CAN CONSTRUCTION COMPANIES SURVIVE IN THE CURRENT DEPRESSED MARKET? Ian Massey, Director MDA Consulting
CONTRACTS l COMMERCIAL SUPPORT l DISPUTES l TRAINING
CAN CONSTRUCTION COMPANIES SURVIVE IN THE CURRENT DEPRESSED MARKET?
Ian Massey, Director
MDA Consulting
INTRODUCTION
Too many service providers
Not enough work for everyone
Policy of award based principally on price
INTRODUCTIONThe one who
makes a mistake gets the job
Has to trade himself out of
the predicament
Proliferation of claims, disputes
and conflict
CONTRACTING OPPORTUNITIES ALL ADVERTISED TENDERS FOR 2015 – 2018 IN AFRICA
INFORMATION OBTAINED FROM LEADS2BUSINESS
CONTRACTING OPPORTUNITIES
INFORMATION OBTAINED FROM LEADS2BUSINESS
0
100
200
300
400
500
600
700
800
900
Oct2015
Nov2015
Dec2015
Jan2016
Feb2016
Mar2016
Apr2016
May2016
Jun2016
Jul2016
Aug2016
Sep2016
Oct2016
Nov2016
Dec2016
Jan2017
Feb2017
Mar2017
Apr2017
May2017
Jun2017
Jul2017
Aug2017
Sep2017
Oct2017
Nov2017
Dec2017
Jan2018
Feb2018
Mar2018
Apr2018
May2018
Jun2018
Jul2018
Aug2018
Sep2018
Oct2018
AWARDED TENDERS FOR 2015 - 2018 IN AFRICA
CONTRACTING OPPORTUNITIES
INFORMATION OBTAINED FROM LEADS2BUSINESS
0
500
1000
1500
2000
2500
3000
Oct2015
Nov2015
Dec2015
Jan2016
Feb2016
Mar2016
Apr2016
May2016
Jun2016
Jul2016
Aug2016
Sep2016
Oct2016
Nov2016
Dec2016
Jan2017
Feb2017
Mar2017
Apr2017
May2017
Jun2017
Jul2017
Aug2017
Sep2017
Oct2017
Nov2017
Dec2017
Jan2018
Feb2018
Mar2018
Apr2018
May2018
Jun2018
Jul2018
Aug2018
Sep2018
Oct2018
ALL TENDERS ADVERTISED FOR SOUTH AFRICA 2015 - 2018
CONTRACTING OPPORTUNITIES
INFORMATION OBTAINED FROM LEADS2BUSINESS
0
50
100
150
200
250
300
Oct2015
Nov2015
Dec2015
Jan2016
Feb2016
Mar2016
Apr2016
May2016
Jun2016
Jul2016
Aug2016
Sep2016
Oct2016
Nov2016
Dec2016
Jan2017
Feb2017
Mar2017
Apr2017
May2017
Jun2017
Jul2017
Aug2017
Sep2017
Oct2017
Nov2017
Dec2017
Jan2018
Feb2018
Mar2018
Apr2018
May2018
Jun2018
Jul2018
Aug2018
Sep2018
Oct2018
CANCELLED TENDERS FOR SOUTH AFRICA 2015 - 2018
CONTRACTS l COMMERCIAL SUPPORT l DISPUTES l TRAINING
SO THAT IS THE NUMERICAL COUNT –HOW DO WE LOOK FROM A VALUE
ASSESSMENT?
