In South Africa, the development of Small scale emerging contractors (SSECs) has become vital to bring about economic prosperity and the government has prioritised the advancement of SSECs as the vehicle towards achieving economic growth, development and job creation for previously disadvantaged people. This paper reviewed related construction studies on small scale contractors and highlighted unique roles and challenges as they relate to emerging construction businesses. The paper established that the main challenges affecting SSECs included finance, skills shortage, enabling environment and competition. Based on data analysis, it is imperative for the South African government to develop a clear and more comprehensive small business contracting policies that would enhance growth and profitability of Small scale emerging contractors.
In every economy, the construction industry plays an important role to improve the socioeconomic conditions of its citizens [
In South Africa, the government has prioritised entrepreneurship and the advancement of Small, Medium and Micro-sized Enterprises (SMMEs) which have been considered as a catalyst to achieving economic growth and development [
In this study, Small Scale Contractor refers to small business which is owned (at least 50%), managed and controlled by previously disadvantaged persons and which is overcoming business impediments arising from the legacy of apartheid [
Many previous researchers have studied the role of small scale businesses in national economies; however, the extent studies have focused on specific small scale sector is limited or has been postponed. This article seeks to provide a concise overview of the role of SSECs in national economies with specific reference to South Africa and highlight the significant role of SSECs in the economy as well as the challenges experienced by SSECs in the industry. There is little clarity on the extent to which SSECs in construction industry have been evaluated. This demonstrates that fewer researchers have done some work on the role of SSECs in South Africa and none in particular on this topic. Through the focus of this paper, it is perceived that the outcome would set a precedent for similar studies in other small scale businesses and this would give uniqueness to the future studies on small businesses. Data for the review were predominantly sourced from, University of South Africa databases, South African journals, overseas journals, online journals, South African media and CIDB databases.
The industry initiatives are implemented through CIDB, the Construction Education and Training Authority and the Department of Public Works. The trends in the industry are largely shaped through these departments. The indicators that can be used to assess industry drivers include the economic outputs such as GDP, state of the infrastructure, construction businesses and employment. Each of the drivers thus tells a story relevant to the understanding of the state of the industry [
The construction industry has an important role in promoting economic growth and sustainable infrastructure of many economies throughout the world and emerging economies in Africa are no exception. In these economies, SSECs are essential vehicles which attend to the construction of schools, residential houses, roads, bridges, power infrastructures and dams. By so doing, they create jobs and contribute towards economic growth. The infrastructure is essential as it provides social and welfare to the nation. In Zambia, the construction industry contributed 8% in 2003 and had employment increase from 140,000 in 2000 to 150,000 in 2001 [
The SSECs employ few permanent staff, usually less than 10 employees [
Although the role of SSECs is a controversy [
In terms of employment, SSECs employ the majority of construction workers. The total number of people employed in the construction industry in 2012 was approximately 986,000 [
When compared to large companies which rely on automation in their operations, SSECs remain a sustainable source of employment creation as they have the potential to build viable construction companies and develop skills. Based on the role played by SSECs to the South African economy, the government and construction sector have engaged in processes that redirected the industry’s growth and performance as a way of supporting the country’s social and economic transformation agenda [
as these cannot be subdivided to accommodate SSECs, this is a condition set within CIDB grading system. Such projects require a high level of management, financial solvency and technical capability [
The contribution of SSECs to South Africa’s economic development has been a focus of discourse for a number of years [
While the role of SSECs to economic development is generally acknowledged, the con-
Province | Employment (2012) | Percentage |
---|---|---|
Western Cape | 135,000 | 14 |
Eastern Cape | 108,000 | 11 |
Northern Cape | 19,000 | 2 |
Free State | 47,000 | 5 |
Kwa Zulu Natal | 210,000 | 21 |
