Small Contractors Located In North West Province Economics Essay

The South African Government is committed to economic growing and transmutation. Historically Disadvantaged Persons ( HDIs ) and little and average sized contractors are being encouraged to take part in the chief watercourse economic system as the building industry is seen as a vehicle for societal alteration and economic authorization ( Construction Industry Development Board, 2004 ) . Under its black economic authorization ( BEE ) programme, the South African authorities has set marks for the per centum of each industry to be controlled by black-owned concerns. Large, predominately white-owned corporations have sold assets to accomplish this aim, with the first sale happening in late

2000. From 1995 the democratic authorities through its assorted sections has initiated some contractors ‘ development programmes by which it awards certain

degrees of its building undertakings to the historically deprived black contractors in order to enable development of competent accomplishments, build feasible building companies, create occupations and redistribute wealth ( Department of Public Works, 1996 ) .

A building company ‘s determination to spread out into international markets must be based on a good apprehension of the chances and menaces associated with international

concern, every bit good as the development of company strengths relative to international activities ( Luger, 1997 ) .The survey was done by appraising the executives in charge of international building of big United States based contractors. The findings indicate that path record, specialist expertness and undertaking direction capableness are the most of import company strengths ; loss of cardinal forces, deficit of fiscal resources, and rising prices and currency fluctuations are the most of import menaces relative to international markets ; and increased long term profitableness, the ability to keep stockholders ‘ returns, and the globalization and open-ness of the markets are the most of import chances available in international plants ( Luger, 1997


The chief aim of this survey was to set up the jobs confronting little contractors in the North West Province that leads to high failure rate.


One hundred ( 100 ) little and average sized contractors were indiscriminately selected from the database of the National Department of Public Works ( NDPW ) , Mmabatho Regional Office: Emerging Contractors Development Programme ; Local Municipalities: Contractors Development Programmes ( CIP ) , and Construction Industry Develop-ment Board ( CIDB ) contractors register/database. The chance trying method utilizing simple random sampling was found to be the most appropriate for the survey. The choice standards adopted to organize the mark population included the followers:

– Contractors from Grade 1 and 4 of the Construction Industry Development Board ( CIDB ) scaling ; and

– Small contractors located in North West state.

A entire figure of 100 questionnaires were distributed among little and average sized contractors and 57 questionnaires were returned. The response rate was good as it was more than 50 % . The research methodological analysis for the survey provided both primary and secondary informations. The primary informations collected formed the probe utilizing a structured questionnaire. The primary information was collected between June 2008 and September 2008. The range of the survey was delimited to little and average size contractors runing in the North West state of South Africa. The Microsoft Word and Excel programmes were used to show the artworks. The statistical programme used for analyses and presentation of informations in this paper is the Statistical Package for the Social Sciences ( SPSS ) . This subdivision consists of descriptive statistics which uses frequence tabular arraies to supply information on cardinal demographic variables in the survey


The necessity for the contractor development programmes in South Africa

Internationally, there is a general understanding that little endeavors contribute vastly to economic development ( International Labour Organisation, 2001 ) . Croswell and McCutcheon ( 2001 ) argue that little contractors can be economically utile if undertakings are designed to accommodate their capacity. The Department of Public Works ( 1997 ) states that contractor development in South Africa is needed for the undermentioned grounds:

– The capacity and insufficient of resources in a tendering phase can take to high opportunities for the historically deprived people to get down to take part in the industry.

– A big figure of functional black owned companies can pave the tract for our growing and the redistribution of wealth in South Africa.

– Small contractors can be powerful instrument on occupation creative activity within the building industry depend on the authorities policies.



The Integrated Emerging Contractor Development Model is based on the Emerging Contractor Development Model ( ECDM ) developed by the CSIR, ( Dlungwana et al,

2004 ) . The ECDM is a best-practice tool aimed at helping implementing agents to ease the execution of an emerging contractor development programme. The

ECDM helps concentrate on the quality and effectivity of development programmes by guaranting more effectual and comprehensive development of contractors ‘ capableness and capacity. Central to the ECDM is the execution of a concern program with clear contractor development outcomes. The IECDM therefore embraces the constructs of the ECDM with the added elements of undertaking direction and Total Quality Management ( TQM ) .