CONTRACTS l COMMERCIAL SUPPORT l DISPUTES l TRAINING
WORK AVAILABILITYVALUE ANALYSIS BASED ON CIDB RATINGS
VALUES OF TENDERS
INFORMATION OBTAINED FROM LEADS2BUSINESS
0 200 400 600 800 1000 1200 1400 1600 1800 2000
No Rating
CIDB 2: R 200,000 - R 650,000
CIDB 3: R 650,000 - R 2 Million
CIDB 4: R 2 Million - R 4 Million
CIDB 5: R 4 Million - R 6,5 Million
CIDB 6: R 6,5 Million - R 13 Million
CIDB 7: R 13 Million - R 40 Million
CIDB 8: R 40 Million - R 130 Million
CIDB 9: R130 Million Plus
15035
1598
1260
867
605
684
639
303
109
CIDB GRADINGS FOR ALL TENDERS ADVERTISED IN SOUTH AFRICA FOR 2018
VALUES OF TENDERS
INFORMATION OBTAINED FROM LEADS2BUSINESS
160
9
13
11
12
17
17
20
12
0 200 400 600 800 1000 1200 1400 1600 1800 2000
NO RATING
CIDB 2: R 200,000 - R 650,000
CIDB 3: R 650,000 - R 2 MILLION
CIDB 4: R 2 MILLION - R 4 MILLION
CIDB 5: R 4 MILLION - R 6,5 MILLION
CIDB 6: R 6,5 MILLION - R 13 MILLION
CIDB 7: R 13 MILLION - R 40 MILLION
CIDB 8: R 40 MILLION - R 130 MILLION
CIDB 9: R130 MILLION PLUS
CIDB RATING OF WITHDRAWN TENDERS FOR SOUTH AFRICA IN 2018
VALUES OF TENDERS
INFORMATION OBTAINED FROM LEADS2BUSINESS
169
93
51
44
23
52
45
47
13
0 200 400 600 800 1000 1200 1400 1600 1800 2000
N O R A T I N G
C I D B 2 : R 2 0 0 , 0 0 0 - R 6 5 0 , 0 0 0
C I D B 3 : R 6 5 0 , 0 0 0 - R 2 M I L L I O N
C I D B 4 : R 2 M I L L I O N - R 4 M I L L I O N
C I D B 5 : R 4 M I L L I O N - R 6 , 5 M I L L I O N
C I D B 6 : R 6 , 5 M I L L I O N - R 1 3 M I L L I O N
C I D B 7 : R 1 3 M I L L I O N - R 4 0 M I L L I O N
C I D B 8 : R 4 0 M I L L I O N - R 1 3 0 M I L L I O N
C I D B 9 : R 1 3 0 M I L L I O N P L U S
CIDB VALUE OF AWARDED TENDERS IN SOUTH AFRICA FOR 2018
GLOBAL AVERAGE DISPUTE VALUE
INFORMATION OBTAINED FROM ARCADIS 2018 REPORT
$0
$10
$20
$30
$40
$50
$60
$70
$80
$90
$100
2012 2013 2014 2015 2016 2017
Global Average
AVERAGE DISPUTE VALUES (US $ MILLIONS)
North America UK Continental Europe Middle East
Global Average
GLOBAL AVERAGE DISPUTE DURATION
INFORMATION OBTAINED FROM ARCADIS 2018 REPORT
0
2
4
6
8
10
12
14
16
18
20
2013 2014 2015 2016 2017
Global Average
AVERAGE LENGTH OF DISPUTE (MONTHS)
North America UK Continental Europe Middle East
DISPUTE STATISTICS SOUTH AFRICA
INFORMATION OBTAINED FROM BYRNE MANDLENKOSI SITHOLE’S DISSERTATION
NUMBER OF DISPUTES REFERRED TO ASSOCIATION OF ARBITRATORS (SOUTHERN AFRICA) FOR FORMAL DISPUTE RESOLUTION.
