallen dramatically between 1985 and Although the above is a reflection of the national skills dilemma, the construction sector plays a crucial role in feeding into the supply of artisanal, engineering and other related skills. Thus, inadequate supply at the sectoral level influences the supply of skills nationally. In the private sector there are huge investments being made in skills training via a range of training academies located in-house. Government skills programmes such as the National Contractor Development Programme and the Extended Public Works Programme have also contributed to supplementing skills development nationally. The CETA has a significant role to play in contractor and sub-contractor training and development in areas such as mentor and assessor training, ABET, financial management, project management, promoting Recognition of Prior Learning (RPL) process, assessing training outcomes and the awarding of qualifications, and selecting the most effective service providers for the delivery of training programmes. A large percentage of employees in the construction sector do not have formal qualifications but have years of experience in working in the sector. The role of RPL in recognising such experience and in providing these employees with the opportunity to obtain a formal qualification/s is important. RPL remains an area of weakness within the construction sector. Between 2008 and 2012 there were only 106 successful RPL cases reported across the six main professional bodies in the sector. 15

16 The development of qualifications and training programmes that are relevant to industry needs is a priority. Partnerships between providers (particularly public institutions such as FET colleges and universities of technology), employers and industry bodies are key to insuring such relevance. The CETA is well positioned to play a meaningful role here. Equally important is the need to place learners within public and private industry so that they may complete the workplace based experience component of their training. Poor competency in mathematics and science is a reality facing all providers in the system and one that needs to be recognized and addressed. The labour market absorption capacities of the construction sector appear varied across the sub-sectors and require further analysis. Small and micro enterprises within the construction sector require skills programmes designed to suit their skills needs. Similarly, the cyclical nature of the sector demands flexibility in the supply system so that it may respond to cyclical changes in skills demand. Institutions offering shortterm skills programmes are probably better suited to meet these changing needs. The CETA, industry and professional bodies and training providers need to work together to produce skills sets that are carefully aligned to actual skills demanded by employers. Demand for skills Workplace Skills Plan submissions have fluctuated over the last three years, and only a limited number of employers in the sector are submitting WSPs in 2013, only 572 WSPs were submitted. As such, WSP data available is very limited in determining skills needs. The data from WSPs was triangulated with that from interviews and surveys, although this was also limited data due to poor participation. Demand data presented in this SSP is therefore based on general data for the sector as well as demand data for SIPs. The table below shows the skills demand for the different occupational groups from 2011 to The highlighted occupational groups have the highest demand: technicians and associate professionals; trades workers and elementary occupations. Occupational Major Group 2011 % of Total 2012 % of 2013 % of Total Total Managers % % % Professionals % % % Technicians and Associate % % % Professionals Clerical Support Workers % % % Service and Sales Workers 550 1% 639 1% 232 1% Trades Workers % % % Plant and Machine Operators and % % % Assemblers Elementary Occupations % % % Total % % % Source: CETA database The demand for the broad occupational groups is consistent over the years for all occupational groups with a slight variation for some, but there is a huge peak for plant and machine operators and assemblers in The demand for skills for SIPs was debated in a stakeholder engagement between CETA and member organisations. The top five skills needs for each occupational group are presented below. 16

17 OFO Major Group Top 5 Scarce Skills: OFO Occupation Annual Number Managers Construction Project Manager Site Manager Operations Foreman Non Manufacturing Programme or Project Manager Environmental Manager 7017 Engineering Manager 5845 Professional Civil Engineer Safety Health Environment and Quality SHE&Q Practitioner Electrical Engineer incl. power and railway signalling engineer) Mechanical Engineer Surveyor incl. land and engineering surveyors Technicians and Associate Building Associate incl. construction supervisor and clerk Professionals of works) Electrical Engineering Technician Draughtsperson Mechanical Engineering Technician Forestry Technician Clerical Support Workers and Service Program or Project Administrators Assistants and Sales Workers Accounts Clerk 5489 General Clerk 2849 Traffic Officer 2797 Security Officer 2321 Trades Workers Concreter Bricklayer Electrician Industrial Machinery Mechanic Mechanical Equipment Repairer Plant and Machine Operators and Assemblers Truck Driver General Grader Operator Crane or Hoist Operator Excavator Operator Earthmoving Plant Operator General Elementary Occupations Drainage Sewerage and Storm Water Worker Handyperson Earthmoving Worker Store Person Cement and Concrete Plant Worker incl. placer and finisher Source: DHET SIP Scarce skills list Given these partial figures, there is some serious and dedicated training that is needed to prepare an effective workforce for the roll out of SIPs. The challenge is striking the balance between skills needed now and in the short term, and those needed for the longer term. 17

18 Sector Strategy As the driver of the skills development revolution for the sector, the CETA has considered the challenges emanating from an analysis of the sector, including supply. CETA has also looked at demand to make decisions on the sector development strategy. Input has been provided on this strategy by sector stakeholders. The following table maps out sector challenges and CETA strategy against NSDS III objectives. NSDS Strategic Objectives Establishing a credible mechanism for skills planning Sector Challenges Capacity challenges within CETA Limited information on some sub-sectors particularly electrical Lack of coordinated information on available research No scarce and critical skills list available No tracking system to track graduates and develop better intelligence on graduate destination Strained relations with constituencies Limited submission of WSPs and ATRs No M&E framework for interventions Provision is extensive, but no central knowledge of all interventions CETA website not being utilised effectively as a relay for information CETA Strategy Provided experiential learning on SSP processes like instrument design, data analysis and report writing to CETA staff. Early implementation of SSP update to allow for mentoring time and participation by staff. Conduct dedicated sub-sector research where necessary. Set up research advisory group comprising industry experts to advice on research needs and methodologies. Embed monitoring and research as integral aspects of project implementation. Set up databank to collect all industry research and keep it at a central point. Compile sharable scarce skills lists and enlist industry feedback and verification. Invest in a tracking system to improve understanding of graduate destination. Conduct road shows, some in the rural areas, to reach out to constituencies. Train SDFs to increase submission of WSPs and ATRs Set up help desks to assist with queries during WSP and ATR submission times. Develop standard operating procedures on how to communicate with stakeholders. Develop an implementation plan with prioritised interventions, and monitor project implementation. Evaluate impact of interventions. Conduct research on supply side for the sector. Conduct heuristic evaluation of website to gain insight on how it can be improved and improve it to make it the most popular landing page for the 18

19 NSDS Strategic Objectives Increasing access to occupationallydirected programmes Promoting the growth of a public FET college system that is responsive to sector s skills needs and priorities Addressing the low level of youth and adult language and numeracy skills to enable additional training in construction Encouraging better use of construction workplaces for skills development Encourage and support small enterprises (including non-profit organisations) cooperatives and worker-initiated training initiatives in the construction sector Increasing, through construction-related Sector Challenges Impact of contractor development programme unknown. Shortage of mentors. Lack of knowledge on SIPs Funding cycles not supportive of sector work context. Challenging to get workplaces learners. for FET Colleges finding accreditation process cumbersome Some qualifications will expire in 2015 Number of NEETs too high in the country. Low literacy, numeracy and science skills. Many people in the informal construction sector experienced but with limited qualifications Shortage of mentors FET Colleges having difficulty placing learners in the workplace NGOs and cooperatives in the sector not documented. Small enterprises discouraged by cumbersome skills development process. Procurement processes and skills in 19 CETA Strategy sector. Conduct research on impact of contractor development programmes. Conduct research to understand mentoring in the sector. Support mentor development and utilise sector input on pathways. Mentor training should have a special focus on women to encourage more young women into the sector. Convene information sharing sessions on SIPs. Revise funding to align cycles with sector needs. Establish linkages between providers and employers. Convene workshops on accreditation Develop guidelines on accreditation. CETA to engage QCTO and position themselves for assistance with course migration from SAQA to QCTO. Assist FET colleges with developing bridging programmes in maths, science and literacy to enable entry into FET by unemployed youth. Conduct research on skills needs of young people in the informal sector. Support RPL process Conduct National Skills Fund (NSF) funded research on needs of youth and other people in the informal sector. Support mentor training and RPL processes. Negotiate access to workplaces. Link providers with employers. Research into NGO and cooperatives Workshop small enterprises, NGOs and cooperatives on skills development process Partner with DTI to support setting up of cooperatives and training for women, youth and military veterans. Compile lessons learnt on procurement from sector

20 NSDS Strategic Objectives skills, public sector capacity for improved service delivery and supporting the building of a developmental state Building career and vocational guidance for construction Sector Challenges government viewed in the sector as not effective and efficient Low participation of women in sector. Shortage of skills. CETA Strategy Capacitate government officials on procurement process Develop career guide Disseminate career guide widely and target women and youth 20

21 Chapter 1: Sector Profile 1.1 Introduction The purpose of this chapter is to provide an overview of the construction sector in the context of skills development in South Africa. The information for developing this sector profile was gathered through desk research by reviewing data and information from several institutions including Statistics South Africa (StatsSA), the South African Revenue Service (SARS), the South African Reserve Bank (SARB), and the Bureau for Economic Research (BER). Research reports and annual reports by industry councils, associations and boards, for example, the Council for the Built Environment (CBE); Construction Industry Development Board (CIBD), the South African Federation of Civil Engineering Contractors (SAFCEC); Master Builders South Africa were also consulted. Further, information from websites and annual reports as well as commissioned research by government departments including Department of Human Settlements (DHS), Department of Public Works (DPW), and Department of Labour (DoL) also informed the profile. Industry research and insight reports from KPMG, Deloitte, Ernst & Young, Creamer Media and PriceWaterhouseCoopers were also consulted to inform this sector profile. The desk research that informs the profile is triangulated with data from CETA levy paying members, data from two surveys that were administered as part of the data gathering process, as well as interviews conducted with stakeholders. Two survey questionnaires were developed for dissemination to contractors. The first survey focused broadly on all sector issues, including company classification, factors impacting the sector, critical and scarce skills, and perceptions of stakeholders on the strategic focus of CETA. The second questionnaire was specifically on Strategic Integrated Projects(SIPs) given their significance in the economy and their potential to facilitate growth of the sector. The SIP Survey probed whether companies will get involved in SIPs or not, and what their reasons are for their stand point. It also explored the skills that the companies have to be able to participate in SIPs, and what role companies envisage for themselves. In total, 139 questionnaire responses were received, based on 86 CETA survey and 53 SIP survey. Although this number of returns is small compared to the number of companies in the sector, the data provided is nonetheless useful and offers an opportunity to test the validity of desk research data. The 47 interviews that were conducted as part of the SSP development process with providers and stakeholders in government, industry bodies, and employers that includedthe built environment, electrical, materials manufacturing and building sub-sectors. These interviews were aimed at investigating the sector context, including factors impacting growth and development, scarce and critical skills, as well as supply of and demand for skills. Most of the interviews were conducted face to face, except where it was not possible to do so, telephonic interviews were conducted. Semi- structured interview schedules wereused, following set questions so that the issues probed would be similar across sub-sectors to allow for comparative analysis. However, the actual interviews had enough flexibility to accommodate the respondents style of engagement whether conversational, informational or question and answer approach. All interviews were analysed using a coding framework specifically designed for the SSP interviews. Using a standard coding system which was develop collaboratively by all researchers enabled consistency with the coding, which also increased the validity of the data. Data for the profile is also augmented by data provided at a stakeholder consultation workshop conducted by CETA on the 5 th November 2013, where 16 stakeholders from industry bodies and 21

22 education providers were represented. This SSP becomes credible based on the multiple data collection methods that were used to develop it. 1.2 Defining the construction sector The construction sector is extensive, with diverse activities including construction, maintenance, renovation or replacement of fixed assets of a variety of magnitude. The sector is made up of five broad sub-sectors - materials manufacturing, construction, electrical contractors, building, and the built environment professions. Each sub-sector covers a different aspect of the industry. The five subsectors translate into 70 Standard Industry Classification (SIC) codes for the sector, all defining different activities of the sub-sectors. Table 1 sets out the SIC codes grouped by sub-sector. The construction sub-sector comprises the largest number of activities. Table 1 SIC Codes in the Construction Sector Sub-sector SIC Industrial Activity Materials 3010C Manufacture of wooden doors Manufacturing Joinery and wood machining including manufacture and installation of timber and other building fixtures Kitchen cabinet making for customized requirements on-site Manufacture of tiles and sanitary ware Manufacture of refractory ceramic products Installation of refractory ceramic products Brick-making Manufacture of articles of concrete, cement and plaster Manufacture of articles of concrete, cement and plaster including precast building and civil engineering product on-site and off-site Dimensional stone trade Manufacture and assembly of building related aluminium components and fixtures, including aluminium fenestration and skylight installation Manufacture of roof trusses except where the manufacturing of timber roof trusses is carried out at a sawmill as ancillary part of the process of producing timber Cutting, shaping and finishing of stones 50499A Manufacture of construction materials, hardware, plumbing and heating equipment Manufacture of memorial tombstones Construction Contractor development Site preparation Excavation, earth moving and tunnelling Demolition of buildings and structures Shoring and pilling Construction management and supervision Cutting, bending and fixing of reinforcing steel Construction of buildings Construction of homes Building construction and project management Timber construction 22

23 Sub-sector SIC Industrial Activity Construction of other buildings Construction of civil engineering structures Construction and maintenance of water supply, sewage and storm water infrastructure Construction of other structures Plant operation Building installation, service and completion Construction by specialist trade contractors Carpentry Ceiling and partition erection Conservation, restoration and refurbishment of building, structure etc Shuttering Structural steel and cladding contracting Construction, maintenance and repair of roads, runway, bridges, tunnels and related structures including draining and road services Road surfacing and repair; hot mix and cold mix asphalt manufacture; and bituminous slurry; bituminous emulsion and modified bituminous binder manufacture Electrical Electrical contracting Contractors Building sector Plumbing Shopfitting Bricklaying Plastering, tiling and paving Fencing Glazing Scaffolding Other building installation not elsewhere classified Painting and decorating Roofing Floor covering Other building completion not elsewhere classified Waterproof contracting Built Environment Professions Activities of professional organizations Activities of property valuers Architectural and engineering activities and related technical consultancy Consulting engineering activities Architectural activities Activities of quantity surveyors Activities of land surveyors Activities of non-registered architects, e.g. tracers and draughtsmen of plans for dwellings 8821C 8821D 8821E Earth crust drilling Landscape architecture Fire protection, fire suppression and fire prevention structures covered by national building regulations Testing the strength of concrete Road construction and maintenance Labour only contracting for building and construction Sub-contracting for building and construction 23

24 Sub-sector SIC Industrial Activity 9130E Town and regional planning Other Activities not categorised Source: Government Gazette Number 9417 & A6 SIC Codes on the CETA website Materials manufacturing 1 The materials manufacturing sub-sector has 15 sector industry codes, and activities include manufacturing of various wooden fixtures, tiles, sanitary ware, ceramic products, concrete and cement products, tombstones, and roof trusses. It is, however, difficult to assess how much can be strictly allocated to the construction industry because materials are supplied to a number of other industries, for example, the mining industry.this sub-sector plays a pivotal role as construction projects can come to a halt when supplies are not available. The CIDB conducted research on this sub-sector in 2008 on the challenges and opportunities of the sector. This research is too dated to use now to develop an understanding of issues in this sub-sector. It would be useful for CETA to support sub-sector research updates so that there is research based decision making informed by current understandings of subsectors Construction With 25 sector industry codes, this is the largest sub-sector in the construction sector, and it includes all contractors including civil engineering contractors, steel, structural, mechanical contractors, residential and non-residential contractors. There are four types of contractors in the construction sub-sector: Civil engineering (CE) contractors are concerned with water, sewerage, roads, railways, harbours and transport, urban development & municipal services. They will also construct cooling towers, bridges, swimming pools, undertake dredging, township services, water treatment, sanitation or soil conservation works. General building (GB) contractors are involved with any activity concerned with building such as renovation, maintenance or removal of permanent building structures. Any activity which falls under the other categories of CE, mechanical engineering (ME), Electrical Engineering Building (EB), Electrical Engineering Infrastructure (EP) or Special Works (SW) is excluded. GB contractors construct buildings for domestic, industrial, institutional or commercial use; handle car ports, masonry, concrete walls and timber fences, stores, and walls. Mechanical engineering (ME) contractors deal with engineering infrastructure for gas transmission and distribution, solid waste disposal, heating, ventilation and cooling, chemical works, metallurgical works, manufacturing, food processing and materials handling. They will install gas transmission and distribution systems, pipelines, ventilation and cooling pumps, oil and gas wells, smelters, boiler installations, central heating or refrigeration and cold rooms, for example. Special Works (SW) contractors are broken down into a large number of different specializations. Among them would be areas such as the maintenance or renewal or removal 1 Information on descriptions of the sub sectors is sourced from the CIDB contractor registration guidelines brochure : 2 CIDB 2008.The Building and Construction Materials Sector, Challenges and Opportunities. Construction Sector Development Board, Pretoria 24

25 of asphalt, shaft sinking and lateral earth support, corrosion protection systems, the demolition of buildings, drencher and sprinkler systems, landscaping, irrigation and horticultural works, installing escalators, constructing specialised foundations, installing or removing road markings and signage, installing or dismantling structural steelwork and scaffolding, the waterproofing of basements, the demolition of water installations, soil and waste water drainage, or steel and precast concrete palisade fencing, to mention just a few of their possible activities Electrical contractors This is the most contained sub-sector with only one sector industry code. Until 2011 when they were recertified under the construction sector, electrical contractors used to fall under the energy sector but were part of the building industry training board, and they do a lot of work in the construction industry. There are two groupings of electrical contractors: electrical contractors for infrastructure (EP) and electrical contractors for building (EB), and their classification generally stipulate that they do not overlap. EP contractors develop, extend, install, remove, renovate, alter or dismantle engineering infrastructure concerned with the generation, transmission and distribution of electricity, such as electrical power generation, street and area lighting, or township reticulations. EB contractors focus on electrical installations in or on any premises used for the transmission of electricity from a point of control to a point of consumption. They install all electrical equipment in buildings, such as wiring, cable jointing and laying and electrical overhead line construction, and provide verification and certification of electrical installations on premises. The addition of electrical contractors is significant to the CETA landscape and a baseline study of this sector is critical so that the CETA understands its profile and its skills development needs Building This sub-sector has 13 sector industry codes and covers all activities that pertain to the construction of buildings but are outside the category defined under Construction (See above). For example, this category covers plumbing, shop fitting, bricklaying, roofing, glazing, fencing, etc. This is also the area in which jobs are often sub-contracted. The work for this sub-sector, to a large extent, is dependent on the construction sub-sector. If no buildings were erected, their pool of potential work would be restricted to maintenance and renovation of existing buildings. Many of these businesses have a short life and many fall into the informal sector as they employ very few workers. Often the owner is the main worker. Construction contractors often sub-contract these businesses to handle parts of their big contracts Built environment professions With 16 sector industry codes, this sub-sector includes architects, engineers, quantity surveyors, landscape architects, land surveyors, town and regional planners, property valuers, project and construction managers.this group is made up of the professionals governed by the Built Environment Professions Act. They are members of the six councils that fall under this sub-sector: Architects - South African Council for the Architectural Profession (SACAP; Engineers - Engineering Council of South Africa (ECSA); Quantity surveyors - South African Council for the Quantity Surveying Profession(SACQSP); 25

