Construction 'fronting' exposed

Posted On Friday, 13 August 2004 02:00 Published by eProp Commercial Property News
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The National Federation for the Building Industry, is to publish the names of its members caught "fronting" for white-owned companies.

Construction IndustryThe National Federation for the Building Industry, the largest black contractors' organisation in South Africa, is to publish the names of its members caught "fronting" for white-owned companies.

The move is part of a new code of conduct that will be passed by the organisation this weekend.

It comes amid growing concerns that fronting - a widespread practice that entails falsifying the empowerment credentials of companies - could have long-term negative effects on development.

The federation's national general secretary, Aubrey Tshalata, says: "We have noted with concern reported incidents of fronting - including [by five joint ventures and one private company involved in the multimillion-rand high-profile] uShaka Island Marine Park [in Durban].

"Our members also report similar incidents across the country in municipalities and provincial departments," he says.

Tshalata says some black contractors have gone beyond fronting for whites. He claims they are "selling" projects worth up to R3-million to white-owned companies for less than R100 000.

"Some [black contractors] win tenders, but when they realise that they will not be able to [deliver] them because banks don't want to offer them the necessary funds, they sell these to white companies, disguising them as a joint venture of some sort."

Tshalata says his organisation is "extremely frustrated" by the lack of transformation in the construction sector. He says the situation is compounded by delays in formulating an empowerment charter for the industry.

"It is important that we finalise the charter .. by the end of this year because that is likely to lead to a stable construction sector [within which] black contractors would be able to work with large construction firms."

But judging by comments from South Africa's large construction firms, the industry is unlikely to have its own charter by the end of this year.

Citing technical problems, construction companies last month said it would be " impossible" to meet the government's target of a charter before the end of the year. Mid-2005 was more likely.

A survey of the industry in 2002 by the Department of Public Works found that:

Difficulties were being experienced by government departments in spending their construction budgets due to capacity constraints caused by the loss of knowledgeable personnel, excessive mobility of senior staff and inadequate succession planning;

Contractors are facing increased competition due to the long-term real decline in demand, and many contractors have responded by shedding labour; and

While emerging contractor development policies were intended for BEE, small government contracts have in fact been used to create opportunities. This has resulted in an overcrowding of this market and increased financial failures among emerging contractors.

Last modified on Tuesday, 22 October 2013 10:52

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