Black industrialists to earn R27bn in construction partnerships

Pretoria – Black owned construction firms are expected to yield an annual turnover between R21bn and R27bn over the next seven years, given their partnerships with established firms.

This is according to Minister of Economic Development, Ebrahim Patel, who was delivering an update on the progress made through a settlement agreement.

Last year, government and seven construction companies implicated in collusion in various projects, entered into a multi-billion rand settlement agreement. The settlement of R1.5bn is to be directed towards socio-economic development over a 12-year period.

READ: Construction cartel: Firms agree to pay R1.5bn to fund

This was in addition to a R1.4bn fine imposed on construction companies WBHO, Aveng, Murray & Roberts, Group Five, Basil Read, Raubex and Stefanutti Stocks by competition authorities.

The firms committed to promote transformation in the sector which involves partnering with developing smaller, black-owned construction companies. They also committed to taking steps to avoid collusion and corruption in their dealings.

“Should all the targets be reached in the Settlement Agreement within the seven year period, it would result in a very significant presence by black South Africans in the construction industry,” said Patel. More than 40 black-owned companies and investment vehicles are to benefit from the transformation commitments.

By the end of seven years cumulative turnover should be between R104bn and R123bn. These emerging firms should generate profits between R600m and R770m annually and cumulatively over the seven years profit should be between R3bn and R3.6n.

Company value worth created would be within the range of R4.3bn and R5.4bn.

Over the past four months the seven firms have been engaging with potential partners and they are expected to finalise these arrangements before the end of the quarter.

Supporting merging firms

So far, construction firm Murray & Roberts sold 100% of its construction and civil engineering business to a black-owned consortium led by the Southern Palace Group.

Aveng is selling 51% of its equity and 45% of economic interest in Aveng Grinaker-LTA to black investors and black-owned construction companies. Aveng has also concluded an agreement with a black-owned women equity firm.

WBHO has identified three partnerships which together will be supported to collectively reach 25% of WBHO’s construction and civil engineering turnover. The three emerging contractors will support further 10 emerging companies.

Stefanutti Stocks identified two emerging companies to be supported to reach 25% of the firm’s turnover.

Raubex is currently engaged with emerging construction companies and will make an announcement on conclusion of their discussions.

Two companies, Group Five and Basil Read are re-evaluating appropriate measures to take, and will advise government next month on their plans.

Transformation is a process

Minister of rural development and land reform, Gugile Nkwinti added that this agreement shows how the private sector can assist in giving opportunities to those who have been denied in the past.

“Transformation is a process… It is something you must be prepared to work on, over a long time,” he added.

Nkwinti said that the process should be carried out without disrupting existing situations. “You can’t kill an industry and hope tomorrow you have an industry that is successful. Use what you have and change it… Transform what you have to reach objective.”

He said that this agreement was an example of the state acting as a catalyst for transformation in the economy. “We are hoping others sectors will learn from this and see government as a potential partner to transform, so that we have radical economic transformation in all the sectors.”

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