26 Landscape architects - South African Council for the Landscape Architectural Profession (SACLAP); Project and construction managers - South African Council for the Project and Construction Management Professions (SACPCMP); and Property valuers - South African Council for the Property Valuers Profession (SACPVP). Because of the existence of these councils, this sub-sector is often well documented as professional profiles are included in annual reports and there are also activity insights and reports that are published. As part of further development of the SSP, all council reports were reviewed to enable a collation of numbers of registered professionals to create a better understanding of this sub-sector. Information on available professionals and their qualifications is useful for informing strategy on mentoring new entrants into the sub-sector. 1.3 Size and shape of the construction sector Data on employers in the sector is available from two sources; Construction Industry Development Board (CIDB) register of contractors, and the CETA database of levy and non-levy paying employers. The CIDB database is more complete than that of the CETA as it contains all registered contractors while that of the CETA comprises only levy paying employers. It is useful to recruit from these two datasets as they enable a richer understanding of the sector. While the CETA database provides information by company size, based on the number of employees, as well as distribution of these by sub-sector activity based on SIC codes, the CIDB data provides information on companies by major activity, so there is a broader understanding created that can be complemented by the more definitive activity based data provided by the CETA employer database. Contractors in the construction industry are designated by grades. The Grade 3 indicates the level of skill and capacity of the company. The lowest designation for contractors is Grade 1 and there are no barriers to entry at this level. Contractors register for the appropriate class of work: GB for general building, CE for civil engineering, ME for mechanical engineering, EP for electrical engineering (infrastructure), EB for electrical engineering (building) and SW for special works. The CIDB reports that in November 2013, there were a total of 115,161 contractors registered on their database, comprising 100,892 Grade 1 contractors and 14,269 contractors registered at Grade 2 to 9. 4 Table 2 highlights Grade 1-9 registrations by class of works. Table 2 Grade 1-9 contractor registrations by class of works Designation CE EB EP GB ME SW Total CIDB Quarterly Monitor, April 2012, p.6. 4 CIDB website: https://registers.cidb.org.za/publiccontractors/reports 26

27 Designation CE EB EP GB ME SW Total Total Source: CIDB website: https://registers.cidb.org.za/publiccontractors/reports General building and civil engineering have the highest registrations, comprising 72% of all contractors. There are interdependencies between Grade 1 and Grade 2-9 contractors. Most Grade 1 contractors, like the Grade 2-9 contractors are in the general building and civil engineering activities. Grade 1 to Grade 4 contractors work at local level within the country. Grades 5 and 6 contractors are often established contractors at a local level and are moving into the regional and provincial markets. Grade 7 and 8 contractors operate at regional and provincial levels. Grade 9 contractors usually operate at the national and international level. Grades 2 to 9 can be registered via two methods. Firstly, they must prove a) financial capability that is, they must have sufficient available cash to handle a potential contract; and b) work capability that is, they must have had work experience over the last five years, employ registered professionals and fulfil statutory requirements. Secondly for registration for Grade 5 9, contractors should provide evidence of available capital and the number of registered professionals employed so this method relies more on high level skills. Contractors must reapply every three years. Data suggests a pyramid narrowing from a big base of Grade 2 6 contractors narrowing to very few Grade 7-9 contractors as the apex is reached. The higher the grade achieved, the fewer the contractors. Grades 2 to 4 account for 60 70% of registrations. Considering grades 2-9, about 93% of all contractors fall into grades 2 to 6; the remaining 7% constitute grades 7 to 9. The CETA database of levy paying employers indicate that there are 44,865 employers registered with CETA. This constitutes 39% of employers if the CIDB database is to be used as proxy for all employers in the sector. About 95% of these employers are small, employing less than 50 employees. Figure 1 All employers registered with CETA by size Employers by Size % 3% 95% Source: CETA member database About 80% of the employers are not allocated to a sub-sector on the database, as reflected in Table 3. 27

28 Table 3 Classification of employers by sub-sector and size Sub-sector Small (0-49) Medium (50-149) Large (150+) Total Building sector Built Environment Professions Construction Electrical Contractors Materials Manufacturing Other Sub Sector Unknown / Not Provided Total Source: CETA Member Database Over 82% of small employers and representing 78% of all employers registered with the CETA are not provided with a SIC-code in the member database and have not been allocated to a sub-sector in this analysis. Figure 2 Unallocated sub-sectors Unallocated Sub-sectors Sub-sector Unknown Sub-sector Allocated 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% Small (0-49) Medium (50-149) Large (150+) Source: CETA Member Database Figure 3 depicts the breakdown of sub-sectors including those that are unallocated. 28

29 Figure 3 Distribution of sub-sectors Breakdown of employers by sub-sectors 3% 3% 12% 0% 2% 0% Building sector Built Environment Professions Construction Electrical Contractors Materials Manufacturing Other 80% Sub Sector Unknown / Not Provided Source: CETA Member Database Figure 4 highlights the breakdown of those employers with a sub-sector allocated. This is based on about 20% of employers registered on the CETA database. Figure 4 Distribution of employers according to sub-sector Employers by sub-sectors 2% 9% 1% 12% Building sector 16% Built Environment Professions Construction Electrical Contractors Materials Manufacturing Other 60% Source: CETA Member Database 29

30 Of the registered employers, the majority of employers are located in Gauteng followed by Western Cape and KwaZulu-Natal. Table 4 Locating the registered employers Province Small (0-49) Medium (50-149) Large (150+) Total Eastern Cape FreeState Gauteng KwaZulu-Natal Limpopo Mpumalanga North West Northern Cape Western Cape Not specified Total Source: CETA Member Database The distribution highlighted in Table 4 is reflected in Figure 5. Figure 5 Provincial breakdown of registered companies with SIC codes Provincial Breakdown 21% 8% 4% Eastern Cape 2% 1% Freestate Gauteng 8% 37% KwaZulu-Natal Limpopo Mpumalanga 2% 17% North West Northern Cape Western Cape Source:CETA Member Database The lack of allocation of SIC codes for such a large percentage of the registered companies raises data fidelity issues for CETA. Although it is a time consuming exercise, it is useful to follow up with contractors and get details to classify them according to the designated SIC codes. It is difficult to formulate appropriate decisions regarding skills development for companies when 80% of the companies are not allocated. It also becomes difficult to use data from these companies meaningfully, for example data on scarce and critical skills, from these companies, as this data becomes quite 30

31 decontextualized. Data from the employer database shows that most of the members are not paying levies only about 21% of registered employers are contributing levies. Figure 6 provides a comparison by provincial location, of levy and on-levy paying members. Figure 6 Comparison of levy paying and non-levy paying members Levy Paying Non Levy Paying 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% Eastern Cape Freestat e Gauteng KwaZulu -Natal Limpopo Mpumal anga North West Norther n Cape Western Cape Non Levy Paying Levy Paying Source: Ceta Member Database 1.4 Employment trends Data on employment in the sector is informed by StatsSA quarterly labour force survey (QLFS) data, research reports from industry bodies, for example CIDB and SAFCEC, and information from levy paying members. CIDB and SAFCEC rely on StatsSA data. The data should also be informed by WSP submissions, but unfortunately for 2012/2013, the number of companies submitting WSPs was very low. Only 2,008 employers out of the registered employers submitted WSPs. In this case, it is better to draw analysis mostly from data from the levy paying member database. Data from StatsSA shows a broad overview of employment in the sector, while that from the CETA database of levy paying companies shows partial data based on a limited number of employers. Like with the employer data from CIDB and from the CETA database, it is useful to have data from the two sources as well as other sources as it provides both high level overview as well as levy paying limited data that can inform the CETA of the extent of the required reach, compared to their current reach. The sector is among the six top big employers among the 10 employing sectors of the economy. In June 2012, the construction sector employed 1,012 million employees as indicated in Table 5. Data for second quarter 2013 highlights that the construction sector is one of five where employment increased. 31

32 Table 5 Employment by industry, Apr- Jun 2012 Jun-Mar 2013 Apr-Jun 2013 Qtr to Qtr change Yr on Yr change Qtr to Qtr change Industry % % Yr on Yr change Total* ,7 2,0 Agriculture ,6 11,6 Mining# ,4 4,5 Manufacturing ,0 3,4 Utilities ,7 16,6 Construction ,1 7,0 Trade ,8-2,0 Transport ,3 5,1 Finance and ,1 4,7 other business services Community ,7 1,3 and social services Private ,1-5,2 households Source: StatsSA Quarterly Labour Force Survey, Q2, 2013, P0211 Sector employment increased the most between the first and second quarters of 2013, increasing by 62,000 employees. Year on year increase from June 2012 to June 2013 for the sector was also among the top five, with 71,000 new jobs created by June Employment in the industry has always been dominated by men as illustrated in Figure 7. Figure 7 Employment in the construction sector by gender Gender dynamics of employment in the sector Women Men NB - Data is thousands Source: StatsSA Quarterly Labour Force Survey, Q2, 2013, P

33 Data by occupation is only available from the Council for the Built Environment (CBE), where information from the different councils is highlighted in Table 6, for engineers. Table 6 Demographic profile of Registered Professionals per Council Professional Professionals African White Indian Coloured Council ECSA SACAP SACPVP SACQSP SACPCMP SACLAP Total Source: CBE 2 nd Quarter Report, 2013 The data on employment is therefore very limited as the data in Table 6 only reflects engineers but not other professions. Distribution of employment nationally as reflected in Table 7 seems to support the validity of the member database data, where employers are mostly based in Gauteng, the Western Cape and KwaZulu Natal. Table 7 Distribution of construction employment Jan-Mar 2012 Apr-Jun 2012 Jul-Sep 2012 Oct-Dec 2012 Jan-Mar 2013 Apr-Jun 2013 Thousand Thousand Thousand Thousand Thousand Thousand Western Cape Eastern Cape Northern Cape Free State KwaZulu Natal North West Gauteng Mpumalanga Limpopo Total Source: StatsSA Quarterly Labour Force Survey, Q2, 2013, P0211 Data from the CETA levy-paying companies shows how this data is minimal in its reflection of the whole industry. The data shows that the 9,424 employers employ 331,205 employees. The distribution of these employees is reflected in Table 8. A column is added to compare CETA data in relation to larger employment data from StatsSA. 33

34 Table 8 Distribution of employees in levy paying companies 5 Province Employers Employees StatsSA Data Eastern Cape Free State Gauteng KwaZulu-Natal Limpopo Mpumalanga North West Northern Cape Western Cape Other Total Source: CETA database of levy paying employers & StatsSA QLFS, Q2, 2013 The employees in the levy paying companies account for only 31% of the employees in the sector. This suggests that analysis of employer and employment data can significantly be augmented by analysis of non-levy paying members. If this data is included in the analysis, perhaps then a closer articulation can be seen between StatsSA and CETA membership data for an evaluation of the extent of potential reach of CETA interventions. What is clear is that the levy paying members employ a small fraction of employees in the sector. This suggests that non-levy paying members employ the majority. The implications of this are that the levies paid could be disproportionate to the need in a sector where a majority of employers do not pay levies. Unfortunately, data on non-levy paying members was not available at the time of writing this analysis. Construction sector employment includes formal and informal employment. Characteristics of informal employment will be discussed in Chapter 2. Figure 8 compares formal and informal sector employment. Figure 8 Comparison of formal and informal employment in the construction sector Comparing formal and informal employment Apr-Jun 2011 Apr-Jun 2012 Apr-Jun 2013 Formal Informal Source: StatsSA Quarterly Labour Force Survey, Q2, 2013, P CETA member database, August The fourth column depicts StatsSA Q employment data. 34

35 Over the three years under consideration in Figure 8, informal employment constituted between 29% - 31% of total construction employment. The industry therefore has a sizeable number of people working in the informal sector, and these people are likely to be excluded from skills development initiatives that are often accessed by employees in the formal sector. 1.5 Employment categories and remuneration Occupations in the sector range from elementary occupations like hand person to management and professional occupations that require high level of qualifications. Table 9 provides examples of occupations in the sector based on the Organising Framework for Occupations (OFO). Table 9 Example occupations in the sector OFO category Manager Professional Technicians and Associate professionals Clerical Support Workers and Service and Sales Workers Trades Workers Plant and machine operators and assemblers Example occupations Construction project manager Environmental manager Contract manager Project manager Health and safety manager Civil engineer Architect Mechanical engineer Surveyor Electrical engineer Quantity surveying Landscapers Draughtsperson Accounting technician Computer network technician Mechanical engineering technician Building associate Accounts clerk Cost clerk Debt collector Payroll clerk Transport clerk Electrician Bricklayer Carpenter Plasterer Concreter Truck driver Grader operator Earthmoving plant operator Crane or hoist operator 35

36 OFO category Elementary Example occupations Excavator operator Store person Handy person Sign erector Surveyor s assistant Road roller operator The only reliable and comprehensive salary data available is from an annual survey of salaried staff amongst quantity surveying practices. Table 10 highlights average salaries by occupation on a specific number of sampled salaries. Table 10 Pay scales for quantity surveying professions Qualification Experience 0-2 years 3-5 years 6-10 years years years 31+ years University Number Lowest 45, , , , , ,992 Highest 516, , ,279 1,299,999 1,200,000 1,651,152 Average 179, , , , , ,143 Median 180, , , , , ,132 Stand Dev 80,803 94, , , , ,594 University of Technology Number Lowest 27,351 68, , , , ,000 Highest 273, , , , , ,288 Average 130, , , , , ,644 Median 108, , , , , ,644 Stand Dev 59,647 80, , ,565 54,187 88,592 None Number Lowest 50,244 81, , , , ,880 Highest 60, , , , , ,512 Average 54, , , , , ,182 Median 52, , , , , ,155 Stand Dev 4, , , ,218 96,992 71,636 Source: Association of Quantity Surveyors, August 2013 These figures highlight that high qualifications at traditional or comprehensive universities and experience are rewarded in terms of earnings. 36

37 1.6 Linkages with other sectors The construction sector has upstream and downstream linkages with a vast number of other sectors. Table 11 gives a brief insight into the inter-relations between all the sectors. Table 11 Sector links Sub-sector Materials Supply Construction: civil engineering Construction: General Building Construction: mechanical engineering Construction: special works Electrical contracting infrastructure Electrical contracting building Building Built environment Linkages with other sectors The mining industry requires machinery, chemicals, wooden structures, cranes. Home owners require building materials. The manufacturing sector requires raw materials. The marketing and retail sectors, distribution channels, transport are all involved. Infrastructure is required by the transport sector to service roads, ports, harbours, railways. Public works sector, health and sanitation, education, water, conservation, all need to protect the environment and provide for the needs of the people. The property and environmental sector are involved with the decisions made. The service sector can get involved with project management in this and all of the following sectors. Housing, property, conservation, safety, public works, human settlements, tourism and leisure, public works, banking, marketing and sales, consumer satisfaction, environment, health and sanitation. There is an overlap here with the chemical sector. Health, transport, waste disposal, energy, food, metals, minerals, environment are some of the sectors that will be involved in these activities. Transport, public works, health, sales, marketing, environment, property are some of the sectors affected by this work. Eskom and the energy sector are obviously related. Other sectors would be health, sanitation, safety, mining, property and environment. Similar sectors would be involved but on a smaller scale as this concerns domestic installations. Retail, Manufacturing, Housing, property, real estate, public works, human settlements, tourism and leisure, banking, marketing and sales, consumer satisfaction, decorating and home improvements, health and sanitation. Town planning, environmental conservation, transport, manufacturing, marketing and sales, agriculture, design, energy, tourism and leisure. Very often this sector is concerned about the aesthetics of development and this involves communities. 37

38 1.7 Economics of the sector The expansion of social and economic infrastructure underpins government s efforts to stimulate fiscal policy to drive growth over the next three years. The study by Kessides (1993, cited in DBSA, 2012), confirms that infrastructure contributes to economic growth, by reducing costs of production, contributing to the diversification of the economy and providing access to the application of modern technology, thus raising the economic returns to labour (by reducing workers time in non-productive activities or improving their health. 6 Kessides adds that infrastructure contributes to improving the quality of life of citizens by creating amenities, providing consumption goods (transport and communication services), and contributing to macroeconomic stability. The same study argues that there are four necessary conditions to achieve the positive impacts of infrastructure investment on economic development: 1. A macroeconomic climate conducive to efficient resource allocation, avoiding distortions in service provision, inflationary funding arrangements and crowding-out of other more rewarding investments; 2. The presence of sufficient other input factors (such as labour) to raise factor productivity in the presence of infrastructure, because infrastructure cannot create economic potential, only develop it where appropriate conditions exist; 3. An orientation to economic demand considerations such as service prices and demand elasticity, not just projections of physical capacities and consumer needs, because infrastructure with the most enduring benefits is that which provides the reliability and quality of services that users need ; and 4. Application of user charges that reflect supply and demand conditions and non-market externalities as far as possible, to ensure infrastructure will be more economically efficient and favourable to the environment. 7 To ensure that these four conditions are met and that capacity gaps in infrastructure delivery are met in the country, several oversight institutions have been established: The Department of Performance Monitoring and Evaluation facilitates delivery agreements for all infrastructure departments, and monitors and evaluates their implementation; The National Planning Commission developed a long-term vision and strategic plan for the country, and infrastructure is one of the key issues addressed by the commission; The Presidential Infrastructure Coordination Commission headed by the President, will coordinate and oversee the implementation of strategic infrastructure projects that stimulate social and economic growth; The Presidential Review Committee on State-owned Enterprises (SOEs) will align SOEs with the government s development agenda, including that of infrastructure development. The medium-term expenditure framework (MTEF) period; 2012/ /15, estimates public-sector project investment totalling R844.5 billion. 8 The large extent of Government s infrastructure budget enables the construction industry to mirror the country s demographic map, and preferential public 6 DBSA, South Africa State of Economic Infrastructure 2012, p.6 7 DBSA, South Africa State of Economic Infrastructure 2012, p.7 8 National Treasury, Budget Review

