Address by Minister Of Public Works, Jeff Radebe, at the Official Handing-Over Ceremony of the Corobrick Klerksdorp Factory
18 May 1999
Ceremonial greetings
Ladies and Gentlemen: I am thankful to the organisers for inviting me to address this historic occasion. We meet at the threshold of the 2nd democratic elections in the history of our country. The long journey towards the complete democratisation of all institutions and facets of life in South Africa is well on its way. Whilst we have covered a great distance from the looming spectre of civil war that stared us in the face in 1994,we still have a long road ahead. I am however encouraged by occasions such as this as it provides us inspiration and new hope for the future.
We must be under no illusion that the task of transforming our political victory of 1994 into a socio-economic victory is an enormous and complex task. Our ANC-led government has over the last five years developed an enabling environment for such transformation to take effect. It has taken this legislative framework forward through a number of bold and practical steps. These include inter-alia:
In all of these areas our government has made significant strides and I can assure you that under the Mbeki government the implementation of these initiatives will be further accelerated. I want to focus on two of these issues this morning. Government and my Department of Public Works in particular have been championing the cause of procurement reform. The underlying philosophy of this initiative is granting access to previously disadvantaged individuals or business entities facilitating their entry into the mainstream economy. In carrying forward this vision we found that prior to 1994 less than 3% of public sector construction contracts were awarded to Previously Disadvantaged Individuals(PDIs) or Affirmable Business Entities(ABEs). We therefore instituted a targeted procurement reform programme that increased this figure to 28% by December 1998. Over the past five years we have directed public sector construction contracts with a total value of R2,1 billion towards targeted procurement. Nearly R0,5 billion of this directly impacted on the cause of black economic empowerment. On reviewing the impact of this thrust we realised that though this was a significant achievement, much more was needed. The vast majority of black contractors were tendering for smaller contracts with little potential for substantial empowerment. Where blacks participated in contracts on major projects they did so in joint ventures with established white companies. In the process they seriously compromised the empowerment element both in economic terms as well as in terms of the opportunities to develop their capacity as prime contractors in their own right.
Ladies and Gentlemen: In view of this, the Department of Public Works intensified its targeted procurement initiatives through the R315 million Strategic Projects Initiative(SPI). Through this intervention the number and capacity of prime black contractors is showing positive signs as the initiative kicks into full effect. We are also able to overcome the negative impact of fronting on the results of black economic empowerment initiatives.
Our government is eager to see that the policies and programmes that it is pursuing are also being emulated by the private sector. It is for this reason that we are appreciative of all initiatives to entrench the cause of black economic empowerment. and the creation of genuine opportunity for our people to have a better quality of life.
Our partnership with the private sector is one of the key engines that is driving the success of our transition to democracy. The private sector has contributed substantially to the development of infrastructure over the last five years. In fact estimates place the ratio of private to public sector spending on infrastructure at R5 for every R1 spent by the public sector.
We have also embarked on exciting public-private sector partnership ventures. Very recently I announced the award of contracts for the construction of two correctional facilities for the state to be run by the private sector for a concessionary period of twenty-five years. These two facilities are valued at approximately R3 billion and we have built effective black economic empowerment into every aspect of management and operations. The empowerment potential during the procurement and construction phase is tremendous and even in the post-construction phase SMMEs will have huge opportunities to deliver a wide range of goods and services.
Ladies and Gentlemen: One of the achievements over the past few years that my Department is immensely proud of is the excellent relations that we have developed with the Construction Industry, and the materials supply sector as an important sector thereof. The immense interest and support that we have solicited from all sectors of the industry has been overwhelming. The process of policy formulation that was so enthusiastically supported by the industry, is now virtually complete. We now wait with great anticipation to move into the realm of policy implementation. I'm positive that on both public as well as private sector contracts we will continue to enjoy your support in attaining our socio-economic objectives.
The history of the Construction Industry as you are well aware is fraught with historic imbalances and extremely skewed in terms of equity stakeholding by blacks. We have re-iterated on numerous occasions that without the full and vigorous participation of all sectors of our society, the industry will not be able to reach its potential. It is in this context that the gesture of Corobrick to handover the Klerksdorp brick factory to workers and the Brick and General Worker's Union(B&GWU) is especially welcome.
