Small and medium contractors are an important sector of any construction economy. The need for efficient small and medium contractors is well documented and cannot be over-emphasized. They are vital in their contribution to employment creation and value re orientation. However their in process operations are not well understood and have rarely been addressed. The aim of this report was therefore to establish a base level of understanding of the operational core face of small and medium contractors. The research done revealed that the challenges that these contractors are faced with are lack of finance, training and business skills and limited skills Construction Information Technology. The findings make an invaluable contribution to the research for solutions to the problems faced by these contractors. These contractors continue to experience poor growth and competitiveness. The recommendations include the development of training programmes in business management, introduction of sector specific financing programmes and the provision of appropriate regulatory and legislative framework. By establishing the core issues affecting the operations of these contractors in the construction industry, this research has contributed to the enhancement of the understanding of this elusive subject.
The construction industry, by nature, has many peculiar problems. The construction industry is affected by many problems including mismanagement, skills shortage, corruption, lack of technology, inflexible credit terms, late payments to contractors and difficulties in accessing finance. In addition dissatisfied clients have been complaining about the under-performance and shoddy workmanship, especially that of the small and medium contractors.
Under achievement is causing growing dissatisfaction among industry clients in both private and public sector. Projects have largely not been delivered on time, budget and expected quality standards. In short construction too often fails to meet the needs of modern business and impacts on their competitiveness in international markets and rarely provides the best value. Construction must improve its performance and achieve its objective and targets in terms predictability, cost, time and quality.
It is therefore important for construction to take measures to improve performance. These contractors must carefully chronicle lessons learned from their past projects. Such undertakings must be aimed at acquiring vital lessons that have immediate and future implications. The concept of close out review which is aimed at acquiring vital lessons influencing current and subsequent project success is hardly new. In fact, Soibelman, Liu, Kirby (2011) suggest that the construction industry should formalise project process review procedures. Such process review instruments would aim at addressing the under-performance that continues to undermine current and future small and medium contractorâ€™s projects.
Statement of the problem
Small and Medium contractors face a host of constraints and challenges.
Hardly a week passes without an article in the newspapers highlighting the shortfalls of Small and Medium contractors work. This is largely blamed on the many limitations these contractors are facing. Many citizens have condemned some of the work carried out by these Contractors.
Importance of the study
It is generally accepted that the growth of a country is measured by the advances in its infrastructure. The construction industry is therefore a vital component in the development of every nation. SMME contractors in the construction industry have a direct impact on skilled and unskilled employment. It is therefore important that constraints contractors face are identified and analysed to ensure that unemployment is reduced to acceptable levels and also to ensure that structures erected are worth their value for money.
Small and Medium contractors lack training.
Training is a very important aspect of any business in order for a firm to succeed. The lack of well trained personnel can be detrimental to the success of the firm. CIDB (2008b) states that there is an indisputable link between the quality of projects delivered by contractors and skills. The board believes that formal education and skills development is the key to a better construction industry in South Africa.
Small and Medium contractors lack access to finance.
Capital is a major problem facing Small and Medium. The difficulties that Small and Medium contractors have in attracting finance; strongly affect the performance of their work. They lead to a variety of sub-optimal situations where construction operators delay construction, work with the wrong type of equipment and sometimes pull out because of sudden financial problems.
Small and Medium contractors lack business management skills.
Management expertise is claimed to be one of the most scarce resource in the construction industry. The lack of managerial know-how places significant constraints on Small and Medium contractorâ€™s development and growth.
Small and Medium contractors lack information technology skills.
Many commentators and researchers have taunted the arrival of Information Communication Technology (ICT) as a way forward to expedite infrastructure development. However, various researchers have concluded that the construction industry is lagging far behind other industries in employing ICT as a major catalyst for improving productivity and job creation (Sunday Times, 2012)
There are many barriers to the development and growth of SMME contractors.
Tax and labour; regulations
Choice of technology;
Lack of collateral; and
Keen competition for limited opportunities and unsteady supply of work
Conclusion and Recommendations
It is clear from this report that there are many constraints and challenges
facing Small and Medium Contractors. Many researchers have attempted to highlight them. This report shows that the challenges range from skills shortage, lack of legislation to support Small and medium contractors, financing problems, lack of equipment, late payments, high cost of
capital, and projects not being completed on time.
The following conclusions can be made with regard to the need for training.
The need for training in financial management should be a priority;
In summary it can be concluded that training of Small and Medium contractors is a necessity to ensure sustainable business enterprises.
The following conclusion can be made with regards of financial problems.
The main problem is inflexible credit terms from banks. In summary, it can be concluded that Small and Medium contractors face financing problems. This is mostly due to lack of collateral. This problem must be solved as it deters growth and development.
The following conclusions can be made regarding business skills:
Site management is one of the major problems, it is vital to address the problem as; and
Other aspects related to business management skills are a great concern, with cash-flow management skills being one of them. In summary, it can be inferred that most Small and Medium contractors lack business management skills.
Conclusion and recommendations cont..
It is clear that the construction industry in South Africa needs to address the challenges and constraints they are facing. I recommend well structured Small and Medium contractor development programmes. Given the necessary support from stakeholders, programmes and models could make remarkable difference in easing the plight of these contractors, as well as that of the construction industry in South Africa.
This report reveals that there is a tremendous need for training in the South African construction industry. Added to this, the report highlights strongly the lack of business management skills. It further recognises the financing constraints and challenges Small and Medium contractors are facing. Small and Medium contractors conduct their business in challenges in the construction industry:
The construction industry stakeholders need to urgently implement supportive legislation to create an enabling environment for these contractors to grow in the construction market.
Contractor development programmes and models should be implemented urgently to develop a culture of continuous improvement. Education should contribute to a culture of learning, knowledge creation and knowledge sharing.
South Africa should embark on strategic programmes to promote the development of skills in areas of management, technical, book-keeping, supervisory, estimating and tendering skills to enable entrepreneurs run their firms profitably and in a sustainable manner. This means that Small and Medium contractors and the contractor development programmes should be
carefully integrated into a streamlined effort designed to build their capacity to grow.
Programmes for developing Small and Medium contractors should be implemented with a clear and supportive policy framework which encourages co-operation through joint ventures, partnering and subcontracting which encourages exploitation between contractors of different sizes.
Conclusion and recommendations continued
The South African Government should be putting aside money every financial year to lend Small and Medium contractors once a project has been awarded to the contractors without requiring collateral but maybe a form of reasonable insurance must be requested from Small and Medium contractors.