Trust tasked to develop construction sector allocates less to industry, more to state projects

At just 23.8%, this allocation by the Tirisano Construction Fund (TCF) stands in stark contrast to the 51.36% – or just over R148 million of the total of R288.25 million – the fund allocated to social infrastructure programmes.

Almost 11% was allocated to the engineering bursary programme, about 9% to construction occupational development, and some 5% to basic education.

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Industry bodies, including Master Builders South Africa (MBSA) and the Black Business Council for the Built Environment (BBCBE), have questioned the allocations made by the fund and the paucity of benefits flowing to black contractors from the Voluntary Rebuilding Programme (VRP) settlement agreement.

The VRP agreement settled any civil claims for damages against the seven construction companies – Aveng, Basil Read, Group Five, Murray & Roberts, Raubex, Stefanutti Stocks and WBHO – from government and state-owned entities arising from admissions of collusion and bid-rigging in their settlement agreements with the Competition Commission.

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Each of the seven companies agreed to contribute R1.25 billion over 12 years to the fund and to undertake further transformation initiatives, including mentoring up to three emerging black-owned contractors.

(Basil Read and Group Five are both in business rescue while Aveng and Murray & Roberts have sold their South African construction businesses to black contractors.)

Allocation imbalance

The enterprise development programme aims to upgrade construction companies owned and managed by black people, and help to build capacity and sustainability through direct assistance for emerging contractors.

The stated objectives of the TCF are to promote the development and enhancement of the construction industry, and promote social infrastructure for all South Africans.

The social infrastructure project allocations include:

• R7.65 million for construction of the Maserunyane Secondary School in Limpopo;
• R14.75 million for facilities at the Nelson Mandela Children’s Hospital;
• R60 million for a Safe Ablutions for Education (SAFE) project involving 15 Department of Basic Education sites; and
• R33 million to a Municipal Boreholes Programme that will benefit 11 municipalities in four provinces.

An industry association executive who did not want to be named said the TCF was not established to supplement the budgets of national and provincial departments and municipalities.

Delay in allocating to the sector

The fund was established in August 2017 – and beneficiaries of the enterprise development programme were selected and contracted for the first time in its 2020/21 financial year.

A total of 15 companies received R68.63 million in loan support, according to the TCF’s annual report for the year to end-March 2021, its most recent.

The BBCBE last month voiced its extreme unhappiness about how the settlement agreement has been implemented, with its president Danny Masimene saying the council wants to re-engage government about the agreement as black-owned construction companies have not benefitted from it.

Masimene also demanded that the seven JSE-listed companies that are signatories to the settlement agreement be blacklisted by National Treasury and deregistered by the Construction Industry Development Board (CIDB).

Read: BBCBE wants seven listed construction companies blacklisted

He said the BBCBE has also withdrawn its representative from the TCF.

Industry-wide benefits required

MBSA executive director Roy Mnisi voiced the same concerns last month, saying MBSA has emerging contractors as members and believes they should be benefitting from the VRP.

He said the programme must provide industry-wide benefits to people irrespective of which construction organisation they belong to and should be able to understand what is happening because all industry organisations share membership that is supposed to benefit from the programme.

TCF chair Mahomed Vawda said he was unable to comment on allegations made by the BBCBE.

“We are running the fund and have got the money in the fund and […] are dispensing funds in terms of the framework of the trust deed,” said Vawda.

He stressed that the VRP agreement was negotiated and suggested the comments and allegations made by the BBCBE have “political undertones”.

“We have got nothing to do with that. We just run the trust based on the mandates that we have got. We have to spend the money on the basis of that trust deed.”

Progress

The TCF’s latest annual report states that of its seven programmes (enterprise development, social infrastructure, engineering bursaries, construction occupations development, basic education, technical capacity, and professionalising engineering practitioners), five are now in implementation.

The technical capacity and professionalising engineering practitioners programmes had not yet been implemented by end-March 2021.

WBHO Group CEO Wolfgang Neff said last week during a presentation on the company’s latest results that the group is doing well with regard to what it has to deliver in terms of the VRP and is “definitely on track”.

Raubex states in its 2022 annual report that as part of the VRP agreement, it has undertaken to develop and mentor two emerging contractors – Enza Construction and Umso Construction. It aims to ensure that within seven years they have the skills and quantity of work required to generate a cumulative combined annual turnover equal to at least 25% of the group’s annual SA civil engineering and general building construction work. Aligned to this are fixed interim period targets as well as penalties for failure to meet these targets.