Address by Jeff Radebe, Minister of Public Works, at the Enterprise Development Forum
Sandton, 20 May 1999
Honourable MC,
Ladies and gentlemen
It gives me great pleasure to be here with you this evening. We are a mere 13 days away from our country's second democratic elections. The Enterprise Development Forum has for some time now brought stakeholders from the black economic sectors in our country together to exchange views.
Looking back on the long journey from April 1994 I see a government track record that includes great successes, major challenges overcome, and a number of problems that we have not been able to resolve in the space of five short years. There can be no doubt that we have come a long way since we assumed the reins of government in 1994. We inherited policies, programmes, structures and work regimes that were not directed at delivering the broad socio-economic goals and aspirations of our people. Our priority was to create an enabling environment which empowered people with opportunities and helped them reshape with their own hands the future of our beloved country and their own destinies.
We don't have to go over the old terrain of describing apartheid. You and I experienced it first hand and don't need lectures on what it was or what it was supposed to be. I am confident enough in the collective success of the efforts of the majority of our people and our ANC-led government to state that the grip that apartheid once held has been released significantly. The forces of the old no longer have much influence and even the little they still have continues to wither.
It is in this context that I wish to place my address on state spending, procurement reform and transformation in our country. When we say that affirmative procurement in public sector construction has grown from less than 1% in 1994 to over 28% today, we are not merely citing statistics. We are in fact rewriting the script that for decades marginalised the majority of our people from the mainstream economy. We are not merely talking of the numerical value of contracts awarded to PDIs and ABEs but also the moral right to participate in a legitimate and rewarding economic activity from which we had been deprived. At the core of it all is the fact that internationally, Affirmative Procurement is recognised as an important and legitimate instrument for addressing and correcting socio-economic imbalances.
The process we embarked upon in 1994 is rooted in the democratisation of our economy that forms the bedrock of our Reconstruction and Development Programme (RDP). We believe that South Africa and its people can only achieve full potential if everyone is afforded the opportunity to participate economic endeavour. Our political freedom needs to be consummated with economic freedom.
Public sector procurement reform's primary assumption is that public sector procurement was and remains an extremely large and powerful mechanism of empowerment and transformation. State spending is estimated to be in the region of R85 billion per annum. My own department's portfolio and sphere of activity suggests that 50% of all new construction related projects are located in the public sector. Add to that the enormous opportunities presented by the management of the state's huge fixed property assets portfolio, we realise we have the ingredients for effective leverage in the construction-related industries.
Recently I released the White Paper on creating an enabling environment for the reconstruction, growth and development in the construction industry that sets the agenda for change in the industry. The policy outlined therein goes a long way to ensure that South Africa's construction industry aligns itself with the requirements of a developing democracy that requires urgent surgery to undo the traumatic experience of the past.
When we emabarked upon the Affirmative Procurement Policy (APP) in August 1996 there was great scepticism, with critics anticipating high premium costs to the state. Our position has been vindicated by the fact that between August 1996 and March 1999, ABEs were awarded contracts worth R0,5 billion of a total value for all contracts of R2,1bn. In Gauteng, as the closest example to us tonight, contracts worth R628m are available for directed ABE participation. Of that figure, R512m has been earmarked for major projects. Premiums hover in the region of 0,8% as opposed to 12-20% by prophets of doom.
We were concerned, however, that the bulk of projects in which ABEs participated were in the R0- R40 000 category and projects ranging from R100 000 to R2 million attracted only 12% ABE participation. Approximately 80,7 % of all projects above R2 million attracted no ABEs as prime contractors. In genuine empowerment terms this is extremely disconcerting. Our in-depth review of this assessment revealed that black contractors who had the capacity to operate as primes, preferred to enter into joint venture agreements with larger established contractors on large projects. What was of even more concern is that the joint venture agreements were effectively reduced to ABEs brokering and sourcing for opportunities without effective participation in the day to day management of construction activities.
In addition, we found that whilst Joint Ventures manifested themselves in Public Sector Procurement opportunities, this was often not the case in private sector projects.
Nevertheless the Affirmative Procurement Policy has already achieved remarkable success. At a micro level the policy appears to have formalised the relationship between prime and sub-contractors. For most ABEs this has been a new experience as such enterprises previously had only verbal subcontracts. The APP has also forced the established contractors to reach out and involve ABEs in contracts. This has in many instances necessitated a certain amount of capacity building and contract financing on the part of the established contractors.
Certainly one of the most pleasing areas is the establishment of new business linkages between established businesses and ABEs. This is vital for the transfer of skills and experience as well as the identification of opportunities. Our experience also indicates that the APP had a measurable impact on the accelerated formalisation of business owned by the disadvantaged sector of the population. In fact, to qualify as an ABE, a business is required to be registered as a legal entity and with South African Revenue Services so as to strengthen South Africa's tax-base. In addition to this, at a quantitative level Affirmative Procurement has helped create new and small micro enterprises and has also enabled existing enterprises to equip themselves and to expand their business operations and joint venture formations to emerge.
Our APOPS programme highlighted the utility of public-private partnerships in the creation of modern infrastructure. Earlier this year I announced the successful bidders for the correctional facilities at Louis Trichardt and Bloemfontein that together are worth some R3bn. Again, it is our belief that these projects will go a long way to promote black economic empowerment as this is a critical element in the shape of the contracts.
I should not need to remind you of recent contracts awarded to joint ventures with considerable ABE input. Only last year I launched 12 projects under the Strategic Projects Initiative. Worth some R345m, these are geared towards developing black primary contractors. They include the correctional facilities at Kokstad, Empangeni, St Albans, the Khayalitsha Magistrate's Court, the Langebaan undercover boat shelter and others.