39 procurement is one of the effective levers of increasing the size of black-owned contracting enterprises. 9 There are six key economic infrastructure sectors that provide work to the construction sector - rail, ports, roads, electricity, water and the fibre optic element of telecommunications. These constitute a substantial proportion (80%) of estimated future infrastructure spending. The majority of public infrastructure expenditure (48%) comes from non-financial public enterprises, and Eskom and Transnet account for the largest share. Figure 9 highlights the proportions of government s infrastructure expenditure in 2010/2011. Figure 9 Government s infrastructure expenditure, 2010/ Source: DBSA, South Africa State of Economic Infrastructure The actual expenditure on infrastructure was significantly lower than expected as highlighted in Figure 10. Figure 10 Actual infrastructure expenditure as a % of budget, 2010/ Source: DBSA, South Africa State of Economic Infrastructure Except for National Departments, all other entities underspent quite significantly on their infrastructure budgets. This suggests that there is scope for CETA to intervene to support government s capacity to plan and execute projects so that the planned infrastructure development benefits the construction sector. 9 CIDB, The Construction Industry as a vehicle for contractor development and transformation, March DBSA, South Africa State of Economic Infrastructure, 2012, p.8 11 Ibid, p.9 39

40 The development of economic infrastructure has potential to benefit the construction sector. In 2012, approximately 60% of Transnet s R93 billion investment plan, (R56 billion) was earmarked for the rail sector. Of this, an estimated 35% will be spent on expanding rail capacity and 65% on upgrading and maintaining existing rail capacity. This can provide work opportunities for the sector. 1.8 Stakeholders in the construction sector The construction stakeholders include both the national government and industry stakeholders, who must play their part in ensuring the growth and success of the construction industry. Communication and cooperation with the CETA is crucial to promote, develop and support the construction sector. Table 12 Stakeholders in the construction sector Department / Stakeholder National Departments Department of Higher Education and Training (DHET) Department of Human Settlements (DHS) Department of Labour (DoL) Department of Public Works (DPW) Department of Trade and Industry (DTI) Role Function in relation to the construction sector FET, HET, Skills Sets standards for quality of education of entrants development to the construction sector: universities and FET colleges Administers Skills Development Act Manages skills development Plans appropriate courses that answer the needs of the industry National Housing Determines policy and manage programmes such as Breaking New Ground Monitors National Home Builders Registration Council Identifies and acquires appropriate land Gets funding for housing projects and infrastructure Labour policy Regulates Occupational health and safety, Industrial relations, Employment equity Stimulates job creation Manages Unemployment insurance Public Infrastructure Plans and supervises infrastructure Aligns current and new contractor development programmes to the National Contractor Development Programme (NCDP) Supports the CIDB Industrial Strategy Implements Construction Sector Charter as sector code to implement Black economic empowerment Implements Code of Good Practice through the services of the Construction Charter Council Monitors Industrial Policy Action Plan Sponsors Industrial Development and Special 40

41 Department / Stakeholder Role Function in relation to the construction sector Economic Zones National Treasury Macroeconomic policy Manages Medium Term Expenditure Framework Department of Monitoring and Evaluation (DPME) South African Revenue Service (SARS) Regional Bodies NEPAD Building and Coordinating Agency Industry Bodies Council for Built Environment (CBE) Organises financing of infrastructure projects Monitoring and evaluation Performance monitoring and evaluation of infrastructure development. Taxation Regulates Vat, PAYE and company tax 41 Collects skills levies Plan for growth of Africa Researches projects in Africa Promotes infrastructure development in Africa Sustainable built environment growth Regulates built environment Manages six councils under its auspices: architectural, quantity surveying, engineering, landscape architectural, property valuation and project and construction management Initiates liaisons in training across borders Promotes health, safety and environmental protection Improves infrastructure delivery and stakeholder engagement Promotes transformation via CBE Bursary Scheme, mentorship programmes, Candidacy Programmes, Skills Pipeline Strategy, career awareness campaigns Construction Industry Contractor development Monitors state of construction industry Development Board Supports contractor development through (CIDB) National Contractor Development Programme Sets up the NCDP framework Maintains Register of Contractors and Register of Projects and set up registration criteria Improves stakeholder communication and collaboration Manages awards like Best Practices Contractor Recognition Scheme, Best Practices Project Assessment Scheme, Women in construction excellence awards Drives Construction Sector Transparency Initiative, Infrastructure Delivery Improvement Programme, Client procurement Officers Forum Oversees Employment Skills Development Agency Monitors and assesses compliance with Construction Industry Development Regulations of 2004 Master Builders SA Represent contractors and Interfaces with government and members

42 Department / Stakeholder National Home Builders Registration Council (NHBRC) SA National Roads Agency LTD (SANRAL) SA Council for Project & Construction Management Professions Financial Institutions Development Bank of Southern Africa (DBSA) Role Function in relation to the construction sector employers Communicates with 9 provincial associations Collaborates with other associations like African Federation of Construction Contractors Association and move across borders Supports health and safety and training initiatives Regulate homebuilding Sets standards Improves capabilities of homebuilders Researches alternative building technologies Carries out inspections in line with the Compliance and Enforcement Division and the Quality Assurance Division Establishes centres like the Eric Molobi Centre of Excellence to encourage job creation for women and youth Road network in South Africa Regulate construction management & construction project management professionals Road safety and community development Plans, constructs and maintains national roads Generates revenue to manage assets, for example tolling Gauteng Freeway Improvement Project Research and technology Keeps Register of professionals Establishes criteria of registration Sets out scope of work and set examinations Establishes Standards Generating Body Accredits programmes Financing Finances infrastructure development 1.9 Conclusion The construction sector is diverse, with five key sub-sectors comprising 70 different sector activities. The sector is among the top 10 sectors that provide significant employment and where employment has seen some growth. There are sub-sector dependencies as well as contractor dependencies within the sector, for example, large contractors sub-contract building work to the smaller contractors, and the building sub-sector relies on the electrical sub-sector for electrification of erected buildings. The sector also relies heavily on government projects and infrastructure needs for work opportunities. Eighty eight percent of the 115,161 contractors registered with CIDB are Grade 1 contractors. The sector has only 44,865 members registered with the CETA, with only 21% of these members paying levies. This has implications for the reach of the funding available as discretionary grants for skills development processes. 42

43 Chapter 2: Sector Analysis 2.1 Introduction This chapter describes the current state of the construction sector, outlining how this state is likely to inform future developments in the sector. The discussion starts with a review of the economic outlook and performance of the sector. Following this, the factors that impact development of the sector are explored. The analysis will ascertain trends so as to identify opportunities for growth and development in the sector. These opportunities will be used to develop a sector strategy for the Construction Sector Education and Training Authority (CETA). The chapter will conclude with a SWOT summary informed by the issues emerging from the sector analysis. This chapter is informed mostly by desk work, and stakeholder consultation based on surveys, interviews, and a stakeholder consultative workshop. 2.2 Economic performance and outlook The financial crisis at the end of 2007 threatened the collapse of many banks and other financial institutions which were subsequently bailed out by governments to avoid their collapse. Stock markets experienced a sudden drop in share prices. The housing market collapsed with evictions and foreclosures of bonds. South Africa prided itself on how well it had handled the situation, but foreign investment declined, export markets contracted, and the country could not escape global pressures. Figure 11 depicts the growth in gross domestic product (GDP) in South Africa between January 2008 and January Figure 11 Growth in GDP y/y and q/q seasonally adjusted and annualized Source: Stats SA Gross Domestic product, First Quarter 2013 The picture is fairly discouraging, but it is in this context that the construction industry must be evaluated. Construction, particularly as regards infrastructural projects, requires huge outlays of capital. Clients, whether they are government departments, state-owned entities, companies or private individuals, are 43

44 cautious when the economy turns down. When it crashes, there is panic, and projects are postponed or cancelled. Construction was to some extent bolstered by the soccer World Cup held in South Africa in Government was committed and projects had to be completed. After that, industry took a dip. The sector has shown negative growth since the first quarter of 2008 and it is feared that construction is lagging behind the rest of the economy. Figure 12 shows the construction sector in relation to the rest of the economy. Figure 12 Construction Sector and the South African economy, Source: BER presentation by Craig Lemboe at the Council for Built Environment Indaba 15 March 2013 However, the downward spiral has relaxed and the negative growth is lessening. Figure 13 shows the rate at which negative growth by the main contractors is being reduced each year. Figure 13 Growth in building activity (Net balance) Source: FNB/BER Building Confidence Index. 18 June 2013, BER, University of Stellenbosch 44

45 Investment in gross fixed capital formation (GFCF) from March 1981 to November 2011 is illustrated in Figure 14. This includes ALL construction, and indicates the very unstable economic climate that contractors have had to face in the last three years. The rise has not been spectacular since 2011 but at least recovery seems evident. Figure 14 Gross Fixed Capital Formation Q4: 2011 Source: SAFCEC, State of the South African Construction Industry 2012, Q2, p.23 The building sector has also been hit hard by the economic downturn. Drastic measures had to be taken. The new Companies Act and the Business Rescue Provision were enacted in May 2011, and since then, there have been about forty applications for help per month. 12 It is estimated that 55% of companies entering Business Rescue have been successful; 38% have been liquidated and the rest are still wavering. However, confidence is returning, although there are warnings for caution. Data reveals that average monthly defaults have risen from R80 million a month in the first half of 2012 to R100 million a month in the last three months of Both residential and non-residential sectors are still experiencing reduced investment but the pace of reduced investment has slowed. In Q1:2012 the residential sector recorded the smallest contraction in 17 quarters. 14 In the non-residential building sector, the majority of contractors (70%) have reported insufficient demand, reduced profits and significant job losses, but since the second quarter of 2012, both residential and non-residential sectors reported increased building activity. The non-residential sector also noted better profit and tendering conditions. As a result, the FNB/BER reported that the building confidence index improved by 41 points in the first quarter of 2013 the highest since Main contractor confidence went up by 30 points. Nominal GDP at market prices stood at R814 billion during the first quarter of The construction sector s contribution to that was R31 billion. There was some increase in building activity which affected sales and production of building materials positively. Architects and quantity surveyors also reported more business. As a result confidence went up throughout the industry as evidenced in Figure Luke Doig, senior economist, SA Builder. January p Luke Doig, senior economist, SA Builder. January p BuildPress.TheFNB/BER Confidence Index 18 June 2013.p BuildPress.TheFNB/BER Confidence Index 18 June 2013.p.2. 45

46 Figure 15 Composite Building Confidence Index Source: FNB/BER Building Confidence Index, BER University of Stellenbosch. 18 June 2013 One of the reasons for the growth in confidence might be the Minister of Finance s 2013 budget speech. Minister Pravin Gordhan promised the financing of R823 billion on infrastructure over the next three years. The Building Industry Bargaining Council (BIBC) spokesman responded with cautious optimism to the announcement, citing apprehension because of government s poor history of spending on allocations. The proposed projects would be heavily dependent on provincial and municipal capacity to spend. 16 Many stakeholders in the sector are aware of their dependence on government capital budgets for the huge infrastructure projects, and they complain about the government delays in implementing agreed projects. Given that the National Planning Commission data has recorded a 30% drop in public spending since there is some justification for these concerns. University of Stellenbosch/BER results note that although competition is reported to be stiffer, constraints on supplies have eased. They state confidence is rising although levels remain below the neutrality level of fifty a sign of an industry still under pressure. 18 There is hope that residential construction is recovering, although non-residential is still looking sluggish, as indicated in Figure South African Builder, March 2013, p South African Builder, January 2013, p University of Stellenbosch /Bureau for Economic Research, Q2 2013, June

47 Figure 16 Investment in the different subsectors of the construction industry Source: BER presentation by Craig Lemboe at the Council for Built Environment Indaba 15 March 2013 Another factor that might affect confidence is the lowering of the forecast for growth in 2013 by the Governor of the Reserve Bank, Gill Marcus. 19 Despite all this, it seems confidence in the construction sector is not completely shaken, although private sector residential investment remains a concern. 20 According to survey results in the second quarter of 2013, the pace of the building recovery... quickened during the quarter, albeit off a low base... with confidence and activity higher from the planning phase (architects and quantity surveyors) through to the builders (main contractors) and suppliers (manufacturers of building material). 21 Work in the construction sector is also generated by poor maintenance by government. In 2009, the South African Institute of Civil Engineers (cited in DBSA, 2012) assessed paved roads and concluded that the paved provincial roads, paved district and local municipal roads and all gravel roads are At Risk D Rating or Unfit for Purpose E-Rating. 22 Table 13 reflects the rating of the roads. 19 Cape Times, 19 July 2013 quotes her as predicting 2.7% in March but 2% in July. 20 BER presentation at CBE BE Indaba FNB/Bureau for Economic Research Building Confidence Index 18 June DBSA, South Africa State of Economic Infrastructure, 2012, p.49 47

48 Table 13 Report card on South Africa s road infrastructure Source: DBSA, South Africa State of Economic Infrastructure The implications for this poor state of the roads are; high cost of repair, which is as much as seven times more than it would have been if adequate maintenance had been done; the backlog in funding grew to R65 billion in 1999; and increased road user costs - twice as high on a road in poor condition as compared to a road in good condition. 23 Clearly, if the cost of repairing roads is so high, intervention at the level of planning is required to cost for maintenance of roads and development of a monitoring framework to evaluate the state of roads to inform decision making about their repair before they are out of shape. CETA can play a role here. Some interventions are suggested by the DBSA who suggest the following as priorities for key interventions for the road sector: Skills: All road authorities require well-placed technical skills to ensure adequate planning and decision making capacity to facilitate the preservation and expansion of the roads network. Funding: Sustainable road funding is required to ensure that road maintenance and capital investment into the road sector are achieved. Asset management systems: Appropriately designed paved road management systems and gravel road management systems are required for each road authority to ensure adequate and timeous decision making. Operations: Effective and coordinated actions are required to ensure the efficient utilisation of the existing road infrastructure and to address road safety, control overloading, and manage travel demand. Integrated planning: The DOT s efforts to integrate planning between roads, transportation and traffic functions as well as between transport and other sectors such as Land Affairs, Public Works, Human Settlements, Health, Education, Economic development, Mining and Agriculture should be continued and intensified. All sectors need good transport and roads; integrated, proactive planning will provide funding motivation from other sectors, and reduce pressure on 23 Ibid, p.50 48

49 roads by reducing the need for travel and by optimising the role of public passenger transport and rail freight transport. Political will: A determined focused effort is required to coordinate and ensure the success of the various efforts to maintain an economical road network. 24 The above proposals each have implications for the strategy of the CETA as well as the skills focus. It must be born in mind that much of this capacity building agenda is outside of the control of CETA, but CETA can play a role in partnership with the relevant government departments and other Sector Education and Training Authorities (SETAs) to explore opportunities to support this agenda. 2.3 Employer dynamics As highlighted in Chapter 1, the sector is dominated by a large contingent of small employers. There are eight large companies whose income is highlighted in Table 14. Coupled with the grading, what also distinguishes the large companies from the small and medium in the sector is their geographic reach and diversification, which earns them huge incomes. There are eight key companies in the SA construction industry: Aveng, Basil Read, Esorfranki, Group Five, Murray & Roberts, Raubex, Stefanutti Stocks and Wilson Bayly Holmes-Ovcon (WBHO), who employ a large workforce, are active in various geographic locations worldwide, and listed on the JSE. 25 Table 14 Financial situation of major construction companies 24 DBSA, South Africa State of Economic Infrastructure, 2012, p Creamer Media A review of South Africa s construction sector February 2013, p.5 49

50 Source: Creamer Media A review of South Africa s construction sector February 2013, p.9 If the Stats SA data on income in the construction industry is considered (R268,100 billion) 26 it means that based on 2011 figures, these eight companies combined income of R 107,540 billion would account for 40% of the industry income. These big companies are in a good position because while their incomes are large, they also have very positive looking order books. Public sector spending on construction has been reduced by 30% since Many big projects were deferred, and public spending was directed at smaller companies, but in principle, government would like to direct its funds in such a way that people benefit according to the demographics of the country. For this reason there is a push to upgrade contractors. However, upgrading slowed in tandem with contracts awarded. According to a survey recently conducted 28 (it is acknowledged that confidence might be skewed by impact of the larger firms), members of the South African Federation of Civil Engineers Contractors (SAFCEC) said it was difficult to remain optimistic in the face of: Corruption in the tender process Unfair tender adjudication Shortage of qualified and skilled engineers Ineffective spending of budgetary allocations by government departments Lack of effective planning and implementation of projects Lack of clarity on policy issues Unreliable supplies of materials, such as bitumen. 29 Many of these criticisms point to inadequacies in the government department commissioning the work. In his State of the Nation address, President Zuma referred to corruption, tender fraud and price fixing, particularly in the infrastructure programme. 30 In his Budget Speech, Minister Pravin Gordhan announced the establishment of a Chief Procurement Office to improve the current system. 31 Corruption Watch received 49 reports of corruption in state-owned enterprises between January 2012 and April 2013, of which 49.9% of complaints cited the type of corruption as procurement-related. 32 SAFCEC concludes 33 that it is not possible to predict what 2013 and 2014 could bring, as they can bring a variety of scenarios. Order books show promise but operating conditions in the first quarter of 2013 were harder than expected. Revenue has improved but profit margins are under great pressure. The Minister of Finance assured the country that infrastructure spending is a priority, but the South African Reserve Bank revised its estimate of investment in gross fixed capital formation in the third quarter of 2013 from 17% to 9%. Expenditure (in real terms) by the Department of Water Affairs is projected to increase by 14.9%, while for transport it is expected to fall by 4%. The tentative prediction is that growth in 2013 is likely to be 1% in real terms, taking into account a potential rise of 7.8% in construction costs Stats SA Construction Industry, 2011, p.2 27 Tubb, J. Outlook 2013 building and construction sector in SA Builder, January 2013, p State of the Civil Industry: 2nd Quarter State of the Civil Industry: 2nd Quarter Louw, Lorraine. 4 July What s the real cost of corruption? In Corruption Watch available on at 31 Louw, Lorraine. 4 July What s the real cost of corruption? in Corruption Watch available on at 32 Parastatals in the grip of grafting Corruption Watch available on at 33 State of the Civil Industry: 2nd Quarter pp State of the Civil Industry: 2nd Quarter

