Depending on which construction industry body you speak to, the Voluntary Reconstruction Program (VRP) is “dead” or “alive and well.”
The future of the VRP was highlighted when it emerged last month that construction industry stakeholders, including cement producer PPC and Master Builders South Africa (MBSA), were engaging with the Department of Commerce and Industry and Competition. (dtic) on development. of a construction industry master plan.
The government subsequently published a National Infrastructure Plan 2050 (NIP 2050) this month for public comment. Some of its purposes and objectives are similar to those of the VRP.
The VRP resolution agreement between the Presidential Infrastructure Coordinating Commission (PICC) and the SA Civil Engineering Contractors Forum (Safcec) in October 2016 resulted in seven JSEListed companies that agree to collectively contribute R1.25 billion over 12 years to the Tirisano Fund for socio-economic development and undertake new transformation initiatives.
The agreement also resolved the exposure of these companies to possible claims for damages from identified public entities that arose mainly from the expedited resolution process of the Competition Commission.
This followed a series of companies that signed consent agreements with the commission in 2013 after admitting to bid rigging and collusion in contravention of the Competition Law.
The South African National Highway Agency (Sanral) withdrew the civil damages claims valued between R600 million and R760 million that it had brought against various companies when the VRP settlement agreement was signed.
‘Dead’ … or not
MBSA CEO Roy Mnisi said that as far as MBSA is concerned, the VRP “is dead.”
“The agreement was signed in 2016 and most of the companies that signed that agreement have fallen into business rescue and some of them have closed,” he said.
However, Webster Mfebe, Safcec CEO, said: “It is total nonsense that the VRP is dead. The VRP is alive and well. ”
Mike Wylie, Former President and CEO of JSEWBHO, which is listed and now chairs the Tirisano Fund, also emphasized that the VRP is not “dead” and is “a fantastic initiative”.
Mnisi’s reference to construction company failures relates to Basil Read, Group Five and Esor going to the commercial rescue and Group Five and Esor are excluded from the list. JSE in 2020.
Mnisi added that the construction industry experienced a sharp decline in 2017 and 2018 and, with the impact of the COVID-19-19 pandemic in the industry, “we doubt that [the] Program [VRP] it will be implemented as planned ”.
However, Mnisi said that MBSA believes that the VRP could be incorporated into other industry plans, such as a master plan for the industry.
Mfebe stressed that the VRP is not a panacea but rather a measure of intervention of the signatory companies to make a contribution to the transformation of the sector.
“It is not the main driver of transformation. It is a supportive measure and should be viewed as such.
“The failure of transformation in the industry, if anything, has nothing to do with the VRP being ineffective or dead,” he said.
Mfebe highlighted the importance of diversity and sustainability to drive transformation in the industry.
He said diversity is important because of the need for experienced white engineers to pass on their knowledge and expertise through mentoring programs to graduates of all races.
Mfebe said that for the transformation to be sustainable, there must be enough work.
This will allow newly acquired companies with majority black ownership a chance to move up the ladder to the point where they can be listed. JSE, if they wish, and over the years have a market capitalization at least close to that of established players in the industry.
“The Tirisano Fund is an interim measure. It’s just a complement to efforts to transform the industry, ”he said.
Mfebe said there will be no disjunction between the VRP and a master construction plan.
“For us to be successful, we must help emerging contractors to integrate into the construction economy,” he said.
Wylie said the VRP comprises seven programs to strengthen construction companies and industry, and is geared towards service delivery.
He believes that the programs that the VRP has are exactly what a master plan needs, because the industry needs to be strengthened because “there has been a huge capacity gap.”
Sector ‘already transformed’
“The industry is pretty well transformed, so transformation is not a big thing on the agenda, because if you look at the industry now, there is not much to transform that is not black already,” he said.
This follows, among other things, Murray & Roberts (M&R) selling its South African infrastructure and building businesses to the wholly black-owned Southern Palace Group in 2016, while JSEA publicly traded Aveng sold its southern African construction and engineering business, Grinaker-LTA, to the black-owned Laula Consortium in late 2019.
This was in line with the transformation commitments of the VRP signatory companies in terms of which each of them agreed to:
Advising up to three emerging black-owned contractors so that they can maintain a cumulative annual income equal to at least 25% of the mentor companies’ annual income for civil engineering and construction works delivered in South Africa by 2024; or
Dispose of at least 40% of its civil engineering and general building construction businesses in South Africa to a company that is more than 51% owned, managed and controlled by Blacks.
Wylie added that the Tirisano Fund has around R1 billion to spend and will hopefully attract more money from elsewhere “to give him a little more pain. [power]”.
However, in November 2020 it became known that several of the VRP signatory companies were not up to date with their payments to the Tirisano Fund.