Emerging Contractors on the IECDM programme participate in a Construction Education Training Authority ( CETA ) NQF level 2 learnership programmes which are combined with the services of a nationally accredited building wise man. It has been widely accepted that the success of the past and current contractor development enterprises has been rather modest. However, important lessons can be drawn from those enterprises. The lessons have shown the demand to:

– Inform the policies and research docket by advancing the engagement of emerging contractors.

– Advocate the involvement of emerging contractors and guarantee that policies and processs in the building industry create an environment conducive to the development and publicity of emerging contractors.

– Inform policies on the distinctive features of the building industry ‘s jobs.

Increase the engagement of emerging contractors in mainstream building activities.

– Well increase the emerging building endeavors portion of work chances within the public sector.

– Stimulate economic activity in the most down countries.

– Promote the engagement of adult females in building.

– Support emerging contractor ‘s entree to concern preparation, finance, tendering information and work chances.

– Support the constitution and strengthening of the organizational capacity of emerging contractors.

– Persuade, through intermittent interaction, moneymans to supply the necessary support to emerging contractors.

– Pilot theoretical accounts for contractor development programmes.

The South African Construction Excellence Model

( SACEM ) and the Emerging Contractor Development

Model ( ECDM ) are good illustrations of this.


There are a big Numberss of little contractors come ining at the lower terminal ; this sector has become highly competitory, thereby doing it hard for new entrants to maintain a sustainable work flow. This inability to prolong workflow impacts on their ability to accomplish sustainable employment and economic authorization ( Construction Industry Development Board, 2006 ) .


The challenges faced by little and average contractors can be distinguished between those that affect small-scale contractors and those that affect moderate-sized contractors. Small and medium contractors are confronting increased competition due to the long-run existent diminution in demand, and many contractors have responded by casting labor. The larger contractors have responded by traveling into the international market. Small local contractors, in peculiar, are moreover capable to volatilities due to the geographic distribution of building and the peak work loads that characterise building undertakings, which has farther reduced their ability to construct capacity. Emerging contractors are capable to the same market forces described above for little contractors.

However, while emerging contractor development policies were intended for black economic authorization, little authorities contracts have in fact been used as occupation creative activity chances.

Insufficient of mentorship during early phases of concern. The contractor ‘s managers were found to be self-managing nevertheless they were cutting off bootless outgos. ( Rwelamila, 2002 ; Croswell and McCutchen, 2001 ; Mphahlele, 2001 ; Ofori, 1991 ) ; Wijewardena and Tibbis, 1999 ) . The comparative deficiency of suc-cess confronting little contractors in South Africa was a consequence of: unequal finance and inability to acquire recognition from providers ; inability to use competent workers ; hapless pricing, tendering, and contract certification accomplishments ; hapless mentoring ; looking for established contractors Poor planning ; insufficient of resources for 8GB work ; deficiency of proficient, fiscal, contractual, and managerial accomplishments ; and late payment for the work done.


South Africa is ruled by politician as far we concerned of accomplishment development bureau they are non making an effort in cut downing unskilled labor. Less capacity in constructing up proposed installation in the industry. There were no calling expo conducted by section ( i.e. section of plants ) EPWP programme is non assisting all South African. Deficit of third intuitions


Attempts to advance SMMEs entree to finance might hold more impact on development and growing but entree is limited and the cost of capital is high. While the authorities has made some attempts to increase handiness to fundss, the targeted programmes have had limited success because the consciousness and use of bing promotional programmes is really low. In add-on to deficient entree, high involvement rates besides pose a restraint to micro endeavor growing. Furthermore, ( Gounden 2000 ) reports that there are core troubles seen in footings of favoritism by fiscal establishments against microenterprises with small collateral, troubles in accessing information and a deficiency of market exposure.


This subdivision of the paper will concentrate on the reappraisal of literature on the jobs confronting Small and Medium Size Contractors in Swaziland. The Government of the Kingdom of Swaziland has identified the building sector as a precedence country for bettering the societal and economic development of the state ( Ministry of Public Works and Roads, 2007 ) . However, to maximise the impact of the building sector as portion of the National

Development Strategy ( NDS ) , it was necessary to develop a sound national policy model for the Industry to better its overall effectivity and efficiency.