The APP will continue to be applied in future. In fact the prospects are for its extension in important areas. For example, my own department has undertaken that 90% of all National and Provincial Public Works projects, 25 % of all Public Works projects at local government level and 15 % of all Public Works projects procured by parastatals should be on Affirmative Procurement specifications. . What is of fundamental importance however is that black contractors should come forward in their own right and participate with us in the process of attaining a long-term vision. In other words, the opportunities are staring you in the face.
I have spent some time talking about the construction industry, partly because it falls under my own portfolio but also because it also provides a very useful example that speaks to the whole of the South African economy. However, there is another area that we in the great cities of this land tend to forget when we discuss issues of black economic empowerment.
I want to suggest that city-dwellers take a much closer look at developments in our rural areas. I spent today in the Northern Province, in deep rural areas where there are no cell phone signals, very few TVs, few electricity connections and so on. I also travelled to Bushbuckridge. Together with Premier Ramatlodi I launched community based public works projects valued in financial terms at R63,5m covering 169 projects. These range from poultry breeding enclosures, a pottery workshop for Venda women, access roads, irrigation schemes for community gardens, multi-purpose halls, sports facilities and so on.
In the five years I have been honoured to serve as Minister of Public Works, I have been fortunate and privileged to witness at first hand the spirit of resilience, fortitude, energy, resourcefulness and generosity of our women, elderly, and youth who live in our rural areas often in conditions of extreme poverty. In many areas, the community itself decides that the people will share the job opportunities that our programmes bring amongst themselves. So instead of a small group of individuals working for a month or two themselves, the community shares the work for the projects so that as many people as possible get a chance to work, to earn a little money and to feel that they participate directly in the production of these important assets.
Government's total commitment to community-based public works programmes co- ordinated by my department alone now amounts to nearly R1bn, creating about 170 000 work opportunities for people over more than 1600 projects. The number of people who benefit from these programmes has been estimated to be about 5 million. I am especially proud that the ILO and CASE reported that our CBPWP was the best public works programme they had investigated in more than 30 developing countries around the world.
I wish I could take all of you to these areas to see for yourselves the strength of the projects and the communities that benefit from them. We are not producing false economies or reproducing the bantustan style decentralised development programmes of old. Instead we identify areas with econoimic potential, and in discussion with stakeholders in the areas develop ideas along cluster lines, making sure that we are able to support and influence emerging economies. I would like to ask, no, challenge you to support these government rural community programmes. We need balanced economic development and growth in our country. We need entrepreneurs all over our country, in towns, cities and in the rural areas. It is only in this spirit that we can begin to fulfil Deputy President Thabo Mbeki's vision of accelerating delivery to all our people.
There is another example I want to mention to you tonight. Yesterday I was introduced to some exceptional people during a walkabout in the Palace of Justice in Pretoria. I have heard so many negative comments about the productivity of our workers, about the skills levels we have in our economy and even some critics arguing that it is practically impossible to train our people.
Victor Mongwe started work on the project as a conventional ceramic tiler. The foyer and passages of the Palace are tiled with 100 year old encaustic tiles imported from Britain. On enquiry, my department was informed by the present-day manufacturers of these tiles that there were only three or four people in the world we could entrust with restoration work on the tiles in the Palace. The costs were prohibitive. Victor took one look at the problem, asked if he could try his hand at the work and after a few efforts, some additional guidance and training, proved that he has the capacity, skill and application to do the work. The finished product is astonishing. Talking to him and hearing him explain his art and love of his work is an inspiration. Today, we can rightlfully boast about someone who most probably is the 5th person in the world qualified to do the work he is doing.
Another worker on the project, Frans Mahlangu, is a young plasterer who again took the initiative and has restored most of the intricate plaster work around pillar ballustrades and other areas. He recently completed his courses with BIFSA with distinction, and is currently doing further studies. His eyes gleam when he describes in the most humble terms the passion he feels for his work. Again, restoration work performed by a young man who has been given the opportunity under our new government.
Dawid Tlabela is no longer a young man and works as a carpenter. He took up the challenge of working on the window fittings, doors and other wooden panels in the Palace, mastering new techniques with an ease that has astonished his supervisors and the project managers. He too is busy with BIFSA courses, upgrading his qualifications and developing new skills.
Ladies and gentlemen, yesterday I personally congratulated these men for what they are doing not only to improve their own qualifications and personal ambitions, but for what they are contributing to the preservation of an important heritage site in our country. They are true role models for all of us, from whatever walk of life we come from. They embody the spirit of the new South Africa, along with the millions of people working on and benefiting from our projects: devotion, passion, confidence and an urge to succeed whilst making a contribution to the greatness of our country.
They join with many, many other people in our country who have blossomed under the new democracy we all of us together have created since 1994. Together, South Africans, young and old, in cities or rural areas, rich and poor, established and emerging business people, black and white, our working people, communities and religious folk, security personnel and countless others, are moving forward.
Ladies and gentlemen, allow me to conclude.
There is no reason to think that the Mbeki administration will alter course from our new democracy's foundations. The ANC is committed to, accelerating and deepening the progress we have made so far. The RDP and Gear as an implementing agent remain cardinal to ANC policy frameworks. We now have a solid legislative base for faster delivery. We have the collective experience of many different communities. We have the political will to do so. We have the means to do so. We know that the mandate to push faster for the benefit of all will be forthcoming on June 2.