51 The impact on large and small firms is different. Large firms operate nationally and internationally and there are opportunities in the rest of Africa while small firms are dependent on provincial and local government projects. In KZN, where small to medium contractors predominate, contractors indicate that conditions are more favourable than in other provinces because of the strong government focus on water and road construction projects. 35 The general level of confidence does appear to be influenced by government promises as only 9% of contractors surveyed by CIDB in the 2013 second quarter SME Business Conditions Survey of building and civil contractors expect conditions to deteriorate as the year progresses even though the percentage of contractors reporting business conditions to be worse, rose from a net 19% in Q1: 2013 to 26% in Q2: Within the construction sector, the size of the companies often dictates their strategies, their capacity, their geographic limitations and their ability to train their workforce. Eighty per cent in this sector are small to medium in size as reflected in Table 15, from a survey conducted by SAFCEC on its member firms, where firms were categorised as follows: small if they employ less than 100 people; medium if they employ ; and large if they employ over 1000 people. These categorisations also show turnover by firm size. Although this is not a representation of the whole industry just SAFCEC members it does give an idea of breakdown between small and large firms. Table 15 Turnover distribution by sub-discipline in Q1: 2013 Discipline Large Medium Small Total Roads 38.9% 32% 5.7% 37.1% Earthworks 3.8% 12.3% 9.7% 5.7% Water Bulk Infrastructure 6.6% 22.3% 53.3% 10.4% Water and Sanitation 2.1% 15.5% 17.6% 5.2% Rail % 0.1% Harbours 2.8% 11.5% - 4.7% Power (bulk) 12.2% % Power (services) Airports 6.7% % Mining Infrastructure 1.7% 1.1% - 1.5% Mining (surface earthworks) 19.8% % Other 5.5% 5.4% 7.9% 5.5% Total 100% 100% 100% 100% Source: SAFCEC State of the civil industry: 2nd Quarter, 2013, p.14. Larger firms handle road works, bulk power services and mining (surface earthworks). Medium-size firms focus on roads, bulk water infrastructure and water and sanitation projects. The small firms manage water bulk infrastructure and water and sanitation. From the same sample, the turnover distribution per client in Q1: 2013 is indicated. Larger firms are currently earning substantially more from state-owned enterprises (corporations) and the private sector than from government. In the first quarter of 2013 state-owned enterprises contributed 40.2% of civil engineering work. 35 State of the Civil Industry: 2nd Quarter CIDB - SME. Business Conditions Survey Q2:

52 Table 16 Turnover distribution by client in Q1: 2013 Large Medium Small Total Central 4.3% 46.6% % Provincial 0.4% 6.8% - 1.8% Local 0.4% 33% 91.2% 8% Corporations 51.1% 2% % Private 43.7% 11.5% 8.8% 36.6% Total 100% 100% 100% 100% Source: SAFCEC State of the civil industry: 2nd Quarter, p.14. Small companies get their work mostly from local government. This suggests that their survival is threatened as this is the level characterised by most government under spending. Table 17, which is not limited to SAFCEC members, shows the provincial distribution of civil contracts from Q1: 2012 to Q1: Table 17 Provincial distribution of civil contracts awarded, by value, by quarter, Q Q Q Q Q EC 8% 10% 12% 20% 9% 13% 13% FS 9% 3% 10% 9% 8% 7% 4% GAU 21% 13% 15% 11% 23% 14% 13% KZN 13% 18% 19% 23% 23% 18% 18% LIM 5% 18% 4% 5% 3% 9% 15% MPU 22% 14% 9% 8% 14% 13% 14% NW 2% 2% 11% 9% 5% 6% 4% NC 3% 9% 11% 7% 4% 8% 6% WC 17% 12% 10% 9% 11% 12% 12% Total 100% 100% 100% 100% 100% 100% 100% Rm(Nominal) R6.9bn R10.5bn R7.4bn R8.8bn R11.9bn R33bn R36bn Source: SAFCEC State of the civil industry: 2nd Quarter, p.16. In Q1 2013, KZN and Gauteng registered the most activity, followed by Mpumalanga and the Western Cape. At the bottom are North West, and Northern Cape. The above representations do not include Grade 1 contractors, and only represent civil construction. Grade 1 contractors do not require any specific qualifications to register, which is why they are usually separated from the other grades. The CIDB has initiated a review of Grade 1 registration due to the unsustainable environment at the entry level of the Register, but of course this is the area in which there is developmental potential. 52

53 2.4 Factors impacting development in the sector Employment conditions In Chapter 1, it was highlighted that about a third of employees in construction are located in the informal sector. The fact that the sector is part formal and part informal affects the employment benefits by employees as reflected in Figure 17. Figure 17 shows that only households lag behind the construction sector when it comes to providing benefits for their employees. This indicates the high level of casual labour in the industry because their temporary status relieves the employer of wage expenses when there are no projects, and there is no need to make provision for paid leave, paid sick leave, maternity leave, medical aid and UIF. Only agriculture is comparable with construction as far as paid leave is concerned and households come in lowest. Medical aid does not feature at all under households; it is negligible under agriculture; construction is the third lowest followed by trade. Those companies that do provide more permanent employment and more acceptable working conditions have to do so in the knowledge that they are competing with many that do not. This is something that impacts on the ability of the CETA and its stakeholders to address skills needs. Casually employed people are likely to lose out on the very skills they need to enable them to access more permanent jobs or form companies. Figure 17 Employee access to benefits by industry Source: Quarterly Labour Force Survey, Quarter 2, p.xii. Contractors argue that they only need labour when they have projects as they cannot afford to pay wages when there is no work. This results in sub-contracting or employing casual labour rather than employing permanent staff. Figure 18 illustrates this phenomenon in the sector: there are three types of agreement for the workers: Temporary work of limited duration Permanent contracts involving the usual benefits Unspecified employment which is probably casual labour. 53

54 Figure 18 Nature of employment contract or agreement by industry Source: Quarterly Labour Force Survey, Quarter 2, p.xii. Additionally, the construction sector is low on the list of industries where collective bargaining can take place again due to the temporary nature of the contracts. Figure 19 Collective bargaining among sectors Source: Quarterly Labour Force Survey, Quarter 2, 2013 Because of the support it provides to larger and more formal contractors, the smaller contractors who are presumed to be mostly informal need development as a skilled and knowledgeable small sector will help maintain high quality standards that will enable them to get work when it is available. High quality construction will also boost consumer confidence, which is positive for the sector Government macro policy and the construction sector The Department of Public Works (DPW) has a mandate to promote the government s objectives of economic development, good governance and rising living standards and prosperity by providing and managing the accommodation, infrastructure needs of national departments, by leading the national Expanded Public Works Programme and transformation of the construction and property industries. 37 Providing strategic leadership to the Construction and Property Industries is one of the ways in which this mandate will be fulfilled. The Department has several programmes to develop and 37 DPW website: 54

55 strengthen infrastructure inthe construction industry: Contractor Development Programme comprises a Contractor Incubator Programme aimed at being an enabler of sustainability for emerging contracting enterprises. Emerging contractors have access to mentoring opportunities, access to finance and information, and they get a steady supply of work to ensure their sustainability. Expanded Public Works Programme (EPWP), originating from the Growth and Development Summit (GDS) of 2003, is aimed at creating work for poor communities, and a specific programme which the construction sector is benefitting from is the Infrastructure sector programme. This programme uses labour-intensive construction methods to provide work opportunities to local unemployed people and provides training and skills development to these people to enhance their chances of employment after the programme. The Infrastructure Sector programmes currently being implemented are the: Vuk uphile programme, focused on training in labour intensive methods of construction to become contractors at National Qualification Framework (NQF) level 2 and supervisors at NQF level 4; National Youth Service, a year-long skills training and development intervention focusing on building technical skills and life skills training, access to practical work experience and mentoring; Large projects, focusing on projects with a minimum budget of R30m to ensure that delivery of large budgets projects are based on EPWP principles and involves meaningful development of emerging contractors; and the provincial roads programme which provides assistance, in partnership with the National Department of Transport, to Provincial Roads Departments to help them implement projects and programmes labour-intensively. The focus in the Provincial roads programme is on rural access roads. 38 Infrastructure maintenance, informed by the National Infrastructure Maintenance Strategy, Infrastructure delivery improvement programme, a collaboration between National Treasury, the CIDB, National Department of Public Works and Development Bank of Southern Africa to support public sector clients to build capacity for improved delivery of infrastructure. The following are key government strategies to generate more jobs and reduce poverty. The significance of these projects to the construction industry is considered. The Minister of Public Works delivery agreement speaks to five delivery outcomes: Outcome 4: Decent employment through inclusive economic growth this is achieved through the EPWP Infrastructure sector programme; Outcome 5: Skilled and capable workforce to support an inclusive growth path The EPWP and the contractor development programmes both have a skills development component; Outcome 6: Create efficient, competitive and responsive infrastructure network the infrastructure maintenance and Infrastructure delivery improvement programme will contribute to the delivery of this outcome. Outcome 8: Sustainable human settlements and improved quality of household life this is achieved through release of land and properties for developmental purposes to the Department of Human Settlements; Outcome 12: An efficient, effective and development oriented public service and an empowered, fair and inclusive citizenship this can be achieved through ensuring that 38 DPW.EPWP Infrastructure Sector: 55

56 immovable assets utilised for delivering various government services yields functional, economic and social benefits to the state for improved service delivery. The Department s medium term expenditure points to a budget of more than R1,231 billion to be spent on new, replacement, upgrade and additions to current infrastructure. The nature of these projects and the expected expenditure is highlighted in Table 18 below. Table 18 DPW Medium term expenditure budget for infrastructure No of projects Programme Main appropriation 2011/12 R 000 Revised Estimate 2011/12 R 000 Medium Term Estimates 2012/13 R /14 R /15 R Departmental Accessibility Dolomite risk management 142 Land ports of entry 8 Inner city regeneration 129 Special projects Total Source: DPW strategic plan There is scope for the CETA to play an active role in the contractor development programme through provision of discretionary funding to increase the number of beneficiaries trained. The CETA can also assist with the identification of reputable and accredited providers and the monitoring of training to ensure the desired impact is achieved. The New Growth Path The New Growth Path (NGP) articulates government s strategy for realizing inclusive growth through large scale employment creation, with the set target of creating five million jobs over the next 10 years. A key foundation of the strategy is harnessing new opportunities locally within South Africa, continentally and globally to achieve socially desirable and sustainable outcomes, with a strong focus on exporting South African goods to the region and other growing economies. The NGP identifies the following levers for achieving job creation: Investment in infrastructure so that jobs are created in four phases (1) construction of fixed assets, (2) operation of these assets, (3) maintenance, and (4) the manufacture of components required for construction; The selection of specific areas to promote employment, such as agriculture, agro-processing and tourism; The use of technology to generate jobs such as renewable energy projects in the quest for a green economy; Investment in social capital and public services, such as cooperatives, non-governmental organisations and stokvels; Promotion of regional development to boost the rural areas through roads, ports, linkages to other countries on the continent. 56

57 The emphasis is on infrastructural investment and the manufacture of components which will affect both contractors and material suppliers positively. Unfortunately contractors fear that investment will not materialise due to constraints on the fiscus. An opportunity exists for CETA to assist in the development of local people for employability where sector players are involved in large infrastructure projects, or where there are plans to deploy such programmes. The National Development Plan The National Development Plan (NDP) was introduced at the end of 2011 by the National Planning Commission. Focusing on the reduction of poverty and inequality, it reiterates the objectives of the New Growth Path, but lays out the vision to be achieved by The most important aspect of the plan from the point of view of the construction industry is the massive infrastructure investment. In his budget speech in 2013, Minister Gordhan assured the nation that R827 billion would be drawn from the fiscus and state-owned enterprises to finance this. There is opportunity for local skills development for the large infrastructure projects distributed nationally and in rural areas. CETA can play a role in some of this skills development, particularly preparing unemployed youth and women with low skills, as well as people with disabilities, to perform elementary tasks in the construction projects. Industrial and Special Economic Zones An Industrial Development Zone is a specific area built for the purpose of attracting foreign direct investment. It is situated near an airport or seaport and has customs controlled areas set aside for the manufacturing and storage of goods. The aim is to encourage beneficiation, investment, skills development and employment. There are three such zones at present in Coega in East London in the Eastern Cape, Richards Bay in KwaZulu-Natal and OR Tambo International Airport in JOhannesburg. Although there has been criticism that the IDZs have not contributed as much as hoped, the government plans to expand this concept with the establishment of Special Economic Zones with improved governance and streamlined procedures which will support businesses. There will be 10 of them and that will mean yet more infrastructure to be built. 39 The extent to which the construction sector will benefit from this programme is the capability of government to raise funds for this programme as well as capacity to implement projects and spend the budget. Strategic Infrastructure Projects Led by the Presidential Infrastructure Coordinating Committee, 18 SIPs have been identified. They fall under the following categories: Five geographic SIPs developing bulk infrastructure to link various provinces of the country. Three energy SIPs development of sustainable energy infrastructure including green energy. Three spatial SIPs improving infrastructure in local government especially in rural communities. Three social infrastructure SIPs developing infrastructure to support social services such as hospitals. Two knowledge SIPs expanding information technology infrastructure as well as supporting initiatives like SKA and Meerkat. One regional SIP building links with other Southern African countries. 39 Allix, M. Special economic zones to employ regional strengths in News Analysis.Available at 57

58 One Water and Sanitation SIP to address backlog of adequate water supply and provide basic sanitation. The SIPs have the potential to create long term projects for the construction sector. The estimated cost of the SIPs is R4-trillion, to be spent over 15 years. Government s intention is to spend some R823- billion on the programme in the next three year period to March Most of the spending will be directed at capital equipment, but it is expected that infrastructure plans will support the construction industry. Construction companies have noted that the infrastructure programme has not so far resulted in increased tender activity from government. Several factors could impede the roll out of the infrastructure programme including failure to source funding the recent downgrades of South Africa s sovereign credit ratings will raise the cost of borrowing, lack of government capacity to implement the plans. User pay or Public Private Partnerships (PPPs) are alternative ways of raising funds for the infrastructure programmes but the protests against the e-tolling system suggests thesemay not be a viable options. 40 Alternatively if they are agreed as being appropriate they may be delayed because of public or sectional protests. Regarding lack of government capacity to implement plans, projects often do not get implemented because there is no capacity to execute projects. For construction companies this leads to cost overruns. Lack of capacity is also evident in under spending in government. The State of the Civil Construction Industry report by First National Bank and the Bureau for Economic Research in October 2012, highlighted that South Africa s municipalities undertook capital expenditure (capex) valued at R33.2-billion in the financial year ended June 2012, representing only 72.5% of the total capital budget for the year. This means that the budget was underspent by R12.8-billion. Municipalities failed to spend R2.27-billion of the municipal infrastructure grant in the 2011/2012 financial year. Spending patterns are not similar for all municipalities though as some of them having a strong record of spending implementation. 41 Comprehensive Rural Development Programme The Comprehensive Rural Development Programme is the third priority of the government s MTSF. It differs from other initiatives in the rural areas insofar as it is based on consultations with the communities. Two pilot projects were conducted in the Northern Cape and Limpopo, before the plan was articulated. It is premised on empowerment of the people through rural business initiatives, cooperatives, local markets and cultural initiatives. 42 Government will take a three-pronged approach: agrarian transformation, rural development and land reform. This programme is linked to the SIPs. Rural areas remain backward because of a lack of transport networks and basic services. Local development offers opportunities for work for the medium to small contractors, especially those based in or near the rural areas. It is not clear to what extent the rural based contractors are able to get CIBD registration and gain access to opportunities made available through the CRDP. The CETA can play a role in facilitating registration of rural contractors, as well as facilitating training on supply chain management so that they are able to tender for work. It is clear from all the above initiatives that the principles remain the same and the emphasis is on infrastructure to link communities and lead to economic growth. This will in turn create jobs and lead to a reduction of poverty. With the focus on transformation in each of the initiatives, it is hoped that inequality will be reduced as well. 40 Creamer Media A review of South Africa s construction sector February 2013, p Creamer Media A review of South Africa s construction sector February 2013, p Ministry of Rural Development and Land Reform, Comprehensive Rural Development Programme Framework, July

59 In order for the above to take place, the skills level of the potential employees needs to be adequate and so the following initiatives are in place to ensure the appropriate level of skills both at entry to the job market and for those already in the market with experience but not necessarily with academic qualifications. The National Skills Development Strategy III Driven by the desire to improve the effectiveness and efficiency of the skills development system, the National Skills Development Strategy III (NSDSIII) serves as an overarching strategic guide for skills development, offering direction to sector skills planning and implementation in the SETAs. The NSDSIII, like its predecessors NSDSI and NSDSII, aims at transformation in the areas of class, race, gender, geography, age and disability and HIV prevalence. It also supports rural development. NSDSIII set targets for SETAs but this version requires SETAs to assess their own effectiveness in terms of outputs, outcomes and impact. NSDS III focuses on what is expected of the SETAs: improved planning and financial management of skills levy resources training that leads to full qualifications regulating per capita cost of training and investing in training that yields better outcomes developing shared services such as IT services, financial systems and human resource development. 43 While NSDS is still focused on upgrading skills, the priority this time is quality training that equips the learner to do a specific job. The CETA must therefore ensure the programmesarespecific to the construction sector. 44 Human Resources Development Strategy of South Africa The HRDSA is an initiative by the Department of Higher Education and Training. Spanning 2010 to 2030, the intention is to develop human potential to achieve productivity, competitiveness and economic growth. In line with the NGP, quality training in designated areas should be accelerated, immigration of people possessing the required skills should be encouraged, and more candidates should be urged to enter professions that lack skilled employees. The CETA s scarce and critical skills will help inform the gaps in skills and enable the development of a responsive strategy to develop scarce skills and prepare the sector by growing skills that will be required in future years. National Skills Accord The National Skills Accord has been developed by the Department of Economic Development in partnership with a host of other departments. The signatories commit themselves to 45 expand the level of training using existing facilities more fully make internship and placement opportunities available within workplaces 43 National Skills Development Strategy III.DHET. 44 The Skills Portal: National Skills Development Strategy: What has changed? by Des Squire. Available at 45 New Growth Path: Accord. National Skills Accord signed

