Construction Industry Development Board and Council for the Built Environment Annual Reports 2005/2006

PUBLIC WORKS PORTFOLIO COMMITTEE
24 October 2006
CONSTRUCTION INDUSTRY DEVELOPMENT BOARD AND COUNCIL FOR THE BUILT ENVIRONMENT ANNUAL REPORTS 2005/2006

Chairperson: Mr F Bhengu (ANC)

Documents handed out:
Council for Built Environment Annual Report Presentation
Council for Built Environment (CBE) Annual Report 2005/06 [available later at www.cbe.org.za]
Construction Industry Development Board (CIDB) Annual Report 2005/2006
Construction Industry Development Board Annual Report 2005/06 Presentation [available at www.cidb.org.za]

SUMMARY
The Council for Built Environment briefed the Committee on its Annual Report for 2005/6. The CBE had established infrastructure, complied with the PFMA. Other achievements included the registration of the Council to be a Schedule 3(a) company. Systems were in place to facilitate the alignment of all professional councils. Challenges included the unavailability of a database of all professionals due to the fact that registration was voluntary. Some professionals were lost to the system because they became managers; others disappeared after they from graduated from the education institutions. Members concerns included the overlapping roles of the CBE and the CIDB, the numbers of professionals and the fact that these could not readily be ascertained, the  remuneration and composition of the Board, the relationships with Umalusi, and the staffing strategy. Members were impressed by what had been achieved in a short time.

The Construction Industry Development Board briefed the Committee, acknowledging the support of the Department of Public Works. The Board aimed to improve of industry standards of performance in quality, employment skills, health and safety. It focused on the empowerment of the historically disadvantaged sector of the population. Challenges included the number of applications, client procurement and delivery capacity and skills. It had difficulty in retaining staff. Successes included the infrastructure delivery improvement programme, training of clients to use the iTender Register of Projects, establishment of the National Register of Contractors, and outreach centres in three provinces. The National Skills study was nearing finalisation. CIDB would host the 2007 World building Congress and client satisfaction was steadily improving. The financial statements showed a surplus of R2 million and the income from contractor registration was steadily climbing. The audit report was unqualified. There were strong internal controls. The race and gender profile was improving. Questions from members included concentration of the industry in urban areas, structures to develop emerging or lapsed contractors, how HIV/Aids was dealt with, the envisaged shortage of cement, and how workshops were conducted. Further questions were asked on the racial profile, the upgrading of contractors, identification and control of fronting, and skills for water purification projects.

MINUTES
Briefing by Council for Built Environment
The Chairperson stated that when the Council for the Built Environment (CBE) was established, it had experienced some teething problems and inadequate support from the Department. The role of the Committee was to help the CBE in its efforts to transform the industry so that it would benefit the whole economy, and to train on scarce skills. 

Mr Sipho Madonsela, Chairperson CBE, stated that he mandate of the CBE was stated in fairly simple terms. Although the environment had changed, its mandate was still relevant, and it fulfilled both long and short tem goals of the organisation. The CBE had an established infrastructure, and complied with the PFMA. It had registered to become a Schedule 3(a) company. Two of CBE’s most important areas of focus were training and protecting the needs of the public in the built environment.

The achievements of CBE included the uniform application of norms and standards on fees professionals. The CBE had the authority over six professional councils. There were overlaps between the roles of the Construction Industry Development Board (CIDB) and CBE. The CBE had developed systems to facilitate the alignment of all professional councils. A study was undertaken on the constraints to transformation within the built environment. A further study had taken place on international best practice standards, to assist the CBE in benchmarking national standards, and to look at compulsory registration of professionals.

CBE stated that there was a need for proper utilisation of skilled people. Many of the skills had been lost to the profession; some had left the profession, some had moved up the corporate ladder into management. There was a disturbing trend that some built environment graduates “disappeared” after graduating from the education institutions so the CBE did not have an accurate data of skilled professionals, as registration was voluntary. Other challenges included the need to create adequate human and institutional capacity to enable it to achieve its mandate and the legislative review of the Act governing the CBE. The CBU would have to respond to issues that had been raised by the Attorney General.

Mr B Zulu, CFO, CBE, mentioned that there had been fruitless expenditure in current assets, and the expenditure in office infrastructure led to an increase in non current assets. On income and expenditure he mentioned the increase in personnel costs and administrative costs due to audit fees and travel. The ratio of operating costs versus administrative and personnel had changed,  from 2:1 in 2005,  to 1:1 in 2006. There had been a deficit.