Ladies and Gentlemen: I believe of special significance is the quality of the transaction taking place today. One is always concerned that some empowerment ventures leave much to be desired and that the ulterior motive is merely to reduce the bottom line, transfer risk and to shed uneconomic aspects of the business that undermine its viability. Our government is acutely aware of such tendencies and watches with keen interest that the socio-economic goals that we have set are not deliberately compromised and undermined. The consequences of such base actions will be disastrous both in terms of stymied labour relations as well as contributing to the moral morasse that we are trying to uproot from our society.
The management and workers of Corobrick must be congratulated on this venture. I am glad to learn that this agreement is the first of its kind ever and I would like to call on others in the Construction and Building supply sector to follow closely in your footsteps. I believe your innovative move will greatly boost the confidence of your workforce and send a clear message that you are genuinely concerned about their well-being. I believe, ladies and gentlemen, that this venture also demonstrates Corobrick's genuine commitment to black economic empowerment.
We wait with bated breath as your example is enthusiastically emulated and followed by other manufacturing concerns. We all have a tremendous responsibility to carry forward South Africa's vision of a fully democratised economy that contributes effectively to the realisation of our socio-economic objectives where there is growth, development and opportunity for all.
After months of intense negotiations I believe both the workers and management of Corobrick can be delighted that they have achieved the objective of factory ownership at worker level. I believe an important milestone for this initiative is to ensure that not only equity is transferred but that opportunities are created to develop the capacity of black workers with the technical and management skills to run a project on this scale.
I would like to pay special tribute to the workers and new equity owners of Kopano Brickworks. Today we have laid another important supporting brick on the edifice of black economic empowerment. You must ensure that you take optimum benefit from the opportunities that are being created for your empowerment. It is therefore important to take full ownership of this project that you have negotiated and ensure that your work ethic and entrepreneurial skills contribute measurably to the upliftment of blacks in the economy.
I am told that the new company will trade as Kopano Brickworks and that Corobrick will retain a 25% shareholding for a two year transition period. The workforce I believe, will hold 50% shareholding and factory management and the Brick&General Workers Union, the remaining 25%.
I am delighted to learn that the Klerksdorp factory is one of the most successful Corobrick factories as it has positive implications for the future of Kopano Brickworks. The fact that this successful factory has been chosen as the model also speaks volumes for the integrity and intentions of management. I believe that the workers of Kopano Brickworks can look forward to the future with great confidence and excitement. It is also a source of great comfort and stability that the agreement guarantees that Corobrick will purchase the factory's production and act as the sole agent in selling the clay masonry products produced by the factory.
One of the most painful experiences encountered by black entrepreneurs is the lack of access to finance. This not only inhibits their entry into the mainstream economy but severely limits their potential for growth. This venture I believe is also unique in the way that the finance package has been structured and that the factory has not had to rely on mainstream financial concerns to borrow capital. I believe that in this regard you are also sending a clear message to the financial services sector and other major private sector roleplayers that are keen on following in your footsteps. For black economic empowerment to be effective and take root, we will have to go beyond the traditional norms and explore innovative approaches to financing and risk management.
Ladies and gentlemen: as we head for the 21st Century I believe we can look forward with a measure of confidence. South Africa's economy comparatively speaking has survived the tumultuous times of the recent global economic meltdown. The work done over the last two years to lay solid foundations for the reconstruction, growth and development of the construction industry has indeed been commendable. Through the joint efforts of the public and private sectors, and particularly the Task Team on Construction Industry Development, our vision of a construction industry that promotes stability, fosters economic growth and international competitiveness, creates sustainable employment, and addresses historic imbalances as it generates new industry capacity for industry development will become a reality.
The challenge to all stakeholders in the industry is to buy-in into the process at the delivery end rather than be overtaken by the pace of events or the inevitable tide of change. Corobrick and the workers here at the Klerksdorp factory must be commended on their initiative. We look forward to the next five years as government and its social and business partners forge ahead towards accelerated delivery.
Our historic and collective responsibility is to ensure that each and every South African has the opportunity to contribute to building a better future. It is my pleasure today to be associated with such an opportunity here at Corobrick Klerksdorp and I shall be observing with keen interest the progress of this project. I trust that the path that you have set for yourself will indeed be a rewarding one for all role players and that this venture will be a forerunner to greater things.
Viva Kopano Brickworks Viva !
I thank you!