The Charter A Review of Implementation October 2006

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The CharterA Review of ImplementationOctober
2006

• James Ngobeni
• Hylton Macdonald

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1. Introduction

• Introduction
• The charter
• The focus and objectives of the charter
• Impact of growth on the sector
• Process to implementation
• Interim period
• Implementation
• Conclusions

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2. The Charter

• 2.1 Sustainable Growth And Development
• The Charter has several key drivers to ensure
  sustainable growth and development in this
  sector
• Human Resource Development
• Skills Development
• Enterprise Development
• Employment Equity
• Direct Empowerment
• Ownership
• Control
• Indirect Empowerment
• Procurement
• Corporate Social Investment

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The Charter (continued)

• 2.2 Participants to the IMC
• Business
• ASAQS (The Association of South African Quantity
  Surveyors)
• ABA (African Builders Association)
• MBSA (Master Builders South Africa)
• NABCAT (National Association of Black Contractors
  and Allied Trades)
• NAFBI (National Federation for the Building
  Industry)
• SAACE (The South African Association of
  Consulting Engineers)
• SABTACO (South African Black Technical and Allied
  Careers Organisation)
• SAFCEC (South African Federation of Civil
  Engineering Contractors)
• SAIA (South African Institute of Architects)
• SAISC (South African Institute of Steel
  Construction)
• SAWIC (South African Women in Construction)
• Women for Housing
• Labour
• NUM
• BCAWU
• Government
• National Department of Public Works (Leading
  Department)

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3. The Focus and Objectives of the Charter

• 3.1 The focus and objectives of the Charter are
• Transformation of the sector in a visionary
  manner
• Sustainable industry growth, competitiveness and
  effectiveness
• Applies to all sector stakeholders
• Allow for differences between Construction and
  Build Environment Professionals
• Bring an end to the malpractice of fronting

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4. Impact of Growth on the Sector

• 4.1 Impact of growth on the Sector
• Investment spend by Government
• Increased investment spend by SOEs
• General increase in Government spending, from
  8,4 in past decade to 12,5 in last two years
• Private sector investment spend grown from 4,7
  in past decade to 8,4 in last two years
• If the targets are achieved we could see an
  industry that needs to double in size within the
  next decade

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5. Process to Implementation

• The process going forward to ensure that the
  Charter becomes a Sector Code is as follows
• 5.1 Application for Section 12 approval of
  Charter by DTI
• This approval will make the Charter legally
  binding on all stakeholders in the construction
  sector
• Document submitted to DPW and forwarded to DTI.
  Approval awaited
• 5.2 Application for Section 9 approval of Charter
  by DTI
• This approval will make the charter a Code of
  Good Practice in terms of the Act
• The codes will be legally binding on all organs
  of the State and PFMA schedule II and III
  companies
• The scorecard will be utilised and used for
  measuring preference points under the PPPFA

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Process to Implementation (continued)

• 5.3 Prerequisites to be achieved prior to
  submitting an application for Section 9
• Independent 3rd party review of the Construction
  Charter in terms of the requirements laid down by
  the DTI.
• Completion of a Charter Council Constitution
  (H.O.T. agreed at IMC)
• Formation of a Charter Council as per H.O.T.s

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Process to implementation (continued)
5.4 Establishment of Charter Forum Council
Government
Business
Labour
Other
Nat DPW DPLG DOH DOT DWAF DTI Treasury
Stat CIDB NHBRC ECSA DOT Prof Reg B.
SOE NRA TRANS-NET ESCOM ACSA
Building MBSA ABA NAFBI ECASA
BEP SAACE SABTACO SAIA ASAQS
NUM BCAWU
Community
Civil SAFCEC
NABCAT SAISC SAWIC/WFH
CHARTER FORUM
EXECUTIVE COUNCIL (10)
No voting rights Corporate Governance
Constr. 2
BEPs 2
Women 2
Labour 2
Govt. 2
Statutory 2
CEO Secretariat
Finance
Legal
Monitoring
Communication
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6. Interim Period

