As players in other sectors scramble for black economic empowerment (BEE) credentials to remain relevant, the construction sector has yet to have a BEE deal. (See table on Basic Industry.)
It is probably safe to say a deal is not imminent, certainly not with any of the big players in the sector: Murray & Roberts (M&R), Aveng, Group Five, Concor, PPC and WBHO. It is telling that no construction companies feature in the top 50 list of Empowerdex's broad-based empowerment rankings.
The construction industry is like the Titanic: difficult to turn once set on a course. It is a conservative industry driven by engineers who tend to have little social dynamism.
However, the idea of sustainable development, including BEE, is catching on in the industry.
To keep the contracts coming, the social environment has to be taken into account. More importantly, as the effects of the broad-based scorecard spread through the economy, the industry faces pressure from customers who prefer to deal with companies with good empowerment credentials.
The sector has its work cut out for it as it struggles to shake off its conservative image. It is being beaten hands down by the new-economy sectors in the race to woo the new breed of black entrepreneur who facilitates empowerment deals. The struggle to transform is made more difficult by the scarcity of empowerment players who can raise capital for equity deals. Black professionals are rarely able to secure deals because companies and financiers prefer structuring deals for the high flyers who have prominent public profiles and are seen as connected.
Those players are flocking to sexy sectors such as IT, financial services and mining & energy.
There is also the question of price. Acquiring a stake in M&R, which commands market capitalisation of about R5bn, requires R500m.
"We are faced with the reality of the risk factor," says M&R CE Brian Bruce. "Our sector is not rated on the same level as the financial or mining sectors."
The funding problem affects the whole economy and other sectors have searched for innovative solutions to equity empowerment. Certainly one reason it is not happening in the construction industry is because the industry is not proactive.
But all is not lost, thanks in part to the score-card approach.
The industry has shown some commitment to skills development by funding black students in engineering faculties. It also commands a fair rating on corporate social responsibility.
The industry claims that it scores high on supporting small entrepreneurs. It sees more value in this than in equity partnerships, which are considered artificial.
In its latest annual report, Aveng lists 12 black empowerment start-up operations in which it holds sizeable equity. They include general contractor Nare Construction, industrial & commercial building contractor Sivukile Contractors and steel merchant Tshipi.
But most of these are for public-sector work and the black groups are almost always left out of other contracts.
"We wholeheartedly support BEE initiatives," says Aveng chairman Richard Savage.
"We have been successful at business-unit level in the past and have now formed a board subcommittee to advance this thinking at group level."
M&R's board is also looking into an empowerment equity partner at group level, says Bruce.
The industry is taking its first tentative steps towards an empowerment charter.