60 set guidelines to improve the level of training use the available funds well and offer incentives to companies to train candidates set annual targets for training in state-owned enterprises improve SETA governance, financial management, stakeholder involvement improve Sector Skills Plans align training to the New Growth Path improve the role and performance of FET Colleges. There are six accords: the Skills Accord, Basic Education and Partnership with Schools Accord, Local Procurement Accord, the Green Economy Accord, Industrial Relations Accord (not yet published) and the Youth Employment Accord. 46 Broad Based Black Economic empowerment In 2011, 75% of all contractors registered with the CIDB in grades 2 to 6 were black-owned. (Black ownership is defined as equity ownership of 50% or more). In the higher grades (Grades 7-9) the transformation has been slower as highlighted in Figure 20. Figure 20 % of GB and CE Black-owned contractors in South Africa by grade in Q1: 2011 Source: CIDB: The Construction Industry as a vehicle for Contractor Development and Transformation Transformation has been taking place relatively well in the construction industry but the pace of upgrades of Black-owned companies has slowed in recent years due to the economic recession. Figure 21 demonstrates Black ownership in the first quarter of There has been some improvement but not as much as hoped. The apparent improvement in CE might not be what it seems. Grade 9 companies are publicly listed so race is not so easy to discern. This was confirmed by stakeholders during interviews, who mentioned that it is difficult to determine who owns the large companies. 46 Summary report on implementation of social accords. Economic Development Department, May

61 Figure 21 Black ownership in GB and CE in South Africa Q1: 2013 Source: CIDB Quarterly Monitor: April 2013, The transformation of the construction industry in relation to gender is not progressing as well as it should be. On average, around 40% of all Grade 2 to 4 contractors are women owned. From Grades 5 and 6 and above, women ownership is typically less than 30% in CE, and between 30% and 40% in GB. Women ownership varies significantly from province to province and across the Grades - with the highest ownership in Limpopo, followed by Mpumalanga. 47 Figure 22 Women ownership in GB and CE in South Africa in Q1: 2013 Source: CIDB Quarterly Monitor: April 2013 The skills that a company has partially determine their grading. As such, in order for upgrading to occur, the smaller contractors need to upgrade their skills. The CETA can play a role in supporting the provision of skills for small companies. The extent to which the CETA s efforts at improving skills to drive the transformation agenda should be informed by the following issues highlighted by stakeholders during interviews and in the survey: Use existing government policies and programmes that promote transformation to inform areas where skills development should be focusing, e.g. BBBEE policies focus on ownership and contractor development programmes focus on upgrading small contractors, so the focus should 47 CIDB Quarterly Monitor: April 2013, p

62 be on entrepreneur development, or managerial development to enable black people leverage into existing white owned companies. They should have the skills to be recruited as shareholders and make a meaningful contribution in the companies that recruit them. Transformation in the lower grades is going well, but a little slow at Grade 9 level. The focus should be to train lower graded contractors so that they are skilled enough to achieve higher grading.part of achieving transformation is through modelling good practice, and the CETA should publicise successful transformation stories to motivate others. One respondent indicated that his company has for the last year recruiting only designated candidates, at all levels in order to improve transformation in the company. This is probably not a unique case, and cases like these need to be acknowledged and widely publicised. There is a perception that in the built environment sub-sector the old and skilled professionals do not want to transfer skills, so mentoring programmes should be carefully monitored in this and similar sub-sectors, otherwise they will not achieve the developmental goal of the mentors are not willing to impart skills.women are delegated clerical work, so a focus should be on advocacy and exposing more women to the sector, in a diverse range of skill areas.most small companies cannot afford to release labour, as most of them have a very small staff complement. This requires the availability of flexible learning pathways so that training does not interfere with the work requirements of the enterprise. Industrial Policy Action Plan (IPAP) 2013/ /16 The IPAP 2013/ /16 is the fifth iteration of what has commonly been referred to as IPAP2. Informed by the National Development Plan (NDP), it is found in the framework provided by the programmatic approach of the New Growth Path (NGP). The National Industrial Policy Framework (NIPF) adopted by Government in 2007 provides the more general industrial policy framework for IPAP and serves as an outline for the state s joint interaction with its social partners from business, labour and civil society. IPAP s goal in this context is to prevent industrial decline, and support the growth and diversification of the manufacturing sector. IPAP surmises that consumption-driven sectors (such as finance and insurance; real estate; transport and storage; communication; wholesale and retail; and catering and accommodation) have been the driving force of SA s modest economic growth, while the production-driven sectors (such as agriculture; mining; manufacturing; electricity and water; and construction) continue to play a minor role. This means that formal employment growth was predominantly in the services sectors (driven by unsustainable credit-fuelled consumption) and in the business services sub-sectors (driven by the outsourcing of activities and the steady expansion of the private security sector). Government s projected infrastructure spend of R850 billion over the next 3 years, and R4 trillion over 15 years has been hampered by structural blockages and the slow roll-out of public sector infrastructure spending plans, especially, for growth and employment in the construction sector. Some of the IPAP highlights related to construction include the following (separated according to sector): Automotive: Construction of a truck plant in COEGA; Agro-processing: Construction of a new feed mill in Standerton has began; Pharmaceuticals: The DTI provided funding towards the commencement of the R1.5 billion ARV API project, due to start with the construction of a R105 million pilot plant in Pelindaba (will create approximately 350 high-tech jobs); 62

63 Green Industries: Construction of a wind tower manufacturing facility in the Coega IDC will begin (expected to create 628 construction jobs and 200 full-time operational jobs); The key action programme of Strengthening implementation of competition policy placed active focus of competition authorities on investigation, prosecution and policy advocacy with regard to, amongst other things, construction and infrastructure; The key action programme of Facilitating the Biovac Project (Manufacture of Vaccines) resulted in the construction of a R75 million Inspection (Viewing), Labelling and Packaging (VLP) facility; Aerospace and Defence: Roughly R1 billion in technology/r&d is spent, annually, consistently providing employment for about 15,000 highly skilled engineers, technicians and artisans many of whom contribute towards national projects in space, transportation (including rail safety), mining, construction, power generation and telecommunications. IPAP is therefore significant to CETA in relation to facilitating growth of the sector and providing employment to the skills in the sector. Medium Term Strategic Framework The Medium Term Strategic Framework (MTSF) is a statement of intent identifying the development challenges facing SA and serves as guide for planning and resource allocation across all the spheres of government. The MSTF has identified 10 Priority Areas as derived from the electoral mandate and the priority for a Massive programme to build economic and social infrastructure.this articulates closely with the construction sector and particularly requires the state to identify opportunities for growth, supplying, where necessary, infrastructure, training, marketing support, efficient regulations and access to start-up capital and so forth. The MTSF stresses that employment creation will largely depend on state supported activities especially public-employment schemes based on infrastructure construction programmes and government-supported community service and cultural activities. The CETA can play a key strategic role in the provision of skills for effective implementation of the said infrastructure programmes. 2.5 Government infrastructure needs The public service, in the implementation of its programmes for service delivery, has a high consumption of construction services. All departments also have a need for construction services as they need repair and services of their own buildings, work usually done through the department of Public Works and on other contracts. The infrastructure needs and programmes of the various government departments are highlighted in Table 19 below. Table 19 Public service infrastructure requirements Department Department of Basic Education (DBE) Infrastructure needs/programmes DBE is running the Accelerated Schools Infrastructure Development Initiative (ASIDI) which is funded from the Schools Infrastructure Backlog Grant (SIBG).This initiative aims at completing the following activities: (a) replace 510 poorly built schools with new structures; (b) supply 939 with a basic level of sanitation where there previously was none; (c) provide 932 schools with electricity for the first time; and (d) provide 1145 schools with access to water for the first time. This is spread across the provinces, though the bulk of these activities are needed to be done 63

64 Department Department of Health (DoH) Department of Higher Education and Training Department of Agriculture, Forestry & Fisheries (DAFF) Infrastructure needs/programmes within the Eastern Cape. The national spread of these projects will generate work for contractors within provinces, some of them in rural areas. NDoH s programme 5, has 6 sub-programmes including Health Facilities Infrastructure Management, which focuses on enabling provinces to plan, manage, modernise, rationalise and transform infrastructure, as well as on health technology, hospital management and improvement of the quality of care in line with national policy objectives. This sub-programme is responsible for funding the conditional grant for the revitalisation of hospitals and new health infrastructure grant. The Infrastructure Support Unit is assisting provinces to plan and implement a number of flagship projects under a public-private partnership (PPP) agreement. Among the key activities planned was the refurbishment and equipping of 122 nursing colleges, the refurbishment of public sector facilities, as well as the building of the six flagship hospitals and medical faculties, through the aforementioned PPPs. Thus far, the Department has established a Health infrastructure grant and a Nursing infrastructure grant - both established in November The Department s 2012 annual report reports that 49 nursing college infrastructure projects were completed and there is a further infrastructure projects at various levels of execution. During 2011/12, allocations were made to institutions to expand among other things, infrastructure development. Of the conditional grants and earmarked funds, the Further Education and Training (FET) Colleges conditional grant was allocated to the Department to ensure the successful transfer of the FET colleges function to the Department. Among the outputs of the grant included the refurbishment, maintenance and repairs of infrastructure and equipment to support the delivery of approved programmes as well as new infrastructure development. The two new universities (one in Mpumalanga and one in the Northern Cape) will require some construction work. Also noteworthy is that the Ministerial Committee for the Review of the provision of Student Housing at South African Universities was completed (February 2012). The report provides the baseline for a comprehensive infrastructure plan for ensuring decent student housing at universities over the next fifteen-year period. DHET will therefore also provide work opportunities for local contractors. DAFF infrastructure needs include: Irrigation systems, Drainage systems, Soil Conservation Works, Intensive/extensive animal production facilities, Intensive crop production facilities, Mechanization, Energy, Agro-processing facilities, Animal production facilities, Storage facilities, Transport systems, Roads, Farm buildings, and Waste management systems The Food Security and Agrarian Reform programme that falls under this Department provides infrastructure support to subsistence and smallholder farmers, in the agriculture, forestry and fisheries sectors. The infrastructure support directorate within this programme also further provides engineering services. The Department coordinated Strategic Integrated Projects (SIPs) 11 to increase investment in rural infrastructure. This also entails the expansion of storage facilities, transport links to main networks, fencing of farms, irrigation schemes, improved research and development on rural issues, including expansion of colleges of agriculture, processing facilities, forestry and fisheries. DAFF is also focused on veterinary infrastructure revitalisation and development, including renovations of existing animal hospitals, animal clinics and veterinary laboratories as well as the erection of new clinics. Through the Working for Fisheries Programme, 11 multi-year projects have been identified, including the provision of 64

65 Department Civilian Secretariat for Police (CSP) Department of Cooperative Governance and Traditional Affairs (COGTA) Department of Correctional services (DCS) South African National Defense Force (SANDF) Infrastructure needs/programmes key infrastructure such as fish-processing establishments, the development of aquaculture hatcheries and fish farms. The Civilian Secretariat for police (CSP) 2013 Annual Report identified effective building of SAPS Infrastructure as a key priority area, relating both to service delivery within SAPS and to government s priority of ensuring that the pace of building new police stations is accelerated and effectively planned and implemented, emphasising that the very existence of the police station structure itself is a deterrent to crime. CoGTA runs the Infrastructure and Economic Development programme, which has a sub-programme to provide support to 70 municipalities to spend their municipal infrastructure grants by compiling credible cash flows and preparing a payment schedule based on municipal infrastructure grant registered projects. CoGTA also runs the Municipal Infrastructure Grant (MIG) programme aimed at providing infrastructure for South Africans to access the basic level of service. Further programmes put in place to improve infrastructure project implementation include: a new Cities Support Programme (focused on improved spatial planning, public transport systems and management of infrastructure utilities); the Neighbourhood Development Programme (which provides technical assistance to municipalities); and the Infrastructure Skills Development Grant, which offered support to 150 graduate interns in engineering and spatial planning. In 2012, CoGTA initiated the process of establishing the Municipal Infrastructure Support Agency (MISA) which will be able to accelerate service delivery through: Municipal infrastructure assessment and diagnosis of the challenges to find solutions that are viable and sustainable; Provision of municipal infrastructure capacity support; Municipal infrastructure implementation support; and Sector capacity development including internship for unemployed graduates within municipalities. The capital works programme of the Department of Correctional Services consists of the procurement of new facilities, the upgrading and refurbishment of existing facilities, the maintenance of facilities, and day-to-day maintenance. The partnership between the DCS and the Department of Public Works in the management and delivery of the infrastructure development programme has been a focus of attention in DCS is, thus, considering two models for ideal size of facilities. Model 1 entails correctional centres not catering for a capacity less than 500 inmates; whilst Model 2 suggests correctional centres catering for between 1000 and 1500 inmates. In the 2011/12 financial year only Brandvlei upgrading had been completed, resulting in 346 additional bed space. The Department has also identified three facilities to be converted and/or upgraded to special facilities for female offenders at Pretoria, Emthonjeni and East London. Programme 8 of General Support provides general support capabilities and services for the SANDF by providing appropriate, ready and sustained materiel, facilities, movement and logistic services focusing on supply chain and life cycle management to enable the Defence Mandate by: providing new and replacing infrastructure assets through 15 projects R104 million in FY2013/14, 9 Projects R109 million in FY2014/15 and 13 projects R640 million in FY2015/16; carrying out maintenance and repairs through 17 projects R1117 million in FY2013/14, R1173 million in FY2014/15 and R1 234 million in FY2015/16; executing rehabilitation, renovations and refurbishments through 17 projects for R1117 million in FY2013/14, 8 projects for R1173 million in FY2014/15; and 14 projects for R

66 Department Department of Arts and Culture (DAC) Department of Energy (DoE) Department of Environmental Affairs (DEA) Department of Human Settlements (DHS) Department of Water Affairs (DWA) Infrastructure needs/programmes million in FY2015/16 and operationalising and capacitating the works capability that will enable the SANDF to assume selected custodian responsibilities from the National Department of Public Works, creating job opportunities in the process.. The infrastructure needs of the sector include creative spaces and places. These are dedicated arts and cultural facilities such as theatres, libraries and museums, as well as natural environments and public spaces. One of DAC s projects includes revitalising the country s community libraries by assisting municipalities and provinces to build new facilities and upgrading existing infrastructure. This will be done via the Library Service Grant, the purpose of which is to transform urban and rural community library infrastructure, facilities and services, primarily targeting previously disadvantaged communities. In the financial period , community libraries structures were established/upgraded as follows: 13 new libraries as at 30 March 2012 and 56 existing libraries were upgraded. In line with the Cabinet decision of December 2010 to terminate Electricity Distribution Industry Holdings (EDIH), a decision was taken by the Department to take over the function of rehabilitating the electricity distribution infrastructure. The deteriorating state of the electricity distribution infrastructure continues to affect the pace of the rollout of the electrification programme. To address these challenges, the Approach to Distribution Asset Management (ADAM) Project has been launched where an initial amount of R320 million has been received to implement a few pilot ADAM projects. The Minister of Energy is also leading Strategic Integrated Project (SIP) 6 Municipal Infrastructure and co-chaired SIP 8 Green Economy programmes, as well as SIP 10 Electricity transmission and distribution for all. In addition, the DoE is directly or indirectly involved in another 15 different SIPs. Under programme 6 of Environmental Sector Programmes and Projects, an amount of R of the Department s 2012/13 budget was spent on the subprogramme, Infrastructure Investment. The Department is committed to supporting the country s infrastructure development initiatives in a manner that takes into consideration and seek to find harmony between the need for development and a balance in protecting and conserving our natural environment. During 2012/2013 the Department finalised and issued 343 environmental authorisations and 165 amendment authorisations, the majority of which are linked to Strategic Integrated Projects (SIPs). This department aims to facilitate the creation of sustainable human settlements and improved quality of household life and transfers funds to the following entities: Human Settlements Development Grant (this funds the national and provincial housing programmes); Accredited metros and cities: Urban Settlements Development Grant (this funds human settlement related infrastructure development); Social Housing Regulatory Authority: Operational Capital Restructuring Grant (this foundation develops and builds capacity for social housing institutions); Rural Housing Loan Fund (empowers low-income households in rural areas to access housing credit). Several housing projects are underway. Water shortages experienced across municipalities is mostly due to old infrastructure and inadequate operation and monitoring. The Cabinet approval of the new municipal infrastructure grant will assist in addressing the water needs of vulnerable communities where, already areas have been identified and plans put in 66

67 Department National Department of Tourism (NDT) National Treasury Department of Transport Infrastructure needs/programmes place to build the much needed water infrastructure. The other related area of great importance is the Regional Bulk Infrastructure Grant which has also worked to improve water infrastructure needs. The infrastructure built programme of the Department committed to completing the Vaal River Eastern Sub-system Augmentation Project and rehabilitating five dams, to ensure compliance with the dam safety regulations. Seven were completed. During 2012/13 the Department has implemented 159 projects to the value of R2.488 billion. This Department also completed three of eight planned regional bulk infrastructure projects (DWA, 2013:20). In addition, capital investment in new water and sanitation infrastructure including the refurbishment of existing infrastructure is estimated to cost around R670 billion over the next ten years. The services rendered by the department are aimed at making the tourism industry more competitive, promoting international and domestic tourism, promoting transformation, supporting job creation, supporting small town and rural tourism, reviewing existing legislation and improving tourism infrastructure. As part of its social responsibility programme, the Department has implemented tourism infrastructure programmes and projects in line with government s Expanded Public Works Programme (EPWP). These labour-intensive projects are targeted at unemployed youth, women, people with disabilities and small, medium and micro-sized enterprises (SMMEs). Programme 8 of this Department, called Technical and Management Support and DevelopmentFinance aids capacity building in the public sector and provides specialised infrastructure development planning. Expenditure in the medium term will be directed towards job creation support as well as infrastructure development through neighbourhood job creation as well as infrastructure development through the city support programme, the neighbourhood development partnership grant and the infrastructure delivery improvement programme. The programme receives an additional R462.1 million towards the integrated cities development grant and the infrastructure skills development grant. The latter, being a newly established grant, will provide for approximately 675 graduates and interns training in infrastructure (with the intention to be registered as professional artisans, technicians, engineers and other specialists). This grant is expected to increase by R103.7million in the medium term. The mandate of this Department is to provide fully integrated transport operations and infrastructure. The Department has programmes in road transport, rail transport, civil aviation, maritime transport, and public transport which are responsible for the following infrastructure developments: Rail infrastructure: R40 billion will be invested in passenger rail infrastructure and service. Maritime safety and industrial development: The department has identified the need to upgrade the existing infrastructure along our coast to ensure the safety of life at sea. Civil Aviation: South Africa s aviation services are premised on the work of the South African Civil Aviation Authority, the Air Traffic Navigation Services and the Airports Company South Africa. These three entities have an obligation to ensure that aviation safety and security, airports infrastructure development and air navigation services are efficiently carried out. SIPs: The Department is one of the key participants in the Strategic 67

