As this is my second report as CEO of BEPEC, I again wish to express my thanks and appreciation to the Board of Directors for the confidence shown and support provided to me during the past financial year. At the time of writing this report my current fixed term employment contract, which expires on 31 December 2015, is in the process of being re-negotiated, and to ensure continuity it is expected that it will be extended for at least another two years. This issue to be finalised in January 2016.

Strategic Issues

This is now the seventh full year of operation for the Built Environment Professions Export Council (BEPEC), during which it continued to operate in accordance with the strategic plan adopted in 2012. However, BEPEC members are not immune to negative impacts and volatilities of the global economy.

They have to operate in a dynamic environment and BEPEC is therefore compelled to constantly reposition in order to best serve its members. To this end it has become increasingly important and necessary to revisit and revise this strategic plan and value proposition to members. A follow-up strategic planning session was held on 10 September 2015, which resulted in the adoption of the following revised Vision and Strategic Objectives (SOs):

  • Vision: To be the enabling export platform for South African Built Environment expertise.
  • SO1: Increase revenues (membership) and Resources (team).
  • SO2: Strengthening relationships with the Department of Trade & Industry (dti) and other Government departments, ensuring alignment.
  • SO3: Build key strategic relationships in line with the North-South Corridor and PIDA.
  • SO4: Strengthening the BEPEC brand internally and externally.
  • SO5: Facilitate business opportunities for members.
  • SO6: Diversify the BEPEC membership base in terms of SME’s and black owned enterprises.

Goals and key activities have been developed for each of these strategic focus areas, which will integrated into reporting systems of the quarterly Directors’ meetings of BEPEC.

Trading Conditions

According to the CESA bi-annual survey of January 2015 to June 2015, global growth is now projected at 3,3 percent, marginally lower than in 2014, with a gradual increase in advanced economies and a slowdown expected in emerging and developing economies. In 2016 global growth is expected to strengthen to 3,8 percent.

Growth in advanced economies is projected to increase from 1,8 percent in 2014 to 2,1 percent in 2015 and 2,4 percent in 2016. Although growth in the US was dragged down by an unexpected weakness in North America, underlying drivers of investment remain intact. According to the IMF these are factors such as wage growth, labour market conditions, good financial conditions, lower fuel prices, and a strengthening housing market.

Growth in emerging market and developing economies is projected to slow from 4,6 percent in 2014 to 4,2 percent in 2015, reflecting the impact of lower commodity prices and tighter financial conditions. Growth is expected to accelerate to 4,7 percent by 2016.

The recent establishment of the BRICS Development Bank can be seen as a catalyst for infrastructure development. The purpose of the new BRICS Bank is to act as an alternative to Western Development Banks such as the IMF which is heavily relied on to fund developing economies. The BRICS economies account for 25,7 percent of world GDP, 42 percent of global population, and 17 percent of total trade.

The BRICS countries attract more than 18 percent of the global total of foreign investment, hold 40 percent of all foreign-exchange reserves, and account for 30 percent of total foreign holdings of US Treasury Bonds. BRICS consumption markets are worth more than $4 trillion, equivalent to those of the Eurozone. According to Goldman Sachs, about 85 percent of the world’s middle class will be living in BRICS and other developing countries by 2030.

However, the BRICS nations all face severe economic challenges. Brazil’s output is stagnating, it faces several corruption charges at the highest level, and their economy is in bad shape. Russia is in a recession owing mainly to sanctions. India is having issues with high levels of public debt as well as a drastically depreciating currency (as in SA). China’s economy is clearly slowing, and in South Africa growth is weak with supply-side constraints hitting the economy hard. Attention is already being turned away from the BRICS economies to economies such as Mexico, Indonesia, Nigeria, and Turkey.

The South African economy slowed to 1,3 percent during the first quarter of 2015. It still has very little underlying momentum, and considering the negative impact of the current energy supply constraints that had a more profound impact on the economy this year, economic growth in 2015 is likely to be on par (at best) compared to 2014. However, the National Development Plan (NDP) is in place and has established the development pillars for the economy.

Although implementation may seem to be slow, it provides a much needed plan and clearer direction for investment in the future and government’s priorities. It is crucial for credibility that government remains on the path that has been mapped out by the NDP so as not to further weaken domestic and foreign market sentiment.

