with Graham Pirie, CEO, Consulting Engineers South Africa (CESA)
Last December saw the introduction of the Public Procurement Policy Framework Act (PPPFA), the aim of which is to use public sector procurement to support the reindustrialization of the domestic economy in line with the New Growth Path and the Industrial Policy Action Plan. In your view, is this a step in the right direction?
The new PPPFA brings state owned enterprises into the charter processes. It compels the client entities to use the Construction Industry Charter processes, creating a uniform approach for our close to 500 member firms. The PPPFA also creates certainty, which is exactly what the industry needs from the government: we can require clients in the public sector to use the charter.
Problematically, on the same day that the PPPFA regulations were promulgated, certain state-owned entities were exempted. CESA is making a big issue out of this: it took us six years to design this charter, and why go through all this trouble to then exempt theseentities ? It creates trouble in the market as each entity can have its own approaches to empowerment. We hope that the public sector will be receptive to our criticism.
How receptive have they been so far?
So far we have written letters and we have talked about it in the press. We have had queries from government asking for clarity; I believe a lot of government departments have been unaware of the issue. We are now waiting for a decision from the government on the definitive direction for this issue.
We are working on next steps to be taken. The Ministry of Finance provided the exemption, so that is where we are focusing our attention.
The number of mergers and acquisitions has increased while there has been an increase in the presence of overseas firms. How does this affect the competitive landscape in the sector?
In the aftermath of the World Cup, competition has become more challenging. Less for consulting engineering firms than for builders and contractors however. Their confidence index went down quite seriously, while ours stayed quite neutral, which can actually be interpreted as a good sign for the industry. It means that at the design and planning stage, something is happening upstream, which will percolate down to the builders and contractors.
Having said that, 60 percent of our work comes from the public sector and a major part of that in turn comes from local government. Our big issue at the moment is the capability of local and provincial governments to deliver infrastructure. Increasingly the clients have become more uninformed and started to lack understanding on how to procure from our sector. It is not a question of money, the Minister of Finance has acknowledged that, but there has been an arrest in the roll out of infrastructure, an issue which we need to tackle urgently. It is not just in the commercial interest of our members, but for the success of South Africa Pty Ltd that we need to deliver that infrastructure: it is the foundation on which the private sector grows, it is important for job creation and for poverty alleviation, it is important to become a competitive nation in the global sense. Everybody agrees that it has to be done.
We have a well resourced private sector but an under-resourced public sector with a shortage of technical, managerial and leadership capabilities. We need to partner these two through innovative procurement models to enable the private sector to assist in recreating knowledgeable and informed clients. That way we can create a constructive environment that enables the client to deal with us and to roll out that infrastructure.
Therefore we are looking at various forms of streamlined PPPs and framework agreements. The infrastructure has to be delivered in a way that addresses the social needs of society as well, for instance by growing small companies and BEE entities.
How difficult is it to bring private-public partnerships to life within the South African context?
We need to address the trust issue. The public sector needs to engage more with the private sector, and we need to build a climate of trust for that to happen. We are putting a lot of effort in engaging with our clients to create awareness on suitable procurement models and to build and sustain a trusted relationship. The situation has not deteriorated, but it is not yet where it should be.
The reason for that question is that African countries are falling on Transparency International’s ranking, and this includes South Africa, although it still tops the list for Africa. Do you see an increase of bureaucratic red tape?
There are a number of issues here. What sets South Africa apart of the rest of Africa is its homegrown infrastructure. The country is not held hostage to overseas multinationals. In many senses we have a first world infrastructure platform. We of course need to maintain it, and we are not doing such a good job at that.
Corruption is a worldwide problem, particularly in the construction industry, and so it is in South Africa. Working towards an ethical means of doing business is a major strategic issue for CESA. We require two things from our members: firstly a Quality Management System and secondly a Business Integrity System. Together with the Construction Industry Development Board (CIDB) we put an Integrity Pact in place, combining resources and fully using their leverage as a government institution. The CIDB is part of the construction industry and can require the client, the contractor, and the consultant to sign the Integrity Pact, by which they show the intention to do business in an ethical manner.