68 Department Infrastructure needs/programmes Integrated Projects(SIPs) driven by the Presidential Infrastructure Coordinating Commission. A number of critical infrastructure investments will be led by the Department of Transport, including the Durban-Free State-Gauteng logistics corridor, and unlocking economic. Road infrastructure and GFIP: Whilst the Gauteng Freeway Improvement Project (GFIP) matter has been before the Constitutional Court, government has continued to search for a lasting solution in financing the road infrastructure. Evidently, there are significant projects within government departments that are being implemented that can provide work to the sector. Some of these projects are small and will benefit the smaller contractors. The challenges within government, as mentioned in stakeholder interviews, including poor skills in writing construction specification, underestimating project scope and project management, need to be addresses through skills programmes if successful implementation of construction projects is to be achieved in a manner that avoids wastage. The CETA can lead the skills development process through partnerships with all departments and facilitate learning networks of programmes to develop skills to improve infrastructure projects roll out in departments. 2.6 Quality standards Quality of construction is critical to the industry. CIDB s study on the quality of construction in South Africa largely from the perspective of the client found that clients are in the main either neutral or dissatisfied with the quality of construction on around 20% of all projects. Additionally, around 12% of the projects surveyed had various levels of defects. The study found that client dissatisfaction is highest in the residential building sector (specifically, low- and middle-income residential), followed by special works and non-residential building. The study surmises that client dissatisfaction with the quality of the projects (surveyed in 2009) translates to dissatisfaction rate to a value of around R3½ billion per year. The study by CIDB considers the barriers to quality in construction as a result of issues within the design, procurement and construction processes, and suggests that dissatisfaction with construction quality could be attributed largely to procurement related barriers, including fraud and corruption in the appointment of contractors that were not capable of undertaking the necessary work. The study also added that given that neither the CIDB Register of Contractors nor the NHBRC Register of Homebuilders, provide an indicator of a contractor s ability to deliver, an assessment of competencies, construction management systems, and previous performance should be used to prequalify contractors and/or to assess their potential to deliver, as seen in international best practices. This especially since the use of procurement systems in the public sector have typically been based on price, not taking into account quality. Competency is a barrier to construction quality in terms of the skills of the workforce as well as the necessity of quality management being built in to courses and strong consideration should be given to introducing The Construction Quality Assessment System (CONQUAS) in South Africa as a basis for absolute measurements of construction quality as being used in Singapore as the basis for a construction quality bonus scheme, using merit and demerit points system. 68

69 The impact of poor quality as a result of the factors identified by CIDB in their study has led to great wastage in the construction of low cost housing, where Rectification of substandard construction work on many of the low-cost housing projects throughout South Africa has left the State with a bill of about R50-billion. The then Minister of Human Settlements, Tokyo Sexwale, highlighted that he was hesitant to spend any of the R25-billion set aside in his budget for housing projects until the issue of substandard work was resolved and he received certain assurances from the sector, adding that Black economic-empowerment was not a licence to deliver substandard or poor-quality work. There were about people at national level who were believed to be involved in corruption and the awarding of tenders before many had a chance to bid. 48 Additionally, as highlighted at the stakeholder workshop, a significant number of Grade 1 small contractors have no experience in the construction sector and outsource when they get tenders. This means that they do not have the quality standards to manage those they have subcontracted. The situation is exacerbated by poor capacity in local government, which is supposed to inspect and approve buildings under construction. 2.7 Conclusion The construction sector can capitalise on its strengths and work on improving on its weaknesses to improve growth opportunities. At the same time, it should be wary of threats to the growth opportunity for the sector and come up with mitigating strategies to address any threats. A SWOT analysis is presented below based on the foregoing sector analysis. Strengths Recovery from economic slump evident Business rescue plan has helped some companies survive closure Strong research culture among industry bodies Inter-dependencies between small and large companies means they can sustain each other Opportunities SIPs spending pegged at R4 trillion over the next 15 years Poor maintenance culture by government of roads and buildings leads to work Large companies have opportunities for expansion internationally and regionally Contractor development programmes Weaknesses Reliance on government for work and poor spending record of government negatively affects work flow Large contingent of small companies that do not pay levies Capital outlay needed before payment for project work Large informal sector Project by project nature of work means no benefits for workers and casualization of labour Threats Sector growth partly depends on economic growth and stability Shortage of material e.g. bitumen can affect outcomes Reduction of public sector spending will affect the sector so far reduction of up to 30% since 2008 Unfair tender practices Small companies rely on local 48Smallwood, J.J. Feedback report on a study Performance of H&S Officers. 26 June South African Builder, January

70 can uplift lower graded contractors and also focus on the development of rural contractors to position them for SIPs government and this is where most poor spending is Chapter 3: Supply of Skills 3.1 Introduction There is a skills shortage in the construction sector despite the steady supply of education and training programmes across a number of public and private education and training institutions within the sector. A survey by Landelahni showed that 74% of construction companies struggle to fill engineering vacancies. The following statistics provide a staggering account of such skills shortages in South Africa. According to the Creamer Media report 49, the graduation of engineers in South Africa lags far behind that of other countries - between 1998 and 2010, an average of 2,252 engineers graduated in South Africa each year, compared with 1.9-million graduates in China, 763,635 in India and 10,765 in the UK, in The ratio of engineers to citizens in South Africa is 1: 3,166, compared with 1: 227 in Brazil, 1:543 in Malaysia, and 1: 157 in India. In 2010, the Engineering Council of South Africa indicated that South Africa had about professional engineers, less than half of government s planned target of engineers by 2014, which seems steep to achieve. Although the headcount enrolments for Science, Engineering and Technology (SET) higher education programmes have grown from students in 2000 to in 2011, including a rise in the graduation rate from 27% to 29% over the same period, such growth is insufficient in providing the necessary skills for South Africa to meet its economic development objectives. 50 Furthermore, there a huge challenges in the system with respect to the performance of learners and students in mathematics and science education, with the latter being a core component or subjects in the majority of learning programmes and qualifications within the construction sector. This is primarily the result of a poor basic education in subjects such as mathematics and science and a reality that must be faced and addressed by all post schooling education and training institutions. Over the past few decades South Africa has experienced an overall demise in both the number and quality of artisans produced. The Joint Initiative for Priority Skills Acquisition (JIPSA) Close-out Report of March 2010 presents the following stark statistics: Between 1985 and 1995 the number of artisans developed dropped from 33,000 to 22,000 per annum. By 2005, this number had declined to a mere 4,500. This was largely attributed to the then collapsed apprenticeship programme and the failure of the new learnership system to focus on artisan and trade-based occupations. Additionally, the quality of apprenticeship training varied extensively, as did the setting of assessment standards and trade testing. The workplacebased component of the apprentice training suffered as the need for increased production overtook that of increased training. Overall an aging pool of artisans from which to draw mentors and supervisors characterized the system Creamer Media A review of South Africa s construction sector February Department of Higher Education and Training. HEMIS data South African Presidency.JIPSA Close-out Report, Mach

71 In 2009, the Department of Higher Education and Training took over the main responsibility for training from the DoL, including that of artisan development via the SETA system for skills development. The National Artisan Development Project that was initially developed by JIPSA is now located in the DHET. The policy on Generic National Artisan Learner Grant Funding and Administration System was approved by the Minister of Higher Education and Training in June This policy stipulates that each SETA and or the NSF will allocate R139,350 per new artisan learner for a 3-year grant based on a 4-tranche disbursement framework. A fundamental aim of DHET has been to develop a single, national artisan development programme that is cross-sectoral and multi-project in its approach, a move away from the existing SETA and or employer-based approach to artisan development that is limited to economic sectors and individual project disbursements. A single, national system would allow for a more systematic analysis of artisanal skills demand and supply annually. A central feature of the programme is joint collaboration from all stakeholders involved in artisan development. All gazetted artisan trade occupations will be awarded equal opportunities for development but linked to the scarcity of skills and economic need. The DHET has since developed 7-steps to becoming a qualified artisan. 52 The National Programme for Artisan Development has increased the number of artisans across all trades from 3,222 in 2006 to 15,277 in the period, but government s target in the National Development Plan (NDP) of 30,000 new artisans per annum by 2030 still appears far off. The success of this programme is sure to impact on the construction sector going forward and must be closely monitored. 53 It is commonly agreed by construction companies that the availability and retention of skills is critical to the success of the construction industry and an important contributor to company performance. Recognising this, many industry players invest significantly in skills development, both in their budgets for skilling people and mechanisms they have created to get a better skilled workforce. A large component of such training is conducted in-house and or on-the-job. Skills development and retention activities include formal and informal skills programmes for both unskilled and semiskilled workers and professional staff at management and executive levels. Adult Education and Training (AET) is on offer to employees, as well as apprenticeships and learnerships, which are seen as key levers to boost artisanal and technical skills. Companies also offer bursaries to engineering, architecture, quantity surveying, construction studies and construction management students at undergraduate and postgraduate levels, as well as offering mentorship programmes. 3.2 Higher education provision Within the public, higher education and training sector there are a range of qualifications on offer spanning the five sub-sectors located in the construction sector. Table 20 below outlines these qualifications, where they are positioned within the NQF, and who provides them. Table 20 Education & training provision in the construction sector Name of Qualification Qualification Type NQF Level Accredited Provider BEng: Civil Undergraduate 7 CHE UCT, UJ, UKZN, UP, SUN, Degree WITS 52 Department of Higher Education and Training. Policy on generic national artisan learner grant funding and administration system, South African Presidency. National Development Plan 71

72 Name of Qualification Qualification Type NQF Level Accredited Provider Bachelor of Architectural Studies (BAS) Undergraduate Degree 7 CHE NMMU, UCT, UKZN, UP, WITS, UFS BAS: Honours Honours Degree 8 CHE WITS, UCT, UFS BSc Honours: Architecture Honours Degree 8 CHE UP BTech: Architectural Tecnology Undergraduate Degree 7 CHE CPUT, DUT, NMMU, TUT, WITS BEng Undergraduate Degree 7 CHE UKZN, NMMU, NWU, UP, UJ, SUN, WITS BSc: Engineering Undergraduate Degree 7 CHE UCT, UKZN, WITS, NWU, UP, UJ, SUN BSc: Quantity Surveying Undergraduate 7 CHE UFS, WITS, UCT, UP, NMMU Degree BSc Honours: Quantity Honours Degree 8 CHE WITS, UCT, UFS, UP, NMMU Surveying BSc: Landscape Architecture Undergraduate 7 CHE UP Degree BSc Honours: Landscape Hounours Degree 8 CHE UP Architecture MSc: Landscape Architecture Masters Degree 9 CHE UP, UCT BSc: Urban & Regional Planning Undergraduate 7 CHE WITS Degree BSc: Construction Undergraduate 7 CHE UCT, WITS, UP, UFS, NMMU Studies/Management Degree BSc Honours: Construction Honours Degree 8 CHE WITS, UP, UFS, NMMU, UCT Studies/Management MSc: Project Management Masters Degree 9 CHE UP MSc: Built Environment, Masters Degree 9 CHE NMMU Construction Management MSc: Built Environment, Masters Degree 9 CHE NMMU Construction Health & Safety Management MSc: Built Environment, Project Masters Degree 9 CHE NMMU Management MSc: Real Estate Masters Degree 9 CHE UP Masters of Land & Property Masters Degree 9 CHE UFS Management BSc: Property Development Undergraduate 7 CHE UKZN Degree BSc Honours: Property Honours Degree 8 CHE UKZN development BSc: Property Studies Undergraduate 7 CHE UCT, WITS Degree BSc Honours: Property Studies Hounours Degree 8 CHE UCT MSc: Property Studies Masters Degree 9 CHE UCT Master of Land & property Masters Degree 9 CHE UFS Management (Property Evaluation) BTech: Engineering Undergraduate Degree 7 CHE VUT, TUT, UNISA, UJ, CUT, MUT, DUT, NMMU, CPUT, WSU BTech: Architecture Undergraduate 7 CHE TUT, Degree MTech: Architecture Masters Degree 9 CHE TUT, MArch Masters Degree 9 NMMU, UKZN, WITS, UCT, UFS, UP BTech: Landscape Technology Undergraduate Degree 7 CHE CPUT, TUT 72

73 Name of Qualification Qualification Type NQF Level Accredited Provider BTech: Quantity Surveying Undergraduate Degree 7 CHE CPUT, DUT, NMMU, TUT, UJ, CUT, MUT, WSU BTech: Construction Management Undergraduate Degree 7 CHE CPUT, CUT, NMMU, TUT, UJ, UFS, DUT BTech: Town & Regional Undergraduate 7 CHE CPUT, DUT, UJ Planning Degree BTech: Architectural Technology Undergraduate 7 CHE DUT, NMMU Degree MTech: Architectural technology Undergraduate 9 CHE NMMU, Degree NDip: Engineering National Diploma 6 CHE VUT, TUT, UNISA, UJ, CUT, MUT, DUT, NMMU, CPUT, WSU NDip: Civil Engineering National Diploma 6 CHE VUT, TUT, UNISA, UJ, CUT, MUT, DUT, NMMU, CPUT, WSU NDip: Electrical Engineering National Diploma 6 CHE VUT, TUT, UNISA, UJ, CUT, MUT, DUT, NMMU, CPUT, WSU NDip: Architectural Technology National Diploma 6 CHE CPUT, DUT, NMMU, UJ NDip: Town & Regional Planning National Diploma 6 CHE CPUT, DUT, UJ BSc: Construction Management Undergraduate 7 CHE NMMU, UCT, UP, UFS Studies Degree NDip: Building National Diploma 6 CHE CPUT, UJ, VUT, WSU, CUT, DUT, MUT, TUT, NMMU, UFS NDip: Landscape Technology National Diploma 6 CHE CPUT, DUT, TUT NDip: Real Estate (Property National Diploma 6 CHE UJ, UNISA, CPUT Valuation) Post Graduate Diploma: Property Postgraduate Diploma 8 CHE UCT Studies NCert N4-N6: Building & National Certificate UNISA Construction National Certificate in Quantity National Certificate UFS Surveying, Construction & Project Management Source: Industry body websites for SACPVP, SACQSP, ECSA, SACAP, SACPCMP & SACLAP Table 20 illustrates the large variety of qualifications applicable to the various sub-sectors within the construction sector. These qualifications range from national certificates and apprenticeships to national diplomas, postgraduate diplomas, degrees and postgraduate degrees that are offered by both traditional universities and universities of technology in the public sector. The large number of qualifications within each level of the NQF provide for clear routes of articulation for students although there may be challenges in relation to articulation between institutional types, for example, between universities of technology and traditional universities. All higher education programmes are accredited by the Higher Education Qualifications Committee (HEQC) of the Council for Higher Education (CHE). The HEQC signs a number of MOUs with various professional bodies and industry associations in the sector to accredit a range of programmes applicable to their sub-sector that are offered by higher education institutions. 54 There are a number of qualifications and occupations that are on the NQF and are due to expire in The migration of these qualifications from SAQA to the Quality Council for Trades and 54 Council for Higher Education (CHE), Available at 73

74 Occupations (QCTO) needs to be addressed speedily and effectively. Also, the QCTO has only been granted authority to quality assure qualifications up to NQF Level 6. The CETA needs to work with the QCTO to address these and other quality assurance related matters. 74

75 3.2.1 Graduate output for higher education institutions Figures 23 and 24 depict graduate output levels for students in the architecture and built environment as well as engineering fields at public higher education institutions in the country between 2009 and It is interesting to note that these graduate output levels vary somewhat between the disciplines. For architecture and the built environment the number of diplomas, certificates and undergraduate degrees has all declined since However at postgraduate level, the number of honours, master s and doctoral degrees awarded have risen slightly. For example, universities produced 41 more masters and PHDs in 2011 than they did in 2009 and 17 more honours graduates in 2001 than was the case in Such an increase is important yet insufficient when one considers the overall numbers of masters and PhDs produced annually in South Africa in comparison to other developing countries such as India and Brazil. Moreover, the decline in undergraduate output levels and below is worrying and this is the pipeline for future masters and PhD students. Figure 23 Graduate output for students in architecture and the built environment field Diplomas and Certificates Source: HEMIS Data Architecture and the Built Environment Undergraduate Degrees Postgraduate Diplomas Honours Masters and PhD The graduate output level for engineering qualifications illustrated below paints a completely different picture. For all categories of qualifications there has been an increase in overall output levels between 2009 and Albeit, there was a slight decrease in output for some qualifications in 2010, but this rose again in The greatest success has been in the number of undergraduate students graduating, which has more than doubled since The steady increase in the number of engineering graduates at public higher education institutions is a reflection of the government s focus on boosting output in the Science Engineering and Technology (SET) disciplines so as to boost skills capacity in line with meeting the development objectives of the country Department of Higher Education and Training. HEMIS data for

76 Figure 24 Graduate output for students in the engineering field Engineering Qualifications Diplomas and Certificates Source: HEMIS Data Undergraduate Degrees Postgraduate Diplomas Honours Masters and PhD Despite the varied supply of construction-type qualifications, particularly at the higher education level, there are a number of other supply-side challenges or areas on concern that were highlighted during the 2013 SSP stakeholder interviews with providers and employers in the construction sector. Some of the key concerns and or reflections include: There were indications of partnerships between various higher education institutions, employers in the sector and industry bodies. This enabled the development of qualifications that were more relevant to industry needs. However, greater collaboration between all education and training institutions and industry role-players is necessary and the CETA can play a more meaningful role in this regard. Some interviewees complained that NATED courses are outdated and need to be urgently revised. FET colleges were seen to provide the theoretical knowledge required to obtain the qualification. The practical component was viewed as being largely dependent on workplace based experience provided by employers. However, learner placement within these companies for both FET and university students remains a challenge. According to a private provider interviewed, about 80% of our students come from FET colleges and enrol in our programmes to obtain the necessary practical training as they don t get this at the FET college. If such a view is a reflection of the reality at FET colleges then these supply-side constraints need to be addressed. The recent drive by the Department of Higher Education and Training to open up all government departments and state-owned enterprises as sites of learning is an attempt to increase sites of delivery for workplace based experience and internships. The Skills Accord reinforces this position. The CETA has an important contribution to make with respect to facilitating the placement of learners and students in public and private industry so that they may complete the workplace based experience component of their learnership or internship 76

