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Capabilities
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Construction SADC
* R millions Background The operations that form the construction cluster in the SADC region stem from the original Murray & Stewart in the Western Cape dating back to 1902, its initial expansion into the Transvaal gold fields through Roberts Construction in the 1930s and into the rest of Africa from the 1940s, as well as a number of key acquisitions, including Gillis Mason in the 1980s and Concor in 2006. The cumulative and collective pedigree of this group of businesses is formidable, covering almost every aspect of economic and infrastructural development in South Africa and the SADC region over the past century. The Group has undertaken contracts on every continent going back into the 1950s and by the late 1970s had developed a significant global presence, well ahead of its peers anywhere in the world. Although there were many periods of low economic activity during this time, it was the increasing political isolation of South Africa from 1976 that brought about a 25 year deterioration in fixed capital formation and severe construction industry decline that ended only in 2002. In recent decades, global competitive forces have driven consolidation in the sector and large international construction groups have emerged with significant capacity to engage ever increasing scale, risk and complexity in major projects. Market environment The South African government is engaged in a significant capital expansion program, including new power generation capacity, road, rail and pipeline infrastructure, water and sanitation facilities, and others. A combination of capacity constraint and limited access to finance continues to delay the process. The impact of the global financial crisis has been felt most severely in commercial and residential building and the year under review was characterised by a limited supply of large projects and erosion of margins on smaller projects due to competitive forces. The Western Cape and KwaZulu Natal operations were particularly hard hit as anticipated workloads failed to materialise resulting in increased holding costs with a redeployment of people to the Group’s major infrastructure projects in Gauteng. The KwaZulu Natal operation has been closed and the company will only participate with selected clients when the opportunity arises. There has been a cautious return by private investors to industrial and mining markets but many planned capital expansion programs have remained on hold. The regional operations in Namibia and Botswana benefited from ongoing demand in the commercial and retail building and civil infrastructure markets and resurgence in the Botswana resources economy. In recent years, Murray & Roberts Construction and Concor have sought to combine their significant capacity to tender for large building and civil engineering projects in the industrial market. A natural progression of this trend will be to extend collaboration between the businesses to the sharing of certain services and pooling of capacity in building and civil engineering, thereby eliminating duplication, optimising the use of plant and other resources for greater efficiency and strengthening the focus of the individual businesses. This process will gain momentum in the new financial year and will be accompanied by a strong focus on building engineering capacity in the Group’s construction businesses, and further developing the synergies that exist between them.
Leadership Keith Smith resigned as executive chairman of the Construction SADC cluster with effect from 30 June 2010 but will remain chairman of the Medupi Civils Joint Venture and a director of Murray & Roberts Construction for the foreseeable future. Since his appointment in 2006 Keith has transformed the constituent businesses, integrated Concor into the Group and facilitated the resourcing and completion of a number of 2010 FIFA World Cup related projects, such as Gautrain and Green Point Stadium. Trevor Fowler joined the Group in September 2009 and succeeded Keith as executive chairman of the Construction SADC cluster on 1 July 2010. Trevor is leading various initiatives to transform the businesses, expand their engagement into the rest of Africa and restructure the cluster to position it for future growth in the economically challenged South African fixed investment and construction market. Concor managing director Cobus Bester has played an important role in streamlining the Construction SADC cluster through the transfer of people, assets and market responsibility between the various operations. Murray & Roberts Construction The Murray & Roberts Construction market strategy is to target selected and repeat clients and focus on major projects in the commercial, retail, hospitality and airport facilities sectors. The business has established systems and processes to ensure project delivery, human capital retention and recruitment, and customer relationship management. It is a major participant in all forms of public private partnership initiatives. Building Piet Martins has executive responsibility for building operations in South Africa. Building projects were well executed during the year and new work was secured in a competitive environment. The R1 billion ABSA Towers West project is well advanced and has benefited from value engineering in the aftermath of the global financial crisis. The project commenced in 2008 and is on track for final completion in 2010. Work on the R200 million Protea Place office facility in Sandton is also due for completion later in 2010. Shopping facilities at Melrose Arch precinct were successfully completed and additional work was secured during