Cardinal to the Swaziland National Construction policy and in line with the Development Strategy ( NDS ) , was the authorization of local Swazis within the industry to maximise their engagement and subsequent impact on the local economic system.

A recent survey conducted by Mvubu ( 2009 ) has identified the following as the major jobs confronting Small and Medium Size Contractors in Swaziland:

Delaies in payment

Delaies with interim and concluding payments, every bit good as burdensome contract conditions faced by building houses, can besides enforce immense restraints on the industry. Many building houses have suffered fiscal ruin and bankruptcy because of holds in payment, which are common with authorities contracts. Contemporary research that was conducted in 2007 by the writers revealed the current grounds for the failure of little and average size contractors in Swaziland. 87 proprietors of the little and average size contractors were interviewed.


63 % of the respondents believe that the four major Bankss in Swaziland have proper systems in topographic point to back up little and average size contractors one time they have secured work. On the other manus 37 % of the respondents do non believe that the four major Bankss in Swaziland have proper systems in topographic point to back up little and average size contractors.

Lack of entree to work chances 33.4 % of the respondents think that the current environment within the building industry in Swaziland is favorable for little and average size contractors to be successful. On the other manus 66.6 % of the respondents believe that the building industry environment is non favorable for the success of little and average size contractors. From the research conducted it can be concluded that the comparative deficiency of success among the little and average size contractors is a consequence of the following jobs which must be addressed in order to ease the success of the little and average size contractors: a deficiency of resources for either big or complex building work ; An inability to supply securities, raise insurance and obtain professional insurance ; the contracts were necessarily packaged in such a manner as to except little and average size contractors ( the client ministries expect the MOPW & A ; T to implement undertaking without fail and are ever inconsiderate of the development facet in the execution of authorities contracts.


The North West Province is bounded on the North by Botswana, on the South by the states of the Free State and the Northern Cape, and on the nor’-east and E by Limpopo and Gauteng state. Covering 118,797 kilometer ( 45, 869 sq stat mis ) , the North West state was created in 1994 by a amalgamation of Bophuthatswana, one of the former Bantustans ( or black fatherlands ) , and the western portion of Transvaal, one of the four former South African states ( Figure 1 ) .

The survey findings shows that the little and average size industry in South Africa is still male dominated with 78 % male and 22 % female owned. The age of the people interviewed scopes from 20 to 59 old ages old. 98.3 % of the people interviewed were Black and 1.7 % per centum was Coloured people. Small contractors in the North West

State are dominated by black people. 71.2 % of the people interviewed were pull offing managers ; 6.8 % were pull offing spouses ; 8.5 % were building undertaking directors and 10.2 % were building directors.

Table 1 above shows that 18 % of the proprietors of the contractors had a grade 11 or lower making ; 30 % had grade 12 makings ; 30 % had a post-matric sheepskin or certification ; 10 % had a Bachelor ‘s grade and 12 % had a station alumnus grade. The consequences besides show that 45.7 % of the proprietors had a making that is up to Rate 12.

Table 2 shows that 75 % of the contractors manage between 0-2 undertakings ; 19 % of the contractors manage between 3 – 19 undertakings ; 4 % of the contractors manage between 11 – 15 undertakings and 2 % of the contractors manage above 20 undertakings at a clip. Most of the contractors at the lower scaling lack the capacity to pull off many undertakings at one clip.

Table 3 shows that contractors lack basic building accomplishments with merely 15 % building direction ; 20 %

Table 1. A study of contractors ‘ makings, North West state, 2008.




Rate 11 or lower



Grade 12



Post Matric diploma/certificate



Bachelor ‘s grade



Post-graduate grade






Table 2. Contractors ‘ path record in North West state as at 2008

No. of undertakings managed



0 – 2 undertakings



3 – 19 undertakings



11 – 15 undertakings



Above 20 undertakings






Table 3. Basic building accomplishments missing.

Type of building accomplishments



Construction Management



Business Management



Undertaking Management



Health and Safety






Site Management






Table 4. Contractors ‘ old ages of experience, North West state, 2008.

