Building industry pitfalls

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Some of the larger companies in the construction sector have taken a massive knock, with small businesses also starting to feel the effects.This comes as several prominent construction companies such as Group Five Construction and Omega Civils are going into business rescue and even liquidation – largely due to the country’s poor economic climate.For small businesses, however, administration irregularities and a lack of business confidence contributed to the difficult position they find themselves in.One such business is Port Elizabeth company Hashtag Aluminium which in 2018 was recognised as one of the standout businesses to be trained by the Volkswagen Business Support Centre in Uitenhage.Today, it is on the verge of closure. This is due to issues related to poor project administration as Hashtag was unlawfully appointed to manufacture aluminium windows and doors for the Mfesane Senior Secondary School development project in the Bay.The appointment had been made by a former employee of Mtawelanga MCC JV, the partnered contractor group for the school project, who has since been suspended.This employee was not authorised to appoint Hashtag.But under the assumption that the appointment was legitimate, Hashtag expanded its operations facility and capacity.It bought machinery worth R600,000 and trained 15 staff members – who have now had to be retrenched.“We are struggling to make ends meet,” Hashtag co-owner Samkelo Qokolwane said.“We were depending on this project to be our key source of income.”According to a project manager at Mtawelanga, Atang Moahloli, when it had been uncovered that the appointment was unlawful and nonprocedural, the company began the procurement of subcontractors from scratch.Moahloli said Mtawelanga MCC JV had asked Hashtag for a new quotation in an effort to salvage the situation.“They came in very high despite requests that they review their prices – at times we pleaded verbally with them.“The overall project was valued at R80m.“Hashtag’s quotation was valued at close to R1m [R939,295.00 exclusive of tax].[This would have meant a large section would have gone towards aluminium windows and doors.]“There is no way the project would have been sustainable.”Qokolwane said the internal inefficiencies of the project’s management had negatively impacted their business’s profitability.Co-owner of Mzingisi Construction, Azeez Davids, said for small businesses working in the Bay, retaining market share was a challenge because of the minimum requirements of development projects in both the public and private sectors.“How do they expect us to reach certain general building (GB) levels if we are not getting work.“GB generally speaks to your growth margins.“For example, a company with a GB level 1 makes an annual turnover of about R135,000.“We find that many of the jobs being advertised are jobs specifically aimed at a GB level 3,” he said.iBhayi Small Business Chamber vice-chair Gaynor Bronkhorst said the chamber noted excessive red tape and poor financial management as key factors hindering progress and growth for Bay SMMEs.“Several businesses in the construction sector sometimes have to wait up to six months to get payment from both government and big business.”

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