LOCAL companies have to compete on an unequal footing as they absorb the costs of transformation, skills development and extraordinary measures such as the proposed carbon tax, says a top executive of cement giant PPC.
PPC special projects executive Richard Tomes told the annual Master Builders South Africa congress in Johannesburg on Monday that South Africa’s cement firms were forced to compete with imported cement from Pakistan. "I’m not arguing for protectionism. But South African companies are becoming less competitive because of these costs," he said.
The carbon tax due to be introduced in 2015, for example, would add an extra R150m a year to PPC’s costs, he said. Business has united against the proposal, which will hit high energy users such as miners and manufacturers.
As much as 22% of PPC’s revenue comes from outside South Africa, and the group plans to raise this to 40% by the 2016 financial year. On Monday, it said it had signed a memorandum of understanding with the Democratic Republic of Congo’s Barnet Group to invest in a $230m factory there, in a greenfield project including the construction of a 1-million-tonne-per-year cement plant and quarry.
The Congo has cement consumption of 16kg per capita, compared with the South African average of 240kg and the global average of 400kg, PPC CEO Ketso Gordhan said.
Mr Tomes echoed Mr Gordhan’s call for an "infrastructure Codesa" to give the government’s spending programme traction and improve business and government relations.
Building firms have repeatedly identified a number of constraints to doing business in South Africa, including a skills shortage, inadequate transformation, corruption, collusion, low productivity and late payment.
Construction Industry Development Board chairman Bafana Ndendwa said transformation in the construction sector was poor. Smaller companies, particularly emerging black contractors, had higher levels of black employment than large, JSE-listed groups.
"What is missing is willingness on the part of established firms," he said. "The lack of goodwill towards the development of emerging contractors is worrying."
Part of the problem was the absence of co-operation between traditionally white, established companies and emerging contractors. Mr Ndendwa emphasised that the industry could not keep looking to legislation to fill the gap. H e also urged emerging contractors to be more responsible. Too many new black firms sold or subcontracted their tenders, which did little to introduce meaningful change.
Construction Sector Charter Council chairman Felix Fuzile Fongoqa told the conference the council had begun a study to determine levels of black ownership, control and management of building and civil construction firms. It has asked the industry to co-operate with its request for broad-based black economic empowerment certificates for 2009-12.
National planning commissioner Bridgette Gasa urged builders to understand the National Development Plan and indicate how they could contribute to its realisation. The plan aims to create 11-million jobs by 2030. Most of those will be in construction, agriculture and manufacturing, which would require partnerships between the government and business, she said.
Dr Gasa acknowledged that co-ordination within government had to improve for the plan to work and said some level of labour market reform was also a requirement for success.