No. of undertakings managed



less than 3 old ages



3 – 5 old ages



11 – 15 old ages



Over 15 old ages






Business direction ; 20 % undertaking direction ; 10 % wellness safety ; 20 % tendering and 15 % site direction. It is besides clear that the bulk of the contractors in the

North West Province deficiency of import accomplishments that will enable their contractors to be successful. The consequences show that scarce accomplishments in the building industry is a chief challenge, as most of the little and average sized contractors can non afford to engage qualified craftsmans and building professionals due to the high demand of reinforced environment professionals. And it leaves little and average sized contractors with no option but to outsource their work to the well-established contractors.

In Table 4 it was found that 37 % of the proprietors of the contractors have less than three old ages experience ; 33.9 % of the proprietors have between 3 and 5 old ages experience ;

18.6 % of the proprietors have between 11 and 15 old ages and 10.5 % have above 15 old ages experience in the building sector.

Table 5 shows the jobs confronting little contractors when running a building concern. The tabular array below illustrates the average value of and ranking of the jobs of running a little and average sized contractor concern. Respondents were asked to rank the undermentioned jobs ; Government non paying on clip, deficiency of capital, hard to set up warrants, deficiency of commit-ment in implementing policies geared to help little and average size contractors by authorities functionaries, providers non willing to offer recognition to little and average size contractors with no path record, and in conclusion depen-ding on bank loans and paying high involvement. The ranking was based on the job which the respondents viewed as the most terrible one and stoping with the least terrible. The mean was calculated by adding the figure of responses and dividing by the figure of respondents per class. It can be seen from Table 5 that Government non paying on clip, deficiency of capital and trouble in set uping warrants are the top ranked jobs confronting contractors when running their concern.

Table 5. Means and rank of jobs of running a little and average size contractor concern.




Government do non pay on clip



Lack of capital



Difficult to set up warrants



Lack of committedness in implementing policies geared to help little and average sized contractors by authorities functionaries



Suppliers non willing to offer recognition to little and average sized contractors with no path record



Depending on bank loans and paying high involvement




This paper has shown that from 1994 since the morning of the new democratic South Africa, the province of little contractors continues to be unsustainable, even with being of supportive programmes ( that is, contractor development programme and emerging contractor development programme ) . The South African building industry will go on to supply occupations for Historically Disadvantaged Individuals ( HDI ) but without such an intercession, little and average sized contractors will stay unsustainable and their public presentation unsatisfactory. The survey finds that deficiency of effectual direction during their early phases is a major cause of concern failure for little and average sized contractors. Owners tend to pull off their concerns themselves as a step of cut downing operational costs. Poor record maintaining is besides a cause for start-up concern failure. Lack of fiscal direction ; deficiency of entrepreneurial accomplishments ; deficiency

of proper preparation ; deficiency of resources ; deficiency of proficient accomplishments, deficiency of contractual and managerial accomplishments ; late payment for work done which are common with authorities contracts ; inability to acquire recognition from providers and looking for established contractors are besides lending factors for the failure of little contractors in the North West Province.

In order to turn to jobs and challenges faced by emerging contractors in South Africa, it is critical for the authorities to reexamine policies with respect to Contractor Development Programmes ( CDP ) to guarantee that the authorities contributes to the success of little contractors in South Africa. The research had established that there is non one critical success factor that can do little contractors to be successful but a combination of factors. In the North West Province instance study it was found that some factors were critical and some were less critical. The writers recommend that the undermentioned factors to be considered as cardinal to the success of little contractors in the North West Province.

Business Skill

Location of concern premises is really of import. Set specific marks for your concern, carry out market research, employ qualified forces and set them in place harmonizing to their accomplishments. Know and understand bing accomplishments needed and attend refresher classs on concern direction accomplishments.


Fiscal direction should be emphasized every bit good as networking with other people with similar concerns and maintaining records of workers to assist in rating of the public presentation.


Merge with others that have similar concerns, negotiate favorable recognition purchases from the provider, beginning low-cost loans from fiscal establishments and negotiate progress payments from the clients.

Good Record Keeping

Fiscal records should be prioritised and a record of books of histories on a day-to-day, hebdomadal, monthly and one-year footing should be established.


Prepare hard currency flow prognosiss and budgets and fix a cost-benefit analysis. Lease equipment and other fiscal assets to better your hard currency flow, negotiate outstanding loans through payment processs and scale down operational costs.


Separate concern activities and household duties and expression for options beginnings of income to provide for the household ‘s basic demands.