Entire value chain of construction projects needs to be managed to drive economic transformation

Entire value chain of construction projects needs to be managed to drive economic transformation

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By: Mpho Sibanyoni

The department of human settlements on Thursday threw the book at its provincial officials‚ saying they were not doing enough with public funds to drive economic transformation.

Value chain of construction projects needs to be managed to drive economic transformation.
Image by: Facebok/Department of Human Settlements

Human settlements director general Mbulelo Tshangana made the assertion during the Gauteng Infrastructure Funding Summit which took place at Gallagher Convention Centre in Midrand.

“In human settlements we all know that 60% to 70% of the development costs are associated with material supply.

“This means the biggest cost driver in any project is the acquisition of the material supply.

“But what we do as government is that we leave that 70% up to those developers to manage‚ which then means we are not the price-maker‚ we are the price-taker‚” said Tshangana.

He said the department has an annual budget of R32-billion‚ which he felt was not administered properly due to his subordinates failing to manage the entire value chain of construction projects.

Tshangana said many heads of department sourced material from companies that were not transformed.

“The developers and contractors you have appointed are price-makers but they are not obliged to source material from transformed suppliers because you don’t have that in your contract.

“Therefore you leave the material supply aspect of the business unattended to‚ you leave it untransformed‚ and you leave it to the developers and therefore they use the budget that you have to decide who they are going to source the material from‚” he said.

Tshangana said there were practical examples across the country where untransformed developers used money from the state to source material from untransformed material suppliers.

“What I would urge is that HOD and colleagues in the built environment space that when we manage development‚ let’s us look at the entire value chain of human settlements: the professional part of it‚ the construction part of it‚ the material supply of it.

“If you want to transform the industry you must look at the entire value chain‚” he said.

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