the year. A number of other new projects were awarded, including a new head office for SANRAL in Midrand and expansions to the Adcock Ingram facility in Aeroton. The Galleria Retail Centre and Holiday Express contracts in Durban were both completed under difficult circumstances in the year. Western Cape Mark Johnston was appointed managing director of Murray & Roberts Western Cape from 1 March 2010. He was previously managing director of Murray & Roberts Namibia which recorded significant growth during his tenure. Andrew Fanton was project director of Green Point Stadium for the 2010 FIFA World Cup which represented a significant achievement by the Western Cape operation. About 65% of the operation’s resources were allocated to the project and it was handed over to the City of Cape Town on 21 December 2009, two months ahead of the original completion date. The stadium successfully hosted nine World Cup matches, including a semi-final. Approximately 10 500 workers were employed on the site during construction and almost 1 200 artisans received training from the contractors. The five star Taj Hotel and four star Crystal Towers Hotel in Cape Town were both completed in time for the World Cup. The anticipated award of the Old Mutual Portside project did not materialise and the Western Cape operation incurred significant holding costs in preparation for the project for which it had been selected as preferred bidder in November 2008. Civils & Infrastructure Anton Botha is responsible for the civil and infrastructure operations which target the industrial and mining, minerals beneficiation, power generation, water and effluent, and petrochemical markets. A number of projects were successfully completed during the year. The market has, however, become more competitive with less work available. Projects include a rock crusher building for Foskor and mine development work at the Amandelbult No. 4 shaft for Anglo Platinum, a klinker silo for Afrisam and civils works at a number of mining projects. New projects have been secured in the mining and sewerage treatment sectors. Murray & Roberts Construction and Concor lead a joint venture for civil construction work on the 4,8 GW Medupi dry-cooled coal-fired power station. There have been severe delays in access to the works and provision of site services, which were partially overcome by an acceleration program instructed by Eskom. The boiler foundation for Unit 6 of the project was successfully handed over to Eskom on 18 December 2009 to allow for accelerated commencement of boiler and turbine erection. The works were about 47% complete at 30 June 2010. Murray & Roberts Construction also plays a key role in the Gautrain infrastructure works. In cooperation with Gauteng Province, phase 1 completion (OCD 1) was achieved on 8 June 2010, ahead of the contracted schedule and in time for the 2010 FIFA World Cup. This required significant acceleration, particularly at Sandton Station where the company has a discreet contract to build the structure and station finishes, excluding all mechanical and electrical systems. Phase 2 of the system (OCD 2) from Park Station to Hatfield via Pretoria Station is being constructed concurrently. This section has experienced considerable challenges with dolomites in the Tshwane area.
Murray & Roberts Botswana Murray & Roberts Botswana has been buoyed by the award of new contracts in the commercial and retail building and civil infrastructure markets as the Botswana economy rebounded after the collapse of mining activity in 2009. Work continued on non-mining projects in Gaborone and Francistown and new awards included work on the airport road project in Gaborone, Debswana’s Jwaneng Cut 8 diamond mine and a clinic in Zambia. Murray & Roberts Namibia Murray & Roberts Namibia again delivered consistent quality workmanship and high levels of productivity that have contributed to its significant growth in recent years. The company is a major participant in the private sector building and infrastructure markets and made good progress on various civil engineering works for electrification projects and the Trekkopje seawater intake pipeline in partnership with Murray & Roberts Marine. Work has commenced on a medical centre for the University of Namibia and a new university in Windhoek. Murray & Roberts established a concrete readymix company, Dynamic Concrete Solutions in July 2009, strengthening its service to the Namibian market and reducing dependence on the current single supplier. Murray & Roberts Zimbabwe The Group holds 46,9% of the shares in Harare listed associate company Murray & Roberts (Zimbabwe) Limited. The company is being restructured to reposition its business model for anticipated future opportunities in the infrastructure, commercial and mining sectors. However, there will be no recapitalisation pending clarity on the country’s future stability and indigenisation legislation. Concor Concor is a major general contractor in South Africa’s construction sector and participates in the building, civil engineering, roads & earthworks, structural and mechanical and opencast mining markets. Building Brad Wantenaar is responsible for the building operation which focuses primarily on the Gauteng region. The R1,3 billion public private partnership head office complex for the Department of International Relations and Cooperation in Tshwane was completed in September 2009 (the project received the SAPOA 2010 Award). The Midrand and Hatfield stations for Gautrain were completed in the year, as well as a new laboratory for Sasol. However, a shortage of quality new work led to a small loss for the year. This business will be consolidated into the Murray & Roberts Construction building division in the new financial year.