Of course pacts, documents and agreements only work if we do talk openly about the issue. The CESA theme for 2012 is “Consulting Engineers: Unquestionably Ethical”. We are working hard to make the employees in our member companies aware of their ethical balance and ensure that the ethics are strong in their hearts.
The World Cup was a magnificent performance for the country as a whole and of its engineers specifically. How did it change the way the world looks at South Africa?
I think there was doubt whether we could do it, but South Africans are incredibly innovative and flexible. As a nation we can make things happen, and we showed that. The rest of the world might have been surprised, but we were not.
South African engineers are sought after worldwide. But with the global downturn we see experienced engineers returning to South Africa. We need to make sure that we keep the engine going and use unspent government budgets to create opportunities for these engineers, also because South Africa still has one of the lowest ratios of engineers to population in the world.
How can this shortage of engineers be tackled?
The Engineering Council has a key role to play in that. The Council developed a number of initiatives, such as their Ingenious program, to popularize the profession amongst the younger generation. The World Cup was a good support as well. People saw cranes on the horizon and perhaps realized that there is such a thing as engineering.
When looking at the GDP growth and growth in fixed capital formation over the years, there is a clear correlation with the supply side of skills. CESA’s role is to make sure that consulting engineers come on to the platform running, especially for new member firms that enter the market. The CESA School of Consulting Engineering has been a major success. From the 12th of March we will be launching the Certificate in Consulting Engineering in two levels: Business of Consulting Engineering and Management of Consulting Engineering. These are one year courses, similar to a MBA. It is the first program in the world oriented and embedded in consulting engineering.
We are one of 80 member organizations of FIDIC, the International Federation of Consulting Engineers. We have received great support from FIDIC to create this unique platform used for capacity building in South Africa. We would like it to become an African platform as well and are opento any requests.
CESA membership has, over the years, grown from 30 individual members in 1952 to over 480 firms in 2011. How has this changed the impact that the association has today?
Our target in 2011 was 500 member firms and 22000 staff, with a combined turnover of 20 billion rand. Only due to a number of mergers and acquisitions we are at 482 member firms at the moment. But all the top players are part of our organization and our members combined hold 80-90 percent of the market.
As an organization, we are proud to be ISO 9001:2008 accredited, as one of the very few in the FIDIC family are.
Furthermore, we set up the Build Environment Professions Export Council (BEPEC), which deals with the export of professional services, as opposed to goods. This means that we now have architects, project managers and quality surveyors on board.
We are members of the Green Building Council as well, and we are currently investigating the initiation of a Green Infrastructure Council – modeled on those in Australia and the United States, as green sustainable energy is very important to us. We feel that green issues need to be coordinated, and the Council can play an important role in that.
Recently Naren Bhojaram was appointed as the new President of CESA. A new President, new ideas?
Naren Bhojaram’s main topic is “Consulting Engineers: Unquestionably Ethical”. Unless the ethics are right, the system becomes porous, and that would not be to the benefit of society. As an organization, our focus has been and will be on branding, visibility, procurement, transformation and integrity.
Would you have a final message?
We have a lot to be proud of in South Africa when it comes to consulting engineering. CESA as the representative of the country’s consulting engineers, likes to see itself as a center of excellence, the one-stop shop, for people looking to do business with consulting engineers in South Africa. Come and speak to us about the environment, the political landscape, the economy.
Africa is happening and offers amazing opportunities. Internal connectivity has been a major obstacle: the absence of internal connectivity prevented continental business opportunities from performing optimally . Finally, we see this changing. Governance issues are coming to the forefront, and democracy is becoming a word that most people in Africa understand. The New Partnership for Africa’s Development (NEPAD) is stitching the African continent back together, and the more that happens, the better the continent will be able to fulfill its massive potential.
What we witnessed in the Far East will happen in Africa in the coming years, and South Africa is incredibly well placed to capitalize on this, not only for commercial gains but also because we believe we can make a difference in the lives of people on the continent.