• 6.1 No legislation in place resulting in
  uncertainty
• 6.2 Section 9 approval anticipated in early 2007
• 6.3 Circular distributed to assist with
  alignment and eliminate confusion and duplication
  in the procurement process.
• Circular covers areas such as
• Implementation
• Legal framework
• Scoring methodology
• Explanatory notes or Practice notes on how to
  deal with
• Joint Ventures
• Foreign Entities
• New Entrants
• Enterprise Development
• Mentoring

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Interim Period (continued)

• 6.4 Verification and Verification Agencies
• No agencies are accredited by DTI to date
• Agency will need to comply with SANAS Act on
  Verification Agencies
• Agency will have to be a member of ABVA
• Agency will not be able to advise and accredit
  the same organisation
• Accreditation by DTI is expected in early 2007
• In the interim agencies can conduct
  accreditations and certificates will still be
  valid
• Certificates valid for a period of 12 months

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7. Implementation

• 7.1 Benefits of the Charter
• 7.1.1 Goal to ensure established consultants
  and contractors transform in an effective and
  genuine manner
• 7.1.2 More importantly an environment is to be
  created where SME contractors and consultants
  can grow, succeed and be sustainable
• 7.2 Benefits of value add and sustainability to
  the sector
• 7.2.1 Skills development
• Direct training in critical skills area will
  drive capacity building in the sector
• Mentoring and development of key human resources
  will reduce losses to the sector
• Development of artisans and learnerships
• Development of management skills
• Particular focus on woman in all areas

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Implementation (continued)

• 7.2.2 Enterprise Development
• Direct input from established organisations
• Coaching, assistance and input over time to
  ensure sustainability
• Support and development in areas such as
• Finance
• Budgeting
• Tendering
• General management
• Programming
• etc

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Implementation (continued)

• 7.2.3 Procurement
• Microenterprises not required to complete a
  scorecard
• Small enterprises complete a foreshortened
  scorecard to ease administration
• Entities contribution to BBBEE are evaluated on
  an equivalency table shown below
• Any enterprise with in excess of 50 black
  ownership status will increase to the level
  immediately above the level at which its actual
  score is evaluated

Equivalency table for procurement spend
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Implementation (continued)

• Procurement (continued)
• BBBEE status will be of benefit to larger
  contractors in their procurement spend
• Benefits SMEs with good scores
• Will assist in development of SMEs
• BBBEE status of enterprise to be used in the 10
  or 20 points procurement evaluation in terms of
  the PFMA

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Implementation (continued)

• 7.2.4 Ownership
• Smaller companies have the opportunity to buy in
  individually or as a collective to larger company
  to enable the established company to meet its
  ownership requirements
• Larger enterprises can invest in SMEs to aid in
  their development and facilitate growth of the SME

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Implementation (continued)

• 7.2.5 Corporate Social Investment
• Large companies will spend money on CSI
  programmes, eg., schools etc.
• SMEs will be a major benefactor of this work in
  these communities
• 7.3 Integration Cohesion
• Charter process has resulted in a greater
  understanding and cohesion in the sector
• The Charter Council must continue to foster this
  cohesion whilst remaining independent
• The formation of an umbrella body Construction
  South Africa will aid in
• Facilitating discussion of and addressing issues
  of common concern to the sector
• Aid in providing a unified construction voice to
  all decision makers

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8. Conclusions

• The Charter will bring about major benefits and
  opportunities to the SME contractors in the
  construction sector
• The Charter will bring about a consistent
  approach to procurement in the construction
  sector
• The Charter Council, whilst remaining
  independent, must continue to foster cohesion in
  the construction sector
• The formation of an umbrella body Construction
  South Africa will aid in addressing issues of
  common concern and provide a unified voice from
  the construction sector