Civils Graham Browne is responsible for the civils operation which produced strong revenue and profit growth in the year, including its share of the Medupi power station civils project. Concor Civils was awarded a R1 billion joint venture contract to design and construct two chimney structures and nine coal and fly-ash silos for Medupi. Work on the chimney structures has progressed to plan with the three-year project due for completion in 2012. A similar contract has since been awarded on the Kusile project. A R140 million crusher contract was completed for Assmang and a railway culvert for Transnet. Additional work was completed on the Ngqura container terminal. Roads & Earthworks Frik Venter is responsible for this operation, which is the principle contributor to the company, focused primarily on the construction of major road and rail projects. Work undertaken during the year included earthworks for dam construction and mining infrastructure. The R1,2 billion joint venture contract to build the Bramhoek and Bedford dams that will supply the Ingula hydroelectric pump storage scheme for Eskom proceeded well with the Bedford dam due for impoundment in October 2010 and both due for completion by early 2011. Concor has preferred contractor status on major mining and resource beneficiation programs for Kumba Resources and BKM Assmang in the Northern Cape which have offered a number of opportunities over an extended period. A number of new mining infrastructure and railway projects were secured in this area during the year. Bulk earthworks for Gautrain were completed early in the year and the upgrade of the N2 highway in an environmentally sensitive area of the Tsitsikamma forest at Storms River Bridge was completed ahead of schedule. Work has commenced on the R1,2 billion Trekkopje uranium mining contract in Namibia.
Opencast mining The opencast mining division is involved with two significant projects. The R1,2 billion four year contract to deepen three pits for Lonmin was awarded in November 2009, with monthly platinum production of 80 000 tonnes. A R100 million Bulk Sample involving the removal of 40 000 tonnes of coal for the Sasol 4 Project Maphutu has been completed. Engineering Jean Charoux is responsible for this operation which provides structural erection and mechanical engineering services to the mining sector, where it is a preferred contractor to many clients. A satisfactory performance in a relatively quiet year saw completion of the Douglas Middelburg Optimisation (DMO) plant for BHP Billiton, a sugar mill contract in Mozambique and two petrochemical tanks. A number of budgets and feasibility studies were completed for clients on projects that have since been released for tender. The business anticipates future growth from medium-sized contracts in the petrochemical sector.
