Construction industry progressing with deals to transform sector

In a move that will see local construction companies further honour their agreements with government to ensure inclusivity for black contractors in the South African construction sector, the Competition Commission has recommended a number of merger deals to the Competition Tribunal for approval.

In October 2016, seven large listed construction companies made the commitment to either ensure that the equivalent of 25% of their yearly South African construction turnover is executed by black construction companies within seven years, or that more than 40% of their construction business is sold to black construction shareholders within the same timeframe.

The settlement agreement also provides for the establishment of a trust fund aimed at developing and enhancing transformation in the construction industry. The commission has imposed conditions to limit the flow of competitively sensitive information within the trust fund.

To meet its commitments under the agreement with the government, Raubex plans to form an economic alliance with small- to medium-sized companies Umso Construction and Enza Construction, which are owned, managed and controlled by “previously disadvantaged persons”.

Raubex’s alliance with the two emerging contractors is aimed at improving competitiveness, innovation and entrepreneurial opportunities in the construction industry.

The alliance will be active for between seven and ten years, during which Raubex, which has a broad spectrum of expertise in all sectors of the construction industry, will have to meet certain targets.

In addition, the commission has also imposed conditions to regulate the effectiveness of the termination of the alliance.

The commission has also recommended the tribunal approve a merger deal between JSE-listed Stefanutti Stocks, TN Molefe Construction and Axsys Group, whereby the parties would form an economic alliance.

TN Molefe is a wholly-owned subsidiary of the MC Share Trust, controlled by historically disadvantaged persons (HDPs). The company specialises in civil engineering works.

Axsys is controlled by HDPs and undertakes structural, civils, roads, earthworks and building construction projects as well as petrochemicals, mining, water and heavy industry sectors.

Lastly, the commission has recommended that the proposed merger be approved whereby Wilson Bayley Holmes-Ovcon Construction (WBHO) will form an economic alliance with Edwin Construction, Fikile Construction and Motheo Construction.

In November 2016, WBHO signed development agreements with the three black-owned contractors as part of the deal.

Under the terms of these agreements, Motheo, Fikile and Edwin will run their businesses independently of each other, with WBHO assisting financially; administratively, and operationally.

About R4-billion a year had to be executed by the three contractors, which, in turn, would increase their turnovers substantially.

The Motheo Construction Group is a leading provider of social housing in the country.

Fikile Construction is one of the largest black woman-owned and -managed construction companies in the country.

Edwin Construction is a black-owned and -managed multidisciplinary construction company active in the industry since 1997, with expertise in constructing roads and highways, dams and earthworks, bridges and interchanges.