Mr Madonsela explained that the deficit arose because there was a general increase in total expenses, higher than the general income. He reasoned that since CBE was a new organisation with no precedents; it was impossible to fix an exact budget.

Discussion
Mr S Huang (ANC) asked how Board Members of the council were chosen. He asked for clarity on the ratio between personnel/administrative costs to operational costs.

Mr Madonsela replied that the Board was comprised of officials that were put forward by the government. Some came from the ranks of the profession and members of the public nominated others. Administrative costs were not supposed to be more than operational costs, and he noted that for the 2006 period the costs had levelled.

Mr S Opperman (DA) asked whether the number of people joining the Built Environment professions was growing.

Ms C Ramutsamai (ANC) asked whether the council knew how many people were currently in the profession. She warned that if the country did not know the exact numbers then South Africa would be forced to import skills to the detriment of the citizens. She said that if the registration was voluntary, then it would be impossible for the country to know which skills were needed.

Mr Madonsela replied that the previous regime had left the built environment to play by its own rules. Therefore it was impossible to know the number of professionals. For instance, some professions, such as architects, saw registration as just a matter of prestige. He said that he also advocated the compulsory registration of all professionals in the built environment. The CBE would look at means of registration from university level.

Ms Ramutsamai asked the reason for the overlap in roles of the CBE and CIDB. She could not understand why Town Planners were not included in the Council, because they played a crucial part in the built environment fraternity. She also enquired about the relationship between education institutions and the CBE, and commented that the built environment was overwhelmingly male

Mr Madonsela replied that town planners were varied because some of them reported to the Department of Transport and Land Affairs. In regard to the overlap of functions, he explained that the relationship started when the CBE shared premises with the CIDB, and some professionals, by the nature of their work, straddled both organisations. The South African Qualifications Authority (SAQA) and the Council for Higher Education were working with the CBE

The Chairperson said that he would inform the Minister about the necessity of compulsory registration for training purposes; as he was concerned that some professionals were leaving the country in droves. If South Africa did not know how many professionals it had, it would be impossible to plan properly.

Ms Ramutsamai cited, by way of example, a conversation with her daughter, in which her daughter had refused to consider engineering as a career because engineering graduates she knew were unemployed.

Mr H Cupido (ACDP) said that CBE was faced with challenges; but was sure that CBE would rise to them. He asked about the remuneration of the Board members.
Mr Madonsela replied that the Board Members who were not remunerated were the ones that had been put forward by Government.

Mr Maduma asked about the type of relationship that CBE had with Umalusi.

Mr Madonsela stated that there was currently little relationship.

Mr Maduma also asked for clarity around the code of conduct and asked what had been done to replace the resigned project manager.

Mr B Zulu replied that staffing strategy was determined by the objectives of the organisation, so CBE had been looking at a retention strategy. The CBE would intervene at different levels, starting from schools, universities up to professional level. He added that the SETA had been helpful with regards to training.

Ms Ngcengwane (ANC) asked the reason why fewer people had registered recently.

Mr Madonsela replied that registration was voluntary, and it impacted on subscription fees

The Chairperson said that the CBE Act empowered the CBE to approach the Minister for amendments to the Act

Members noted the need for more interaction and thanked the CBE for what it had achieved during the short time it had existed.

Briefing by Construction Industry Development Board
Mr Spencer Hodgson, CEO, Construction Industry Development Board, (CIDB), acknowledged the co-operation from the Department of Public Works. The aims of the CIDB included the improvement of industry standards of performance in quality, employment skills, health and safety. The CIDB had focused on the empowerment of the historically disadvantaged sector of the population. The CIDB would focus on delivery performance empowerment. He highlighted snapshot results for 2005/06. Challenges included the service challenges,  such as dealing with 500 applications per week. Others arose on client procurement and delivery capacity and skills. The CIDB had to deal with unintended consequences and perception challenges. Corporate challenges arose as it was proving problematic to retain staff

Mr R Khoza, Procurement and Delivery, CIDB, said that over 90% of the posts had been filled now. CIDB had procured 40% services from Black Owned Enterprises. On the question of procurement and delivery he said that there had been a massive capacity building programme. The infrastructure delivery improvement programme (IDIP) focused on provincial planning and implementation. The CIDB had trained clients to use the iTender Register of Projects. The CIDB, as mandated by the CIDB Act 38 of 2000, had established a National Register of Contractors. The register was meant to categorise contractors in accordance with their capability. The register was also used for contractor development, so that they could move to higher grades, which were more lucrative; and increase their capacity Outreach centres were established in three provinces, and the programme would be rolled out to other provinces by mid-2007.