77 programme. A large number of providers interviewed indicated that the CETA has not played this role to date. Providers and industry bodies complained of poor maths and science competency amongst students enrolling across institutional types.there are indications of poor English language competency amongst students enrolling at the various institutions of learning. Whilst this is a challenge for the formal education system, rather than the CETA, the SETA will need to factor this into plans, exploring ways of both motivating the need for sound basic knowledge, and providing opportunities for foundational learning within funded programmes. Some providers complained of high drop-out rates attributed to poor levels of student success. Poor levels of competency in maths and science as well as English were some of the reasons attributed to this. Training provision in the sector needs to be based on the actual needs of employers and should not be driven by service providers in the sector. Absorption of students into the labour market upon completion of their qualification appears varied across the sub-sectors within the construction sector as well as across the qualification types. A more in depth analysis of this is required. There are vast skills development opportunities associated with the SIPs projects. However, there appears to be a lack of coordination between the CETA, employers and providers with respect to the supply of adequate and relevant skills for the SIPs. The CETA is well positioned to facilitate this process and needs to become more engaged with employers, providers and the skills managers located within each SIP. Given the recent findings of collusion between various construction companies in the sector, it is imperative that the tender processes for the SIPs are transparent and well communicated by Government. Many stakeholders interviewed were either unaware of the SIPs or the role that they could play. According to a respondent from a construction company, Government needs to communicate its plans better to all role players in the Industry in order for us to prepare ourselves to access opportunities in the country s infrastructure roll out. From the 2013 CETA SIP survey, it emerges that approximately 60% of companies surveyed indicated that they did envisage a role for themselves in the SIPs. This is promising and the CETA needs to facilitate where possible to cater for this. What is interesting is that from the 40% of companies surveyed that did not see themselves participating in the SIPs, the only reason given for this was a lack of information on how to participate. The interviews conducted point to a level of apathy and poor work ethic amongst employees in the construction sector, particularly the building sector. Although this is something that cannot only be corrected via interventions other than training, it may necessitate the inclusion of ethics modules within the broader programme offerings of the various providers, including short skills programmes and RPL programmes. The development of work discipline and a sound work ethic and attitude was one of the generally accepted outputs of the apprenticeship system. Further research may be needed to understand why those emerging from current programmes do not appear to have these basic requirements of a skilled artisan. In one discussion with a manager in the Navy, it was stated that those acquiring a trade in the armed forces were often poached. This was partly because of the high quality of training received, but also because of the discipline of those trained in the armed forces. Although the artisan training in the armed forces is generally agreed to be much more costly than other artisan trade routes, it would be 77

78 useful to explore this issue in more depth, and to identify improvements to both the content of training and the structuring of the training, including conditions of moving from one level to the next. A large percentage of the construction sector consists of small, micro and medium-sized enterprises. Such enterprises face two challenges in terms of acquiring adequate training and skills. The first is that of funding. Many small, micro and medium-sized enterprises have not accessed funds for skills development through the CETA due to the bureaucratic burden involved in acquiring such funds. Secondly, these companies cannot afford to have their employees away from work attending training programmes. The CETA must begin to play a more active role in supporting the needs of such employers as less likely to pay for training themselves yet they are crucial to the process of creating jobs within the sector. Some employers interviewed suggested that the process of accreditation within the CETA was inefficient, due to lengthy delays, and the process was also regarded as expensive. Interviewees also reported that the process of certification was problematic. One provider indicated that they had waited for almost two years to have a certificate issued. Streamlining ETQA processes and making them conducive for the expansion of training should be considered. Obviously this has to be approached with care as stakeholders also emphasised the importance of quality standards in the industry. Some contractors in the construction sector pointed to a lack of information on how to access the training interventions made available by the CETA. They also expressed concern that if access is only possible once a year, there are many who would miss out. The cyclical nature of the construction sector requires an approach to supply that is somewhat flexible. Although universities, universities of technology and FET colleges will continue to produce a constant number of graduates based on demand and available funding, the provision of short term learning programmes are better suited to responding to cyclical changes in skills demand. Some employers described the need for providers to incorporate soft skills and knowledge relating to negotiation, contract development and management, presentation, risk management, project budgeting, technical report writing, business development, and ICT as part of their programmes. According to an industry body interviewed, Diploma graduates are more employable than degree graduates because of the nature of training they receive at universities of technology that is more practical as this benefits the employer. There needs to be further research collected and conducted to assess the validity of this statement as it has implications for provision at universities. There appears to be overall consensus that the quality of university graduates in the construction sector is good. The challenge identified remains the poor level of workplace based experience and practical knowledge amongst these graduates. Employers interviewed indicated that they did not have any influence over what training providers teach students. This may be attributed to a lack of collaboration between providers and employers in the construction sector, a role that the CETA is best positioned to fill. The picture is somewhat different amongst industry bodies and professional bodies as many of 78

79 these bodies work closely with higher education providers in developing their academic programmes. Additionally, the CHE has delegated the task of programme accreditation to certain professional and industry bodies in the sector. 3.3 CETA funded programmes The Construction SETA has 1,698 active training providers of which 571 have assessors. There are 370 accredited training providers with a moderator. Table 21 below shows the overall number of learners whose training has been funded by the CETA in its various sub-sectors. What emerges immediately is the drastic decline in the number of learners trained for all five of the sub-sectors. The data is based on the number of WSPs and ATRs submitted by employers in the construction sector. Hence the decrease in training is not necessarily a reflection of a drop in the real demand for skills training and development in the sector but rather a decline in the number of employers seeking funding for such training linked to rapidly reduced WSP and ATR submissions and or the inability of the CETA to disburse funding. The economic downturn in the past two years may have contributed to the overall contraction of the construction sector and the resultant decline in training accessed. On the other hand, the implementation of the SIPs should help to boost the demand for training so as to produce the skills required for these large infrastructure projects. Table 21 Number of learners that the CETA has funded across the various sub-sectors Grand Total Building sector Built Environment Professions Construction Electrical Contractors Materials Manufacturing Other Grand Total Source: CETA WSP and ATR database, 2013 Table 22 below outlines the top 20 occupations across all sub-sectors in which CETA funded training took place. Since 2010, the CETA has been responsible for the training on 4,057 builders, 5,470 civil engineers and some 8,010 earth moving plant operators. Although such training is important for developing skills needed in the sector, the annual number of builders, civil engineers and earth moving plant operators trained has been diminishing since For example, in 2012 the CETA trained 85% fewer builders than it did in If this was the trend for a select number of occupations then there may be reasonable explanations for this due to changing occupational training needs within the sector. Unfortunately this appears to be the trend across all 20 occupations between 2011 and Further investigation into possible causes for the decline in training is urgently required. A thorough assessment of the impact of the SIPs going forward and the role of the CETA within these projects is crucial and is beyond the scope of this SSP. 79

80 Table 22 The top 20 occupations on which training was conducted across all subsectors OFO Code Occupation Total Builder's Worker Earthmoving Plant Operator (General) Civil Engineer Building Associate Scaffolder Earthmoving Worker Cement and Concrete Plant Worker Civil Engineering Technician General Clerk Paving and Surfacing Worker Carpenter Truck Driver (General) Handyperson Clay Processing Factory Worker Quantity Surveyor Operations Foreman (Non-Manufacturing) Corporate General Manager Metal Engineering Process Worker Construction Project Manager Source: CETA ATR database, 2013 Upon assessing training within each sub-sector individually, a similar trend emerges. Tables 23 and 24 below show a decline in training provided for the building contractor, built environment, construction, electrical contractor and materials manufacturing sub-sectors. From training 881 scaffolders in 2011, the CETA in 2012 trained only 42. The number of plumber assistants being trained fell to zero in 2012, from the 71 that were trained in 2010 and Table 23 Top 15 Occupations where training was conducted among building contractors OFO Code Building sector Total Scaffolder Builder's Worker Plumber Industrial Spray painter Operations Foreman (Non-Manufacturing) Product Assembler Clay Processing Factory Worker Truck Driver (General) Steel Fixer Building Associate Accounts Clerk

81 OFO Code Building sector Total Plumber's Assistant Earthmoving Plant Operator (General) Carpenter and Joiner Source: CETA ATR database, 2013 Although 2,869 learners were trained as civil engineers in the built-environment sub-sector between 2010 and 2012, the numbers being trained annually have fallen significantly from 1,369 in 2010 to 198 in Table 24 Training conducted in the built environment sub-sector OFO Code Built Environment Professions Total Civil Engineer Civil Engineering Technician Architect Draughtsperson Civil Engineering Technologist Bus Driver Director (Enterprise / Organisation) Quantity Surveyor Handyperson Miner Programme or Project Manager Source: CETA ATR database, 2013 A review of the number of learners trained in the construction sub-sector suggests that this was formally a sub-sector in which the bulk of training occurred over the past couple of years. Large numbers of builder workers, earth moving plant operators and building associates were trained by the CETA in 2010 and 2011 even though there was a slight decline in the numbers by It is the 2012 figures that are most concerning. The number of builder workers trained dropped from 16,674 in 2010 to 2,848 in In other words, in 2012, the CETA trained less than a quarter of the builder workers that were trained in The number of earthmoving plant operators and building associates trained has declined from 3205 and 2847 in 2010 to 1045 and 337 in 2012 respectively. Table 25 Training conducted in the construction sub-sector OFO Code Construction Total Builder's Worker Earthmoving Plant Operator (General) Building Associate Earthmoving Worker Paving and Surfacing Worker Carpenter Scaffolder

82 OFO Code Construction Total General Clerk Civil Engineer Truck Driver (General) Operations Foreman (Non-Manufacturing) Source: CETA ATR database, 2013 All categories of training in the electrical contractors sub-sector have fallen between 2011 and From having funded training for two electronic engineering technicians in 2010, to 30 in 2011, the CETA in 2012 funded none. Table 26 Training conducted in the electrical contractors sub-sector OFO Code Electrical Contractors Total Electrician Electrical Line Mechanic Electrical or Telecommunications Trades Assistant Accounts Clerk Builder's Worker Electrical Engineering Technician Electrical and Electronic Equipment Assembler Operations Foreman (Non-Manufacturing) Handyperson General Clerk Electronic Engineering Technician Source: CETA ATR database, 2013 For the materials manufacturing sub-sector, there were no clay products machine operators and builder workers trained in 2012 and the number of cement and concrete plant workers declined from 1266 in 2011 to 214 in 2012, even though this was one of the top 20 occupations in which the CETA conducted training. Table 27 Training conducted in the materials manufacturing sub-sector OFO Code Materials Manufacturing Total Clay Processing Factory Worker Cement and Concrete Plant Worker Forklift Driver Clay Products Machine Operator Builder s Worker Clay Production Machine Operator Handyperson Builder's Worker Concrete Products Machine Operator Truck Driver (General) Loader Operator

83 Source: CETA ATR database, Employer training Academies The descriptions below provide a picture of a number of training initiatives taking place within six large companies in the construction sector including Aveng, Basil Read, Esorfranki Civils, Group 5 and Murray & Roberts. What is clear is that huge investments in training are being made by these companies with a large portion of this being at their own expense Aveng Aveng, an infrastructure development group of companies, has an Artisan Training Institute called Ikhaya Fundisa Techniskills Academy (IFTA) which offers technical training for learners, artisans and artisan assistants in the mechanical, electrical, motor/diesel and boiler making field. IFTA has successfully placed trainees into relevant learnerships. By 2013, over a five year period they had invested R8,734,000 in the Artisan Training Institute in Dobsonville, and Soweto. This sponsorship, which is part of Aveng s socio-economic development investment, has already benefited 102 unemployed artisan trainees Basil Read This company runs the Basil Read Training Academy where the focus is on foreman development at NQF 4 level. This is a three-year programme and participants are sourced externally, mainly from previously disadvantaged backgrounds, and displaying technical aptitude. On completion of the programme, qualified trainees are appointed to foreman positions. The recently introduced three-year foreman programme (NQF 5) is aimed at those already in foreman positions to further deepen capacity and provide foremen with a recognised qualification. Artisan (carpentry) training is another 3-year programme offered where candidates will write trade tests upon completion. The investment in these technical programmes exceeds R15 million and will benefit around 160 participants at its peak. Basil Read has also introduced a three-year carpenter apprenticeship programme (NQF level 3), partially funded by grants from the Construction Education and Training Authority (CETA) valued at R1,4 million over three years. Collectively, Basil Read spent 2,91% of the leviable amount as defined by the construction sector scorecard on training and development, well above the 1% requirement. 57 The range of training that Basil Read outsources to accredited providers includes: Executive development. Management development. Development arising from individual development plans. Learnerships. Artisan training Foreman development (NQF 4) Foreman training (NQF 5) 56 Aveng Group. (2013). Aveng GroupIntegrated Report 2013, Page Basil Read.2010 Basil Read Annual Report, Available at: Page

84 Adult basic education and training. Mentorship programmes, on-site technical training, international exposure. Continued professional development Esorfranki Civils Esorfranki Civils is in the process of establishing an internal accredited training centre based at their Germiston workshop. The primary objective is to increase the internal skills pool as well as to provide skills transfer for temporary employees. To assist temporary staff, Esorfranki has employed two trainers to provide skills training not necessarily related to the tasks for which they are employed. This training is offered on a voluntary basis during the employee s own time. Once the training has been successfully completed the employees will be declared competent in skills such as shutterhand, concrete hand, pipe laying and steel fixing and issued with certificates of competence. These individuals are then better positioned to apply for employment, but not necessarily within Esorfanki Civils.The total amount spent on training for 2013 was R754,176. Training and development was focused in the area of management development. Focus was also steered towards the further study scheme for existing employers and learnerships Group 5 Group Five has been running learnerships since 2006 for both employed and unemployed learners. 59 These training courses include: Generic Management (for employees): This programme is intended for employees who wish move into a management role. This programme enables participants to become junior managers. Upcoming and planned learnerships include: Building and Civils, NQF level 2 Generic Management, NQF level 3 Safety, NQF level 3 Boilermakers, NQF level 2 Business Administration, NQF level 3 (for people with disabilities)(group 5, 2013). Internships: This 12-month programme promotes opportunities for professional development in construction-related qualifications. In-service training:this programme aims to provide opportunities to tertiary students to complete their required practical training. The company also considers taking on students from universities of technology for on-site, in-service training for their one year practical experience. Students wishing to pursue this must have achieved a minimum of 60% in both Maths and Science within any of the following courses: BSc/ B.Tech. Civil BSc/ B. Tech. Quantity Surveying BSc/ B. Tech Construction Management BSc/ B. Tech Mechanical Engineering 58 Esorfranki Civils. (2013).Integrated report Page Group 5.(2013). Group 5 Academy. (Link: 84

85 BSc/ B. Tech Electrical Engineering National Diploma in Construction and related disciplines Murray & Roberts Murray & Roberts houses a Cementation Training Academy at its premises in Bentley Park near Carletonville on the West Rand. The academy was established in November 2005 with the aim of providing employees with company induction and special skills training. Conventional mining mock-ups in varying stages of completion have been built in the training yard of the Academy and are available 24 hours a day for trainees to improve their practical competence. Drilling, winch operating, load haul dumping and underground engineering are some of the skills that can be demonstrated on the mock rails, stopes, tunnels, decline shafts and soon vertical shaft mock-ups. Simulators are also used to prepare trainees for working in the real world. These simulators will assist the company in training its employees up to three times faster Raubex Raubex has established a dedicated training centre where a pilot scheme was launched (run under the supervision of the CETA) to train 20 road construction learners on NQF level 2. Eighteen learners have since completed the course. Furthermore, the training centre has been accredited by MERSETA operating as a fully functional training facility for all diesel and civil trainees (Raubex Group. 2010/14). In addition, a number of civil and mechanical engineering students are placed at the company for their one-year experiential training component. Acceleration training and mentorship programmes as well as on-the-job training are also on offer at Raubex Government programmes In 2010 the Minister of the Department of Higher Education and Training (DHET) signed a Delivery Agreement with 11 departments and the MECs for education with the goal of establishing a credible institutional mechanism for skills planning. This is in line with the government s goal to ensure a skilled and capable workforce to support an inclusive growth path 62 for South Africa. There are too many institutions collecting information in isolation. The DHET has resolved, in partnership with all other relevant departments, to integrate all the databases and establish a standardised framework for the collection and dissemination of information pertaining to the demand and supply of skills across the country. There are three expected outcomes from this collaboration: the establishment of a standardised framework to assess the supply of skills, the shortages of skills and the vacancies that exist in the labour market; the establishment of mechanisms to interface with existing operational systems; the establishment of strategic management systems to research, assemble, analyse information, provide career guidance and access a business intelligence reporting system. 60 Goldwyer, N. (2007). Education and Training in Mining. Mining Weekly. (Link: 61 Raubex Group. (2010). Annual Report DHET Delivery Agreement 1 for output 5.1. p.3. 85

86 In support of this goal, the DHET has approached the Human Sciences Research Council (HSRC) to set up a national research body to create a labour market intelligence system. 63 The Department of Trade and Industry (DTI) points to a lack of alignment between industrial policy and education and skills development. 64 The CIDB has also encountered complaints from the contracting body that training funded by the CETA is focused on literacy and numeracy and too generic in approach. It has been suggested that the training should be more construction specific. 65 Additional to higher education programmes, CETA funded programmes and industry efforts at boosting skills development, government programmes also supplement skills development efforts Skills development for sub-contractors Another possible area to promote skills development is sub-contracting. Up to 70% of building is subcontracted in South Africa and about 30% of civil engineering. 66 Contracts last three to six months in general building and up to twelve months on civil engineering projects. There are specialist subcontractors who carry outwork like plumbing, air-conditioning, electrical contracting etc., generalist and specialist contactors who do work like painting or brickwork, and labour-only contractors. Research undertaken by the CIDB uncovered some problem areas like financial management skills, management skills, safety and health practices, lack of formal registration certificates and tax evasion. 67 Since upgrading in the construction business depends on a track record, it was suggested that the CIDB actively encourage subcontractors to get a grading and keep a performance record. On public sector contracts, the CIDB should investigate the feasibility of: Requiring contractual arrangements between contractors and subcontractors; Introducing requirements for compliance with the law regarding tax and compensation for occupational injuries and diseases (COID); Upholding health and safety regulations. The CETA and the CIDB should consider offering formal courses for sub-contractors (open to contractors as well) where training in areas like management and financial planning could be given. The education and training challenges of the CETA have been highlighted as follows: 68 poor throughput of ABET learners; training stopped when the project ended, regardless of whether the learner has completed the course or not; lack of respect for ABET training on the part of industry; learnerships and short skills programmes inappropriate as they do not get learners into the industry; small to medium businesses who do not pay levies place a burden on CETA; 63 HSRC Labour Market Intelligence Partnership. 64 DTI.A National Industrial Policy Framework. 65 Parliamentary Monitoring Group available online at 66 CIDB Subcontracting in the South African Construction Industry: Opportunities for Development CIDB Subcontracting in the South African Construction Industry: Opportunities for Development Parliamentary Monitoring Group available at 86

