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Bureaucracy, lags in approval are killing the construction industry, say developers

17th May 2019 BY: Kim Cloete
Creamer Media Correspondent

Bureaucratic delays in getting property developments under way have badly damaged the development and construction industry, prompting a crisis, industry experts have outlined at the Western Cape Property Development Forum (WCPDF) conference, in Cape Town.

They have also lamented a "shocking" decline in spending in the City of Cape Town’s capital budget.

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Several speakers listed political interference, confusion in procurement and regulatory approval processes and inconsistencies and constant delays as major obstacles. They said these have cost jobs and undermined the construction industry.  

Academics from the University of Cape Town’s (UCT's) Nedbank Urban Real Estate Research Unit (Ureru) and industry members representing the WCPDF have joined forces to produce a Property Development Process Model in an effort to determine why the development process now takes so long. The objective is to find solutions to shorten the unwieldy timeframe.

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The model was revealed by Rob McGaffin, a senior lecturer with UCT’s Department of Construction Economics and Management, which represented Ureru at the WCPDF conference.

The model displays an indicative graphic timeline of the property development process in Cape Town, and illustrates the complexities of the process from start to finish, from the initial three-year project initiation phase to obtaining land rights, and then through procurement, construction and ultimately project handover.

It also enables users of the model to access up-to-date documentation and information on legislation governing the industry.

McGaffin said the model provided a detailed breakdown of why developments are now taking between four and eight years to complete. 

“How long a process should take and the reality of how long it actually takes, are worlds apart. This model substantiates what many developers have been saying for some time – that there is a crisis that is leading to the current destruction of the development and construction industries.”

The process model was originally conceptualised by project management firm MDA and its consultants Jedd Grimbeek and Johan Slabbert, and Alwyn Laubscher & Associates’ current CEO Deon van Zyl in 2014.

“The crisis in the development and construction industry is really only now hitting the media headlines, because companies as large as Group Five are closing their doors. But members within our industries have been warning of this crisis for years, and it is one driven largely by politics and bureaucratic red tape,” said Van Zyl.

Companies on the ground also spoke out about how long it takes to award a tender.

Stellenbosch University School of Public Leadership senior extraordinary lecturer Len Mortimer called for a change in legislation.  

“There are 80 legal instruments applicable to supply chain management. To comply with each one of them, how is that possible? The legal environment needs to change.”

The tender process was raised as one of the key challenges, with speakers saying it took up to six months for tender approvals. On top on this, irregularities could lead to tenders being abandoned.

“We cannot have a situation where people put money into a tender and somehow it is abandoned because of a technical irregularity somewhere down the line.”

Power Developments MD Stefan Bothma spoke from the company's perspective, saying companies had several frustrations.  

“We are concerned that tender rules are changed after close, as well as the issuing of addendums during the tender. In the City of Cape Town, we must go from official to official and it takes longer and longer.” Drawn-out procedures also cost the taxpayer. “The taxpayer is milked unnecessarily,” he added.

Tafani Quantity Surveyors director Chris Steffen said he had sent a survey to architects, engineers, quantity surveyors and other professionals about their experience with the City of Cape Town. He received 101 responses. Many said tenders were not worth submitting bids for, as the process was too onerous.

“The professions don't have a problem with tendering, but the current methodology needs to be overhauled and reviewed so that it is a fair system that works well,” he said.

City of Cape Town head of tenders and contracts Fabian Sepkins said he had noted the amount of challenges by the industry and developers, as well as the hurdles they face.

“I will take this back to my organisation and see what kind of approaches we can take in having more engagements with the industry.” He proposed the possibility of creating a "war room" to deal with the challenges.

“It is the city’s mandate to have ease of business and our responsibility to create an environment [conducive to creating] jobs.”

Some 24 000 vendors of all kinds are registered on the City of Cape Town’s database. The city spends R14-billion a year on procurement.

“The reality on the ground is that the construction sector has failed. We have one company after another folding and we have hit the wall,” said Grimbeek.

“As the WCPDF, we are hearing from all the representative organisations that make up our membership base how the regulatory complexity and the lags in approval are killing the industry. Hundreds of thousands of construction jobs have already been lost, not to mention the investment that has gone elsewhere when willing investors do not get their projects past the first phase," said Grimbeek.

Speakers have also lamented underspending by the City of Cape Town on its capital budget by 27% in its previous financial year. This has had a huge effect on the construction industry.

Economist Brian Kantor said real spending on plant, property and equipment was less than half today than it was in 2009, taking into account inflation. 

EDITED BY: Creamer Media Reporter
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