WOLFGANG NEFF: Construction sector transformation initiatives

The Public Procurement Bill, which was adopted by parliament on Wednesday, aims to standardise procurement and advance transformation through the national procurement framework, as per the prescripts of the constitution.

Debate over the bill has again highlighted the critical need for transformation and empowerment within key economic sectors, including the construction sector where a large percentage of government’s procurement expenditure sits.

The major driver of transformation in the sector is the application of the Construction Sector Codes, with individual companies showcasing considerable investment arising from the application of these broad-based codes. 

With the construction industry representing 4% of the country’s GDP and employing more than 1.4-million people, it has the potential to make a major contribution towards achieving the government’s transformation objectives and delivering empowerment that changes people’s lives for the better.

In this regard, the sector is one of the biggest employers of unskilled people and one of the biggest employers of young people, while the infrastructure it builds, especially in rural areas, has immediate benefits for the communities involved.  

These factors alone already make the industry a driver for change, but many of the big construction companies are also implementing far-reaching empowerment initiatives that are transforming people’s lives and could serve as a blueprint for other economic sectors.  

This includes Wilson Bayly Holmes-Ovcon (WBHO), which has invested in the growth and development of broad-based BEE objectives, and this has proved to be bearing fruit.

Ownership structure

There has been considerable focus over the past few years on making its ownership structure more transformed and equitable, providing skills development opportunities to ensure there are more black professionals in the industry, as well as supporting black-owned businesses through enterprise development and preferential procurement programmes. 

As a listed entity it is not possible to obtain 100% black ownership, and therefore broad-based employee share schemes and trusts have been developed to ensure that a significant percentage of WBHO’s ownership structure is owned by permanent, predominantly black employees who have been at the company for five years or longer.

The remainder is owned by various investment institutions and pension funds. Contrary to public perception, the WBHO executive leadership team owns less than 1% of the company. 

This substantial employee ownership was first achieved through a BEE vehicle established in 2006 named Akani Investment Holdings. Since the vesting of this initial scheme WBHO is building on this success with special purpose vehicle Akani 2 Investment Holdings, which was established this year and received 20.43% of WBHO issued shares.

Akani 2 Investment Holdings shares are divided across three trusts, namely the BBESI Trust (90%), which represents employees up to junior management who have been employed by the group for a minimum of five years; the ASI Trust (8%), which will benefit employees above junior management level (excluding prescribed officers and directors on the board of directors); and the ADB Trust, which will undertake programmes for the benefit of black women, youth and black people living in rural and underdeveloped areas. 

WBHO supports the 2003 concept of broad-based BEE, and aside from black ownership has actively implemented the other four crucial elements of measurement within the scorecard, which have been carefully designed to achieve the most effective and rapid development of black suppliers and contractors. These elements consist of targets and weightings implementing management control and employment equity, skills development, enterprise and supplier development, and socioeconomic spend. 

As part of these criteria WBHO has invested significantly in skills development and training for black employees and youth, having spent nearly R483m over the past decade in this critical area, with a specific focus on addressing the shortage of black built environment professionals in the country. Additionally, the group is committed to supporting the development of small and large black-owned construction companies in the industry and has spent R149m over the past 10 years on their development; including providing senior managers to act as mentors to help train, guide and support black business owners.  

Contractual spend

Finally, another critical focus area is WBHO’s comprehensive preferential procurement spend, which focuses contractual spend on black suppliers and subcontractors, including all the designated groups being deliberated in the Procurement Bill. These include emerging micro enterprises, qualifying small enterprises, black women-owned businesses, and black businesses owned by youths, the disabled, rural people and military vets. In the last financial year alone R7.2bn was spent in this regard.  

The recent increase in public spending, using the sector prescripts, will be a major win for transformation as all new contracts will benefit BEE suppliers of services or material for these projects. It will also benefit black-owned contractors in our enterprise development programme initiatives that champion sustainable and comprehensive empowerment, demonstrating a will — not only in sentiment but in action — to use public sector investment to advance transformation in the construction sector in a rational, sustainable manner, according to the industry-agreed targets and weightings and measurement criteria.  

It is imperative that we ensure government projects not only create jobs, attract investment and improve public infrastructure, but also enable real transformation that changes lives. This must happen while ensuring the recovery and survival of the entire construction industry during unsure economic times.   

• Neff is CEO of Wilson Bayly Holmes-Ovcon.