Tolcon Traffic volumes through the various road systems managed by the Tolcon group of companies (Tolcon) remained flat throughout the year. Tolcon operates the entire N3 toll route from Heidelberg in Gauteng to Cedara in KwaZulu Natal, including the Marianhill Toll Plaza; the N2 South Coast toll road; the Huguenot Tunnel; the Cape Point funicular and retail centres; Chapman’s Peak Drive; and has a 33% shareholding in the operation of the N1/N4 Bakwena Platinum highway. The company was recently awarded the N17 operations and maintenance contract and submitted a new tender for the Huguenot Tunnel operations contract. Tolcon is participating in the tenders for N1/N2 Winelands and R300 toll projects in the Cape as well as the N2 Wild Coast project. It has submitted proposals for the Intelligent Transport Systems (ITS) tender. Tolcon has upgraded its internal training capability and implemented new initiatives to uplift staff capabilities and strengthen its performance. An employee recognition program called Personal Responsibility in Delivering Excellence (PRIDE) was introduced to strengthen customer service and productivity, and reward exceptional performance. Tolcon managing director Judy Van Es is chairperson of Bombela Operating Company (BOC) in which the Group has a 24% share. BOC will operate ten Gautrain stations on full commissioning of the system, the bus feeder system (125 buses), the automatic fare collection system, the central control system and the maintenance of all facilities, including buildings, tracks, bridges, trains and buses. Sustainability Murray & Roberts Construction has led a comprehensive process of education, training and development and has made significant strides in the re-establishment of an internal skills base. About R37 million was spent on training during the year, including study assistance for staff members, 55 bursary students, nine graduates on the graduate development program and 59 executives, managers and specialists undergoing management development. More than 120 junior supervisors, 240 learners, 240 apprentices, 60 skilled workers and 75 operators received training and there were more than 23 100 skills training interventions. The Elandsfontein training facility is accredited with the Construction Education & Training Authority (CETA) and is also a registered artisan Trade Test Centre and Further Education & Training (FET) College. It is recognised by CETA as a “centre of excellence”. This successful skills development model will be expanded to group operations in Namibia and Botswana to support longer term growth in these regional markets. The company also spearheads the Group’s involvement in an industry initiative to develop capacity in the Department of Higher Education to accelerate the development of construction skills at FET Colleges. Concor has its own skills development and retention program which dovetails with the Murray & Roberts and industry initiatives. This is a key element of its strategy to create opportunities for growth and advancement. A Concrete Centre of Excellence established by the Group in January 2010 with a mandate to raise the level of construction technology across the Group achieved an estimated saving of R43 million by the end of the financial year. Murray & Roberts Construction regrettably suffered three fatalities (2009: two) at the Sandton Station, ABSA Towers and Medupi projects but recorded an improved lost time injury frequency rate (LTIFR), excluding Gautrain, of 1,2 (2009: 1,3). Plans and tactics to achieve zero harm include the STOP.THINK campaign to improve safety awareness. A new initiative to train and accredit all foremen as competent supervisors has been developed, and implementation has commenced. Health and safety standards for the Medupi project remain world class with a LTIFR of 0,8 per million hours worked over 13 million hours completed. Concor suffered no fatalities (2009: three) and achieved a LTIFR of 1,2 (2009: 1,0). The company has a strong commitment to a safe work environment and implements a range of measures to reinforce this commitment, including a weekly safety inspection on every work site by senior management. Concor operations achieved a total of 8,5 million LTI free hours and five million fatality free hours during the year.
A value-based organisational performance system, The Medupi Way, was implemented at the power station project to secure high levels of employee engagement, alignment and productivity. The Invocom System has been introduced to strengthen understanding, leadership and systems on the Medupi site. ASGISA trade skills programs and learnerships are progressing well and 310 employees undergoing skills development are scheduled to complete the program by December 2010. The challenge for the new financial year will be to obtain OHSAS 18001 and ISO 14001 certification. Murray & Roberts Construction received a level 4 BBBEE rating during the year. Plans to improve on this achievement include ongoing transformation of the race, gender and disability profile of the company’s management category and other employees. Such transformation utilises the company’s bursary, graduate and mentorship programs. The Medupi project’s target for BBBEE procurement was achieved before year end. Concor was rated a level 4 contributor on the dti scorecard and a level 5 contributor on the Construction Charter, and has targeted a level 4 in 2011. Tolcon was rated a level 3 BBBEE contributor and has BEE partnerships with the Lehumo Women’s Investment Trust, Marib Holdings, Thebe Tourism and The Strategic Partners Group. Prospects Construction SADC, excluding Concor, ended the 2010 financial year with an order book of R3,5 billion (2009: R5,2 billion), which demonstrates the impact of the decline in the South African construction economy. The company is targeting municipal infrastructure projects, public private partnerships, and mining and power infrastructure programs in South Africa, Botswana and Namibia. The pipeline of construction work associated with the Eskom power station build program indicates 20 years of future work in this market. Concor ended the 2010 year with an order book of R3,9 billion (2009: R3,4 billion). The company is likely to continue benefiting from its preferred status with many of its major clients in the power generation, railway and mining sectors.
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