Commenting on industry performance, Mr Khoza said that there were monitoring and evaluation mechanisms in place; and that a construction industry knowledge centre and research agenda had been developed. The National Skills study informing the Joint Initiative For Priority Skills Acquisition (JIPSA) was nearing finalisation. The CIDB had a newsletter reaching all registered contractors to inform them of new developments. The 2007 World Building Congress would be co-hosted by the CIDB. Client satisfaction was steadily improving.

Ms Marina Aucamp, Corporate Services, CIDB, turned to the financial statements and reported that there had been a surplus of R2 million, and the income from contractor registration was steadily climbing. The CIDB had an unqualified report from the Auditor General; who had certified that the organisation had strong internal control systems. The staff profile was comprised of 71% black employees, while 58% of the staff component was comprised of women.

Discussion
Mr Blanche commented that refrigeration was not mentioned, although the building of new structures would put a demand for more refrigeration. He was concerned that development of the building industry was concentrated in urban areas.

Mr Hodgson replied that outreach centres would be opened in all provinces. These would be equipped with webcams to provide direct communication with the national office.

Mr Maduma (ANC) asked whether there were incubation structures to develop emerging contractors, and asked how the grading system worked. He also asked whether anything had been done to rehabilitate lapsed contractors.

Mr Hodgson replied that lapsed contractors were concentrated in the former homelands, due to the fact that development was mostly in urban areas. A helpdesk had been opened in Mpumulanga to deal with such issues. A contractor development programme was meant to help lapsed contractors. Up to 80% of general building contractors were black owned, and 60% were in engineering, but the focus was on women contractors. On the question of incubation he said that Grade 5 contractors could tender for Grade 6 services. That would be possible only if the contractor had been provided with proper support, prompt payment, and project management support to ensure that they would not fail.

Mr Opperman (DA) enquired about the means used to deal with HIV/Aids in the construction industry.

Mr Hodgson agreed that the construction industry was a vulnerable group because they were highly mobile. There were many service organisations that were dealing with the sector, running prevention workshops. Bigger contractors had enough resources to deal with HIV/Aids but smaller contractors did not have the capacity to deal with the pandemic.

Mr Opperman enquired how the industry could cope with the envisaged shortage of cement.

Mr Hodgson replied that it could be possible that the industry could experience cement and refrigerator shortages. South Africa could always import supplies that were not available locally.

Mr Opperman was disturbed by the absence of coloured employees in the staff composition.

Mr Hodgson stated that CIDB was addressing the issue.

Mr Huang asked how the CIDB could cope with running workshops every third day.

Mr Hodgson replied that outreach team members ran the workshops.

On a point of clarity, Mr Hodgson also stated that an unqualified report meant that the financial systems of the CIDB were in order.

Mr D Nxumalo (ANC) enquired about the long process which contractors must undergo in order to register. He wanted to know whether it was possible to upgrade a contractor from Grade 1 to Grade 9.

Mr Hodgson replied that there was a need to grow contractors to a higher grades. The Expanded Public Works Programme was instrumental in upgrading contractors to higher grades. It would be impossible to develop contractors from Grade 1 to 9. Grade 9 contractors were international companies that were listed. There were only six Grade 9 contractors in South Africa. He added that the Grade 9 Contractors were rapidly transforming, and most of them now had 25% empowerment ownership with a large component of black managers.

Mr Hodgson clarified that it took 21 days to register contactors. Some companies tendered for business and registered later with the CIDB because the tendering process demanded registration. Those were the contractors who often complained of the long process.

Mr L Maduma (ANC) asked about the kind of steps taken to combat fronting.

Mr Hodgson replied that it was not easy to identify fronting, but there was an existing verification process. There were no fronting cases identified yet. He stated that most emerging companies were women owned

Mr Blanche asked what had been done to address the shortage of skills that would be needed to build massive water purification projects.

Mr Hodgson replied that there was enough capacity to build water purification projects.

The Chairperson stated that the members would look at all the issues that had been raised.

The meeting was adjourned.