Africa's Public Procurement & Entrepreneurship Research Initiative – APPERI


Northern Cape

Afrimat chief says public sector is spending and paying

Engineering News

By Irma Venter

May 25th, 2012

As a country, South Africa often has a herd mentality. We have certain themes we believe and we act accordingly,” says Afrimat CEO Andries van Heerden. “We must start questioning some of the fundamental assumptions we make,” he adds.

Some of these assumptions are that infrastructure spending is not happening and that government, in general, is not paying its bills.

Van Heerden says Afrimat has not experienced payment problems. Also, government is indeed spending money on infrastructure, but contracts have become smaller, and work has moved out of the major cities. The Northern Cape, for example, is earmarked for R8-billion in roads spending over the next two to three years.

Where an average road contract was valued at R800-million to R1-billion three or four years ago, it is now R100-million, notes Van Heerden.

“We are seeing a change in our environment and a lot of the big guys find it difficult to adapt.”

Van Heerden says all players within the construction industry often select data that proves their point, adding that Afrimat’s position is that “infrastructure is alive and well and happening out there”.

As proof of this, he says, South Africa’s spend as a percentage of gross domestic product in 2012 remains above 8%, as has been the case since 2008. In 1997, this was just over 4%. Provincial and national roads expenditure has also been sustained at more than R30-billion since 2010, up from just over R10-billion in 2007.

Building plans passed have started to bottom out, adds Van Heerden, with cement sales picking up every month since August last year.

“We are not close to the levels of 2006, but the market has turned. It has bottomed out. There are no fireworks, as in 2006, but that not will happen in my lifetime again, and I’m still very young,” quips the 46-year-old executive.

However, he adds that it is all not good news, as challenges remain, such as the high fuel price, and the uncertainty surrounding the South African National Roads Agency Limited’s future as the hugely unpopular tolling process in Gauteng has started to take scalps, most notably that of CEO Nazir Alli.

Afrimat’s exposure to Sanral is not big, however, notes Van Heerden, with the agency making up only 6% of turnover in the past financial year.

Municipalities’ financial woes also remain a persistent challenge, as does congestion in Africa, pushing margins on the continent ever lower.

“The margins in Northern Mozambique are lower than in Mpumalanga and the risk-reward does not work,” says Van Heerden.

He adds that Africa is filled with Chinese, Indian, European and Brazilian companies hunting for work.

Afrimat had a good 12 months, ended Feb- ruary 29, on home ground, says Van Heerden.

“This is a really pleasing set of results.”

Revenue at R996-million was up 16.6%, compared with the previous financial year, with headline earnings per share up 17% to 62.6c.

Operating profit increased by 18.7% to R130-million, with the operating margin inching up to 13.2% from 12.8% in the 2011 financial year.

The company also had more cash than debt at the close of the year – in a “market that was very volatile”, says Van Heerden.

The new acquisition of Clinker Suppliers and SA Block will add to Afrimat’s 2013 numbers.

Van Heerden says the company will continue to look at possible acquisitions, especially as the strong balance sheet allows such a move.

However, he adds that he is aware that the most dangerous time in a company’s life emerges when everything is going well.

“We must work to keep the ‘fat cat’ syndrome away.”

South Africa: Public Works to boost technical skills base

7th Space

Compiled by the Government Communication and Information System
Date: 21 May 2012
Title: Public Works to boost technical skills base

Pretoria – The Department of Public Works is set to invest more funds in developing in-house technical capacity, which in the long run will help it to save money that is currently paid to consultants.

This emerged after Minister Thulasi Nxesi met with Public Works MECs in Johannesburg over the weekend to develop strategies to enhance service delivery.

Among the issues discussed was the need to address the lack of professional and technical skills, given the fact that Public Works is a highly technical department.

This, according to the department, means recruiting from the private sector, as well as inserting clauses into construction contracts to require contractors to train young engineers and artisans. The department will determine the minimum basket of skills required nationally and provincially.

The discussions also centred on developing and capacitating emerging black construction contractors, whilst strengthening sanctions – including blacklisting – against non-performing contractors to enhance service delivery.

Also taking part in the meeting was the Construction Industry Development Board (CIBD) – a public entity which reports to the Minister of Public Works. CIBD is concurrently reviewing the regulatory framework to ensure it enhances, rather than inhibits, contractor development.

The meeting also explored the use of alternative construction methods (ACMs) to tackle the issue of mud schools. Pilot schemes have been completed in the Eastern Cape and North West provinces.

These methods produce buildings that in most instances are better than conventional buildings, in that they are more sustainable, cheaper and quicker to erect.

Nxesi also explained the implications of the recently announced national infrastructure roll out plans.

“The effective roll out of the Strategic Integrated Projects (SIPs) … the revitalisation of health facilities and the national school building programme, require that Public Works, nationally and provincially, together with client departments, local authorities and implementing bodies work closely together to ensure effective delivery.

“This means maximum coordination and changing the way we work to reduce delays and cut through the bureaucracy. The roll out of health and education infrastructure will also stimulate further economic activity in communities and job creation,” said Nxesi.

Professor Shadrack Gutto, constitutional law expert and public policy commentator, was invited to present a legal opinion and research findings on the application of cooperative governance and concurrent mandates, concepts which are central to improving coordination between the spheres of government.

He concluded that whilst minor legislative or regulatory changes might be necessary, much could be done administratively to strengthen coordination between the spheres, including developing a memorandum of understanding to clarify roles and responsibilities.

A resolution was taken to, among other things, request Professor Gutto to undertake further research, whilst joint structures are established to identify the areas that need to be covered in a memorandum of understanding and to encourage greater cooperation and interaction between provinces to share experiences and best practices.

As examples, the MEC of the Eastern Cape – where ACMs have been used to replace mud schools – invited other provinces to visit these schools, whilst the Western and Northern Cape provinces discussed cooperation to address skills deficits.

The national department will also coordinate with provincial departments to further enhance reliability of the Immovable Assets Register of state assets.

Reported by: South African Government News Service

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