87 no attempt to track outcomes of training; no analysis of reasons for lack of job creation. impermanent nature of training colleges; poor organisational structure in rural areas; fraud within CETA uncovered to the amount of R204m. With modern technology there should be a central data-collecting agency. When the SETAs were established it was not specified that they should collaborate to share information. Each SETA focused on their particular area of concern. The Delivery Agreement signed in 2010 under the auspices of the DHET was intended to establish a central database. This is essential so that all the information collected by every SETA is housed in a central bank and can be accessed by all of them. This will help to integrate planning so that each sector does not have to re-invent the wheel. In the construction sector the availability of a management information system for management of data is also important so that sub-sector data is stored at a common point and is easily accessed for research based decision making. There are vast differences in the training and education required for the five sub-sectors of the construction industry. Electrical contracting, Construction and the Built Environment sub-sectors all ideally involve university education. Materials Supply requires either university or some other tertiary education from FET institutions. Training for the Building sub-sector can be done at FET colleges or through apprenticeships. It is clear that many contractors have experience rather than formal training. The CIDB has committed itself to upgrading such contractors National Contractor Development Programme The National Contractor Development Programme (NCDP), a partnership between the Department of Public Works (DPW) and CIDB, is aimed at improving skills capacity in the construction sector and promoting equity ownership across the board. NCDP comprises Contractor Development Programmes (CPDs) which should result in upgrading the participating contractors. Various development models have been used because not one model can apply to all the grades: Extended Public Works Programme learnership type models apply to Grades 1 and 2; Emerging Contractor Development Programmes incorporating mentorship are more appropriate for emerging contractors in Grades 2 to 3; Enterprise Development Programmes apply to Grades 3 to 6 contractors Performance improvement programmes suit established contractors on Grades 4 to The challenges facing this type of training are that the participating contractors are not always the ideal candidates. Because the programme is located within the DPW, applicants see the programme as a low-risk opportunity for work rather than skills development. The risk is carried by the DPW. There is also no standardised framework for the level, quality and relevance of the training. The CIDB is developing a Best Practice Contractor Recognition Scheme as a grading framework and it is hoped that it will assist in assessing the results with a view to upgrading NCPD Status Quo Report, March NCPD Status Quo Report, March

88 The CIDB reports that the NCDP framework is beginning to be appreciated in the workplace. Monitoring remains a problem and to help establish a framework for good practice, models of CDPs were assessed. Eskom Contractor Academy, KZN ethekwini Large Contractor Development Model and Coega Small Enterprise Development Programme were identified as examples of good practice. 71 The only real way to evaluate the NCDP is by the upgrades that result. This is difficult to assess because in the current economic climate, contractors are struggling. However, Table 28 shows the upgrades from Grades 1 to 8 between Q2: 2012 and Q1: The trend in Grades 5 to 8 shows fewer upgrades, but it is difficult to isolate the cause. Table 28 Upgrades from Grades 1 to 8 in GB and CE from Q2: 2012 to Q1: 2013 Source: CIDB Quarterly Monitor April p.31 makes the picture much clearer: the overall rate of upgrades in General Building (GB) and Civil Engineering (CE) is decreasing although the rate in GB seems steeper for Grades 5 and 6, and in CE decreasing at a quicker rate for Grades 7 and In Figure 20, the left graph shows GB and the one on the right reflects CE. Figure 25 Upgrades per quarter Q2: 2009 Q1: 2012 Source: CIDB Quarterly Monitor; April p CIDB Annual Report 2011/2012.p CIDB Quarterly Monitor April p

89 The average rate of contractor upgrades per year is seen to vary between around 5% for Grades 5 & 8 to around 10% for Grades 2 to 4 while for Grade 1 contractors the rate of upgrading is significantly lower, namely around 3% Vuk uphile Programme Another programme of this nature is the Vuk uphile programme which is part of the Expanded Public Works Programme (EPWP) aimed at on the job training. Vuk uphile Learnership Programme aims at contractor development by providing training, mentorship, funding and work experience. Emerging contractors should go through the programme and after two to three years emerge as fully-fledged contractors. CIDB provides the framework and it operates under the auspices of the DPW. The idea is good but depends on so many imponderables: that the mentor is good, that the candidate is committed, that the contractor is cooperative, that funds are forthcoming, that projects are suitable. 73 Although there has been some progress, it has been limited and slow CIDB research in the construction sector In 2011, CIDB was working on an outline for Requirements for Contractor Competence Assessment in order to promote their Best Practice Contractor Recognition Scheme. A survey 74 was undertaken to investigate whether small operators were registered, but lacked the necessary qualifications; and whether they could be tested in an external Competence Assessment. Core competencies recognised by the CIDB are: business management, building and construction works management, both supervisory and operational, and knowledge of the legislation that applies to the workplace. In terms of the CIDB Requirements for the Contractor Competence Assessment system, the minimum qualifications include: Grade 5 & 6 contractors: - National Diploma(NDip), bachelor of technology (BTech) and higher qualifications; Grade 2 to 4 contractors: - Trade Test (Including Foreman Certificate), NDip, BTech and higher. Figure 26 illustrates the qualifications held by four types of employees: owner/director; manager/professional; supervisor; and technical/artisan, according to category. Grades 2 to 4 fall into the one category, and grades 5 and 6 constitute the other category. The qualifications range from none (red) to B Tech or higher (green). It is clear that a large proportion have no formal qualifications of any description. Even more interesting is that in grades 2 to 4, quite a high proportion of artisans, relatively speaking, have a B Tech or higher qualification and only 27% have no formal qualification. 73 Impact Assessment of the Effectiveness of the Vuk uphile Contractor Development Programme presented by Econologics Africa for the DPW. 74 CIDB.Contractor Skills Survey

90 Figure 26 Highest education qualifications in the construction industry, Grades 2 to 6 Source: CIDB. Contractor Skills Survey 2011, p.11 Many construction workers make up for the lack of formal qualification by having years of practical experience. It was found 75 that in Grades 5 and 6: o 45% of employees possess minimum qualifications, o of the remaining 55%, 45% have at least five years working experience, o 10% have neither experience nor qualifications and do not qualify for the test. in Grades 2 to 4: o 30% of employees possess minimum qualifications, o of the remaining 70%, 60% have at least five years working experience, o 10 % have neither and do not qualify for the test. That means that 10% of employees in Grades 2 to 4, and 10% of employees in Grades 5 and 6, do not possess either qualifications or experience required for a competence test. 75 CIDB. Contractor Skills Survey 2011, p.6. 90

91 Lack of skills affects quality and can cost the sector financially. Another study undertaken by the CIDB investigated quality of construction in South Africa in terms of design, procurement and construction in order to assess the value to client. 76 Clients were neutral or dissatisfied with 20% of construction projects. This represents a substantial amount of money: 2% of completed projects in 2009 where clients registered dissatisfaction had a value of R3.5 billion. 77 The findings were that Client dissatisfaction is highest in the residential building area; Low and middle income construction elicited more dissatisfaction than high income construction; Procurement related barriers accounted for many cases where quality was in question; Contractors were appointed who were not competent to do the work; A trend of declining ability to adhere to technical standards, codes and specifications was manifest; Design capability is deteriorating; Poor procurement methods were based on price and preference, ignoring quality - a quarter of provincial and local authority contracts were found to ignore quality as a factor in the procurement process; Lack of procurement capacity was prevalent in client departments; There are no mechanisms in the CIDB for identifying corruption; The client s representative on site was unable to enforce adherence to quality Recognition of prior learning (RPL) Recognition of prior learning (RPL) is government policy to redress the lack of opportunities for formal education that prevailed mainly amongst non-white citizens during the apartheid era. RPL is an industry-led mechanism under the Qualifications Framework (QF) to provide alternative routes for experienced practitioners to receive formal recognition of the knowledge, skills and experience already acquired. To ensure its standards and credibility, RPL facilitates practitioners with learning aspirations to better understand their level of competencies they have acquired in the industries, so that they can determine their starting point for learning and progression, and reduce duplication in training for the same skills. The built environment sector professionals have been resistant to this route. They argue that technical and theoretical knowledge is essential in their areas of expertise and believe RPL does not adequately provide the scope to test for these. With the same competency assessment standards, they see this route as a tool to facilitate entry to the career ladder at entry level. 78 Table 29 presents how RPL has performed in the industry. ECSA and SACLAP have never been successful in using the RPL mechanism. Table 29 Number of successful RPL cases 2008 to / / / /12 SACPVP SACQSP ECSA CIDB: Construction Quality in South Africa; a client perspective, no date. 77 CIDB: Construction Quality in South Africa; a client perspective, no date. 78 CBE Annual Report 2011/2012.p CBE Annual Report 2011/2012.p.46. Sourced from Professional Council Quarterly Reports, 2009/10; 2010/11; 2011/12. 91

92 2008/ / / /12 SACAP SACPCMP SACLAP Total Source: CBE Annual Report 2011/2012.p.46 The CBE is considering changing the regulatory framework of the built environment sector in order to effectively implement government policy. One of the problems at present is the lack of baseline information to assess the level of applying the RPL mechanism in the industry. 3.6 Conclusion Given the skills shortages within the construction sector, an in-depth assessment of current training provision is worth pursuing. As it stands, existing data collected on the supply of skills in the sector, based on the desk review conducted, the data that emerged from stakeholder interviews, the online survey and the WSP and ATR analysis, points to a number of key issues. Despite national increases in the number of science, engineering and technology (SET) enrolments from 160,802 in 2000 to in 2011 and a 2% rise in the graduation rate from 27% to 29%, South Africa still does not produce enough skills in SET to meet its developmental objectives and continues to lag behind fellow BRIC countries such as India and Brazil in the production, for example, of qualified engineers. The development of artisans nationally has only just begun to increase again in recent years after having fallen dramatically between 1985 and Although the above is a reflection of the national skills dilemma, the construction sector plays a crucial role in feeding into the supply of artisanal, engineering and other related skills. Thus, inadequate supply at the sectoral level influences the supply of skills nationally. The supply of skills training in the construction sector is varied and located at different institutions. Formal training consists of short learning programmes, certificates, diplomas, degrees and postgraduate degrees. Such training includes CETA funded and non-ceta funded training and is located largely in higher education institutions as well as at FET colleges and private providers (including employer training academies). There is a need for a more in-depth analysis of non-ceta funded training programmes within the sector. Informal training consists of on-the-job training, coaching and mentorship. There are vast differences in the training and education required for the five sub-sectors of the construction industry. Electrical contracting, Construction and the Built Environment sub-sectors involve university education whilst Materials Supply requires either university or some other tertiary education from FET institutions. Training for the Building sub-sector can be obtained via an FET college or through an apprenticeship. The CETA has been involved in some degree of training but the decline in the number of employers submitting WSPs and ATRs and a failure to disburse CETA funds has reduced this portion of training significantly, as has the poor relations between the CETA and key stakeholders in its sector. In the private sector there are huge investments being made in skills training via a range of training academies located in-house. Government skills programmes such as the National Contractor Development Programme and the Extended Public Works Programme have also contributed to supplementing skills development nationally. The CETA has a significant role to play in contractor and sub-contractor training and development in areas such as mentor and assessor training, ABET, financial management, project management, promoting Recognition of Prior Learning (RPL) process, assessing training outcomes and the awarding of qualifications, and selecting the most 92

93 effective service providers for the delivery of training programmes. A large percentage of employees in the construction sector do not have formal qualifications but have years of experience in working in the sector. The role of RPL in recognising such experience and in providing these employees with the opportunity to obtain a formal qualification/s is important. RPL remains an area of weakness within the construction sector. Between 2008 and 2012 there were only 106 successful RPL cases reported across the 6 main professional bodies in the sector. The development of qualifications and training programmes that are relevant to industry needs is a priority. Partnerships between providers (particularly public institutions such as FET colleges and universities of technology), employers and industry bodies are key to insuring such relevance. The CETA is well positioned to play a meaningful role here. Equally important is the need to place learners within public and private industry so that they may complete the workplace based experience component of their training. Poor competency in mathematics and science is a reality facing all providers in the system and one that needs to be recognized and addressed. The labour market absorption capacity of the construction sector appears varied across the sub-sectors and requires further analysis. Small and micro enterprises within the construction sector require skills programmes are designed to suit their skills needs. Similarly, the cyclical nature of the sector demands that there is an element of flexibility in the supply system so that it may respond to cyclical changes in skills demand. Institutions offering short-term skills programmes are probably better suited to meet these changing needs. The above suggests that employers, the CETA, industry and professional bodies and training providers need to work together to produce a skills sets that arecarefully aligned to actual skills demanded by employers. In other words, the supply of skills must not be driven by providers but must be based real skills need. 93

94 Chapter 4: Demand for Skills 4.1 Introduction The purpose of this chapter is to describe the pattern of skills demand in the various sub sectors that make up the Construction Sector in South Africa. The CETA understands that to project demand for skills is not a straight forward exercise. There are various sources of data which are vital to enable sound projection and to report on the total numbers required. Scarcity can be seen as a function of the following: Anticipated demand for additional skills based on the performance of the economy Remuneration patterns within the Sector for the different job categories Changes in technology rendering certain employee classes redundant but requiring specialised skills to operate the technology Age of the workforce and anticipated retirement rate General health and wellbeing of the current workforce New economies emerging or growth in certain economic areas leading to workers migrating into such jobs The skills pipeline from the skills development system etc. Demand for skills is not a simple concept to identify as it has a number of factors influencing it but a sufficient estimate can be gained by examining: Where information exists within the sector, the above factors were analysed to provide an indication of the pattern of skills demanded as well as those skills that are considered scarce or critical. While there are many similarities between the sub-sectors of CETA, there are also many unique factors driving the demand for skills. Therefore, each sub-sector is analysed separately below. Some of the key factors driving demand for skills in the Construction Sector arise from these developments. While there are unique factors from sub-sector to sub-sector, there are also cross cutting issues that need to be acknowledged. They are: Demand for skills in rural areas outstrips supply as people are reluctant to work outside of the major metropolitan areas. Government has scarce skills allowances to compensate for this, but the other factors cited above may limit the effectiveness of this strategy. Employment equity. Huge strides have been made in the sector over the last decade and a half in terms of transforming the sector. 94

95 4.2 Labour demand in the sector As outlined in Chapter 1, the Construction sector experienced some fluctuations in total employment between 2011 and Due to the project based nature of the work in the sector, employment tends to follow the economic fortunes and investment in the sector. In other words, with more projects and increased investment in capital formation in the economy, employment tends to increase. Figure 27 demonstrates the fluctuations in employment between beginning of 2012 and mid Although there has been an upward trend overall, the dip in January to March 2013 signals this fluctuation in labour demand. Figure 27 Total Employment in the Construction sector between Jan 2012 and Jun 2013 Employment in the Construction Sector Jan-Mar 2012 Apr-Jun 2012 Jul-Sep 2012 Oct-Dec 2012 Jan-Mar 2013 Apr-Jun 2013 Source: StatsSA Quarterly Labour Force Survey, Q2, 2013, P0211 The fluctuation in labour demand in the sector could be understood from an analysis of labour composition in the sector. As outlined in chapter 1, Construction sector employment includes formal and informal employment. Between 2011 and mid 2013 informal employment constituted between 29% and 31% of total employment in the construction sector. It is likely that the bulk of these people in informal employment are sourced only when the employers have work and are released when contracts come to an end. A majority of them are likely to be employed in elementary occupations or occupations requiring low level skills. Given the high levels of unemployment in the country coupled with the existence of labour brokers who service the construction sector, it should be easy for employers to access this labour pool. 95

96 Figure 28 Comparison of formal and informal employment in the construction sector Comparing formal and informal employment Formal Informal Apr-Jun 2011 Apr-Jun 2012 Apr-Jun 2013 Source: StatsSA Quarterly Labour Force Survey, Q2, 2013, P0211 Demand for mid to higher-level skills is a reality in the sector. About 25% of employees in the sector work in occupations that require higher levels of skills. The job requirements for managers, professionals as well as technicians and associate professionals generally require incumbents to have post-schooling qualifications. In the construction sector, such entry requirements include professional degrees, diplomas and professional registrations or certifications. The demand for artisanal skills in the sector cannot be over emphasised. Figure 29 Occupational profile of employees in the construction sector 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% MANAGERS PROFESSIONALS TECHNICIANS AND ASSOCIATE PROFESSIONALS SKILLED AGRICULTURAL & RELATED TRADES WORKERS CLERICAL SUPPORT WORKERS SERVICE AND SALES WORKERS PLANT AND MACHINE OPERATORS AND ASSEMBLERS Source: Ceta WSP Database,

97 Age of employees has a bearing on employment in the sector. In most instances the most experienced and skilled people are those nearing retirement. As people retire, they have to be replaced and this results in the need of an increase for skilled people in the sector. Figure 30 Age of employees Age of Employees Age Under 35 Age 35 To 55 Age Over % 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% Source: Ceta WSP Database, About 9% of employees in the sector are above the age of 55 and are therefore nearing the retirement age of about 60 to 65. In other words, over the next five to 10 years these people will have to be replaced. Amongst managers, those older than 55 years constitute 18% whilst 11% of professionals and technicians and associate professionals are older than 55 year. Other labour market factors that have to be taken into cognisance include: Migration: The globalisation of the labour market has serious implications for demand of workers in the construction sector. South African workers including artisans, engineers and other professionals are constantly being recruited into other countries requiring skilled people to work on construction projects. There are international recruitment agencies that target qualified and experienced workers from South Africa. Equity: Within the South African economy people move quite often. The advent of employment equity has created a labour market where qualified and experienced Black people are highly sought after. This coupled with the transformation agenda of the country including the requirements of the B-BBEE codes puts employers under pressure to recruit, skill and develop people from previously disadvantaged backgrounds. Cross Sectoral Employment: The financial services sector increasingly recruits qualified people from sectors such as construction, energy and manufacturing. Insurance companies are also known for recruiting the best civil engineers and quantity surveyors as building claims assessors and loss adjustors. In investment banking, people with engineering qualifications are highly sought after. Thus people are prone to moving around between various sectors. Apart from professionals having the flexibility of moving out of the construction sector into other sectors like manufacturing, chemicals and energy, they can also move into areas where they would not be applying their technical knowledge but will be learning new skills, like is the case with banking. 97

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