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Burying the hatchet for a brighter future

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In a week of tumultuous South African political news, as Finance Minister Pravin Gordhan’s battle with the National Prosecuting Authority came to a head, a crucial infrastructure story broke to little fanfare.

The South African Forum for Civil Engineering Contractors (SAFCEC) announced that under its auspices, most of the major listed construction companies reached an historic, unique and far-reaching voluntary agreement with the South African government.

The signing of this settlement ends years of dispute between the construction companies and government following findings of collusion by the Competition Commission investigation launched in 2009. The agreement commits the parties to chart a new future co-operative trajectory underpinned by measurable commitments to empowerment and transformation.

Collectively, the construction companies will make a combined contribution of R1.25 billion ($87.5 million) over 12 years into a trust fund to be controlled by a board of trustees appointed from government, the construction companies and SAFCEC. Each year, individual companies will pay between R15 million ($1 million) and R21.25 million ($1.5 million).

This voluntary contribution is in addition to the R1.46-billion ($100-million) penalty imposed by the Competition Commission Tribunal on some companies in 2013.

The trust will use the payments to develop and enhance the construction industry in line with government’s transformation goals and to develop emerging contractors and suppliers in South Africa.

Initiatives to be supported by the fund will include financial support for young trainee artisans and engineers from disadvantaged backgrounds, support for the teaching of maths and science at public schools, funding for social infrastructure and the development and promotion of construction companies owned and managed by black people.

The funding will also be used for the appointment of professionals to provide the government with engineering, project management and other services to strengthen its capacity to deliver the public infrastructure.

Combatting large-scale collusion and corruption, opportunities for South African companies in infrastructure projects elsewhere on the continent will be identified.

The construction companies have also individually undertaken to either develop up to three emerging black-owned businesses or dispose of a portion of their South African basic construction businesses to majority black-owned enterprises.

The agreement provides a framework for settlement of claims by the industry regulator, the Construction Industry Development Board (CIDB), as well as civil claims by public entities against companies investigated by the Competition Commission.

The positive implications of the Competition Commission extend beyond South Africa’s borders. The investigation was active in other territories and being watched across Africa and the rest of the world. Foreign competitors gained ground in these markets because our construction groups were not supported by the South African government until a resolution was found.

That is all set to change now and perhaps South Africa can hunt as a pack and claw back markets and jobs for the benefit of people and suppliers in those territories and within South Africa.

Those who have followed my column will have noted my consistent call for an end to the destructive standoff between the South African government and the construction industry. In my latter years as a CEO in the industry, and now in retirement, I have been committed to resolving the industry’s future and was a member of the CEO group who helped craft the early foundations of this voluntary resolution program. I recall many late evenings driving back from ministerial meetings in Pretoria and intensive debate and strategy sessions within SAFCEC. Important stakeholders from black business, who will likely significantly benefit from this agreement, were included.

Simultaneously with this announcement came an uptick in the project outlook for gold, the announcement of two big private sector coal power plants, and momentum on nuclear power.

“Through the transformation commitments in the agreement, we can rebuild the relationship with the companies concerned and work in partnership in future,” says Gugile Nkwinti, the Minister of Rural Development and Land Reform, as well as the Chairperson of the Management Committee of the Presidential Infrastructure Coordinating Commission.

“This arrangement also demonstrates the commitment to a transformed, transparent and ethical industry, which has a major role to play in delivering much needed infrastructure,” says Webster Mfebe, the CEO of SAFCEC.

I was thrilled to learn of the successful conclusion of this agreement. It took seven years, but the benefits might be felt for decades to come.

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