THE BOTTOM LINE
Is this the right time to be pushing BEE in construction?
Amid what is widely called a crisis, economic conditions have been far from perfect to adopt such policies
Some analysts of the South African construction industry say there is no evidence to suggest that the government has withheld projects from large listed companies.
Instead, the reason that Basil Read has suspended its shares on the JSE is that it has been hit by SA’s stumbling economy, coupled with aggressive competition and the poor execution of projects.The question remains, though, as to what role the government has played in the demise of the country’s construction industry. For one thing, the state has not spent money on large infrastructure projects since the end of the 2010 soccer world cup. This comes as it is forcing big listed construction and engineering groups to sell off at least 40% of their domestic civil engineering businesses, or to mentor black construction firms.
Amid what is now widely being called a “crisis” in construction, economic conditions in SA have been far from perfect to adopt such policies. While state spending in rural areas has seen new entrants boost competition, many of the biggest groups, Aveng, WBHO and Murray & Roberts now get the bulk of revenues and profits from outside of the country.
This has not prevented Aveng from becoming a penny stock, which many blame on years of ineffective management. Of course, the global financial crisis and subsequent minerals commodities slumps have helped this process.
Meanwhile, years of state capture at state-owned enterprises means that many government agencies continue to push for 51% black ownership in companies that do business with government, regardless of charters and previously negotiated targets.