EMERGING CONTRACTORS GAIN ACCESS TO VITAL SUPPORT
Emerging contractors in the building and construction industries can now benefit from a vital enabling incentive in the form of the Contractor Development Programme (CDP). The programme is set to create a pool of capable, sustainable, self-sufficient and highly skilled contractors able to compete with the best in infrastructure development.
The project grew out of a national project to eradicate mud schools, a construction project managed by the IDT. In its drive to secure participation by contractors from historically disadvantaged backgrounds, the IDT was faced with barriers such as limitations in fulfilling procurement requirements, a lack of skills and shortcomings in business management capabilities.
The programme is a joint initiative of the Independent Development Trust (IDT), the National Empowerment Fund (NEF) and Siseko Se-Afrika (SACE) to contribute towards the upliftment and empowerment of disadvantaged communities by providing opportunities to existing contractors as well as emerging entrepreneurs in the building and construction industries.
Nhlanhla Nyembe – Imbewu Fund Manager at the National Empowerment Fund says, “Our role is that of providing a loan facility for the working capital requirements of qualifying contractors who participate in the CDP. In the process of submitting tender documents, the contractors are also required to complete NEF Loan Application forms,” He says.
He continues to say “as the NEF, we will issue loans at prime less 2% (two percent). The working capital will be made available to the SMME’s in a staggered manner depending on the value of the contract and the experience of the SMME.”
There is a mammoth need for such support. SMME’s in the construction sector are known for a high rate of non-payment to creditors. This is due to a number of issues including poor work planning, poor costing, and lack of access to capital.
Due to the risk associated with SMME’s in this industry, they either find it difficult to raise the required 10% guarantee and working capital or in the few cases that they can raise the guarantee, they do so at a high cost of debt. Some SMME’s would go to the extent of factoring their tenders or selling them to white contractors that can raise the required guarantee. This then defeats the purpose of establishing black SMME’s in the construction industry.
In a thrust to bring such emerging contractors into the mainstream, the CDP has embarked on a leverage creation programme that provides skills training, mentorship, and construction management, the provision of financial support to qualifying contractors, materials support and other appropriate support measures.
Mr Ayanda Wakaba, Executive Head: Development Programme Services at IDT, believes “One of the key success paths linked to the project was ensuring that the three patrons of the development project have clearly defined roles. The IDT’s role is to create opportunities for emerging contractors. The organisation’s role is vital since it represents the core opportunities that the contractors seek to access. In line with the Public Finance Management Act, the IDT issues tenders and awards such tenders to qualifying contractors on the basis of its tendering and procurement policies’’.
The drive to limit non-performance and increase the quality of delivery is a national imperative. The IDT’s engaged professional team will perform regular inspections of the contractors’ building sites, hence the need to pre-empt failure of any of the contractors.
A third partner in this project, SACE, provides management services in the form of technical training and mentorship to the qualifying contractors. Once contractors have been identified and selected by the IDT, SACE takes such contractors through a skills development and management training system.
Mduduzi Ndlovu, Chief Executive Officer of SACE says “As an organisation, we conduct an assessment of the contractor’s needs. On this basis, the company allocates a mentor to work with the contractor in terms of their technical and skills needs. Similarly, we link them with a mentor to ensure that they build up key business systems including business management, financial management and governance systems”
Similar to the IDT monitoring role, SACE’s counterparts will perform regular visits in order to establish a sustainable oversight of project management and financial assistance issues. SACE’s role in this aspect will assist in limiting non-payment of loans.
The success of this scheme will open opportunities for the contractors to retain existing contracts and be in line for repeat business, over and above improving their CIDB grading.