North West | 46,000 | 5 |
Gauteng | 265,000 | 27 |
Mpumalanga | 64,000 | 6 |
Limpopo | 92,000 | 9 |
Total | 986,000 | 100 |
Source: Ref: [
Designation | CE | EE | PE | GB | ME | SW | Total |
---|---|---|---|---|---|---|---|
1 | 23,268 | 1313 | 4051 | 50,998 | 4227 | 15,389 | 99,246 |
2 | 1499 | 113 | 119 | 2032 | 217 | 497 | 4477 |
3 | 639 | 82 | 86 | 597 | 92 | 135 | 1631 |
4 | 788 | 132 | 201 | 811 | 151 | 154 | 2237 |
5 | 681 | 133 | 265 | 636 | 212 | 255 | 2182 |
6 | 738 | 41 | 79 | 614 | 85 | 73 | 1630 |
7 | 234 | 29 | 47 | 223 | 44 | 36 | 613 |
8 | 86 | 7 | 15 | 86 | 18 | 14 | 226 |
9 | 47 | 2 | 21 | 31 | 21 | 19 | 141 |
Total | 27,980 | 1852 | 4884 | 56,028 | 5067 | 16,572 | 112,383 |
Key: GB: General Building, CE: Civil Engineering, ME: Mechanical Engineering, EE: Electrical Engineering, PE: Plumbing Engineering, SW: Specialist Works. Source: Ref: [
tractors are faced with many challenges that limit their growth and profitability. The author in [
・ The inability of SSECs to access the right type of finance which is vital for them to operate and grow. SSECs face more difficulties in accessing finance from banks [
・ Late payment is a challenge for SSECs in construction businesses. Late payment of completed work, results in contractors halting work unless payment for completed work has been processed after the agreed date [
・ There are more demands from more knowledgeable and better organised clients and other stakeholders.
・ Lack of adequately qualified staff to effectively execute projects, hampers the performance of SSECs works [
・ There are more regulations in efforts to address environmental, health and safety concerns in South Africa [
・ There is intensive competition from large construction companies offering similar and diversified services [
・ The contractors do not have adequate technical training, business culture, capacity or maturity [
・ SSECs find it difficult to access the required equipment. Leasing and purchasing of equipment are not feasible options due to costs and collateral required.
・ Challenges of interpreting the Joint Building Contracts Committee (JBCC).
The challenges highlighted above are supported in a subcontracting survey conducted by [
Considering the important role played by SSECs in South Africa, the government has initiated development programmes to encourage a wider participation of SSECs in the construction industry [
In spite of the challenges encountered by SSECs in South Africa, SSECs continue to be a vital component of the economy in terms of job creation, income generation, poverty reduction, contribution to the GDP, source of entrepreneurship and innovation. SSECs are well placed to benefit from the opportunities presented by the government as important programs have been developed or are underway to remove barriers on financial challenges, skills shortages, weak policies and rules that inhibit them to realise their potential. Based on the analysis, the recommendations are:
・ The South African government needs to develop a clear and more comprehensive small business contracting policies. The solution required to develop SSECs should
Model | Description |
---|---|
EPWP | Learner ship type models meant for the development of the Grade 1 and 2 construction workforce |
ECDP | Emerging Contractor Development Programmes meant for Grade 2 to 3 SSECs |
EDPs | Enterprise Development Programmes for, typically, contractors in Grades 3 to 6 who exhibit potential to develop |
IECDM | Realised in the improvement of business management skills, tendering skills, business growth, CIDB grading and increased employment chances |
SACEM | Programmes focusing on improving the performance of established contractors in, typically, Grades 4 to 7, such as the Contractor Incubator Programme in line with the SA Construction Excellence Model |
Key: EPWP―Extended Public Works Programme, ECDP―Emerging Contractor Development Programme, EDP― Enterprise Development Programme, IECDM―Integrated Emerging contractor development model and, SACEM― South African Construction Engineering Model. Source: Ref: [
focus on getting the policies right.
・ The skills shortage can be improved by providing a better trained workforce and hold training agencies accountable for meeting SSECs goals.
・ The cost of finance and the conditionality tied to the loans of SSCEs are the main hindrances to access finance and this need to be removed to increase access to finance. This would stimulate growth and profitability.
・ The government needs to enact legislation that protects SSECs against the delay in receiving payments from the clients.
・ The competitiveness of an individual SSEC is strongly related to the quality of its owner, thus individual owners need to improve their individual human capital in form of formal education and training. This would improve their individual management capabilities.
Hove, G. (2016) Small Scale Contractors in Africa’s Emerging Markets: The Case of South Africa. Open Journal of Business and Management, 4, 649-658. http://dx.doi.org/10.4236/ojbm.2016.44065