YEAR NEC JBCC FIDIC GCC COMMERCIAL OTHERS TOTAL
2015 15 104 4 3 4 43 173
2016 14 107 10 3 2 39 175
2017 0 67 3 0 3 24 97
MDA ADJUDICATION SURVEY 2017
• Number of adjudications increased from 27 (2016) to 45 (2017)
• 40% GCC
• 27% FIDIC
• 13% NEC
• 16% JBCC
• Value increased particularly in the 20 to 50 million zone
• 27% of adjudication awards rejected
STOCK PERFORMANCE OVER THE PAST 3 YEARS
INFORMATION OBTAINED FROM SA RESERVE BANK AND THE JSE
R 0.00
R 5.00
R 10.00
R 15.00
R 20.00
R 25.00
R 30.00
JSE STOCK PRICES NOVEMBER 2015 - NOVEMBER 2018
CALGRO -62,33% GROUP 5 -94,84% RAUBEX +28,30% M&R +73,11% BASIL READ -99,05%
ESOR -89,66% STEFSTOCKS -40,20% AVENG -98,50% TREND
STOCK PERFORMANCE OVER THE PAST 10 YEARS
INFORMATION OBTAINED FROM SA RESERVE BANK AND THE JSE
R 0.00
R 0.02
R 0.04
R 0.06
R 0.08
R 0.10
R 0.12
R 0.14
R 0.16
1
21
41
61
81
101
121
141
161
181
01
-No
v-…
01
-Jan
-11
01
-Mar
-…
01
-May
-…
01
-Ju
l-1
1
01
-Se
p-1
1
01
-No
v-…
01
-Jan
-12
01
-Mar
-…
01
-May
-…
01
-Ju
l-1
2
01
-Se
p-1
2
01
-No
v-…
01
-Jan
-13
01
-Mar
-…
01
-May
-…
01
-Ju
l-1
3
01
-Se
p-1
3
01
-No
v-…
01
-Jan
-14
01
-Mar
-…
01
-May
-…
01
-Ju
l-1
4
01
-Se
p-1
4
01
-No
v-…
01
-Jan
-15
01
-Mar
-…
01
-May
-…
01
-Ju
l-1
5
01
-Se
p-1
5
01
-No
v-…
01
-Jan
-16
01
-Mar
-…
01
-May
-…
01
-Ju
l-1
6
01
-Se
p-1
6
01
-No
v-…
01
-Jan
-17
01
-Mar
-…
01
-May
-…
01
-Ju
l-1
7
01
-Se
p-1
7
01
-No
v-…
01
-Jan
-18
01
-Mar
-…
01
-May
-…
01
-Ju
l-1
8
01
-Se
p-1
8
JSE STOCK PRICES NOVEMBER 2010 - NOVEMBER 2018
WBHO +22,9%
CALGRO -62,33%
GROUP 5 -94,84%
RAUBEX +28,30%
M&R +73,11%
BASIL READ -99,05%
ESOR -89,66%
STEFSTOCKS -40,20%
AVENG -98,50%
R VALUE AGAINSTUSD
TREND
CONTRACTS l COMMERCIAL SUPPORT l DISPUTES l TRAINING
COLLATERAL DAMAGE
THE EFFECT ON THE INDUSTRY AND COMMUNITY
SKILLS LOSS
Recent publications by Stats SA show:
• Estimated emigration figure of 1 016 994 between 2016 – 2021 at the current rate
• Estimated 1 000 000 immigrants set to enter South Africa’s job market over the same period
INFORMATION OBTAINED FROM STATS S.A
SKILLS LOSS
• In July 2017, the Department of Home Affairs officially gazetted a white paper
• Using recent census data, the white paper estimated that more than 520,000 South Africans had emigrated between 1989 and 2003, with the numbers growing by about 9% a year.
• About 120,000 of those emigrants had professional qualifications.
• “This represents about 7% of the total stock of professionals employed in South Africa and is more than eight times the number of professionals immigrating to South Africa in the same period.”
INFORMATION OBTAINED FROM BUSINESSTECH
SKILLS LOSS
Articles by several online publications quoting emigration specialists and businesses discuss the skills loss being as a result of:
• Most South African emigrants are skilled / wealthy families who are emigrating due to attractive opportunities in other countries
• Most immigrants to South Africa are unskilled migrants from neighbouring African countries and will not combat the skills shortage in South Africa
INFORMATION OBTAINED FROM STATS SA, BUSINESS TECH, THE ZULULAND OBSERVER, THE SOUTHAFRICAN.COM, COSMOPOLITAN.CO.ZA
CRITICAL SKILLS VISAS ATTRACT PROFESSIONALS
Critical skills shortages are being experienced world wide, with many countries offering special visas to attract skilled immigrants, such as:
• Australia
• New Zealand
• UK
• United Arab Emirates
• Canada
• USA
INFORMATION OBTAINED FROM STATS SA, BUSINESS TECH, THE ZULULAND OBSERVER, THE SOUTHAFRICAN.COM, COSMOPOLITAN.CO.ZA