In the meantime some economic constraints which will have to be overcome include energy constraints, current account and trade deficits which put pressure on government to cut spending or increase taxes, further downgrades by international credit ratings on the country and SOE’s which will impact on borrowing costs and limit international investment, poorly formulated policy amendments, and fraud & corruption which are reaching unmanageable levels.

New Export Council Model

Since the implementation of the new dti Export Council model in 2014, BEPEC has commenced with aligning its activities and programmes with the key objectives of the dti for Export Councils to grow exports and the exporter base. However, increased emphasis was also placed on the secondary objectives as stated in the previous report, and repeated below:

  • Making BEPEC more representative of exporters in its various sectors.
  • Growing the membership base of BEPEC to include more emerging exporters, specifically SME’s and black owned businesses.
  • Aligning BEPEC with government priority sectors.
  • Improving communication between export stakeholders, especially between the dti and BEPEC and its members.

To further give effect to the above and to regulate the strategic and operational relationship, BEPEC has signed a Memorandum of Association, as well as a Service Level Agreement with the dti. These are to be reviewed and updated on an annual basis.

BEPEC Value Proposition Initiatives

Definition (draft): To provide the enabling platform for member companies in the Built Environment wishing to export their professional services, by facilitating exposure and access, on an on-going basis, to strategic and relevant projects and project opportunities along the development corridors of Africa, as well as to the financing programmes of the major development and commercial funding institutions (DFI’s).

Market Access

Together with the dti and with renewed interest and focus, BEPEC is facilitating the establishment of a Multi-Stakeholder “Platform” for effective PPP collaboration on the accessing of project opportunities along the North-South Corridor. This will involve the updating of a BEPEC commissioned detailed study done in 2012 by an external service provider which identified specific project opportunities, especially with regard to exact projects status, participation potential, tender opportunities, funding arrangements, etc. along the North-South Corridor.

Opportunities also not limited to infrastructure only but also to resource-linked growth nodes that will require many commercial activities related to housing, hotels, property development, public sector building & construction, etc.

BEPEC continuously engages and interacts with the dti to provide inputs to the African Business Council initiative in respect of export strategies for companies providing professional services in the Built Environment.

During the year the South African Department of Trade and Industry and three Export Councils (BEPEC, ISF, & SAEEC) collaborated and acted as joint mission leaders for an Outward Selling Mission to Mozambique. The mission included visits to Tete and Maputo. The aim of this visit was to receive a broad based update on the future trends in project and export opportunities relating to infrastructure projects in Mozambique across a number of infrastructure sub-sectors.

Specific objectives of this Mission included: Early identification and engagement i.r.o. key opportunities and projects, understanding the timeframes of these opportunities and where these projects were in terms of their lifecycles, etc.

In further support of facilitating market access for its members, BEPEC, in partnership with Africa Project Access, hosted a number of “Show me the Projects” workshops. These were mostly attended by member companies of BEPEC, members of other Export Councils, Funding Agencies, and Project Service Providers. The workshops were mostly sector focussed and covered Water & Sanitation, Energy, Transportation, ICT, and Building & Construction infrastructure.

Funding Access

During February 2015 three Export Councils (BEPEC, ISF, & SAEEC), together with the dti, collaborated and acted as joint mission leaders for an Outward Selling Mission to the World Bank in Washington. The main aim of this visit was to expose participating member companies to developments and funding arrangements in respect of infrastructure projects in Africa, i.e. Transportation & Roads, Water & Sanitation, Power & regional networks, Telecommunications, ICT, and Community Development.

South African companies from these sectors regularly travel to African countries, especially Sub-Saharan countries and regions supported by the World Bank. The current low level of access to projects and project opportunities is related to the complexity of the Procurement Processes at the World Bank, from pre value-chain work like project identification, project preparation, feasibility appraisal, implementation, and supervision.

Frequent, researched, and well prepared visits to the World Bank will go a long way towards securing early South African involvement in projects on the African continent, which in turn will greatly contribute towards the dti stated objectives of growing the exporting capacity of South African companies, as well as growing the South African economy.

BEPEC also hosted a number of “Show me the Money” workshops at various locations in South Africa as a new and innovative way of exposing member companies to public and private development funding institutions, i.e. the dti’s Capital Projects Feasibility Programme (CPFP), Development Bank of Southern Africa, the IDC, World Bank (incl. IFC), AfDB, EIB, etc. These presentations were very well received.

Networking

BEPEC’s key strategy with regard to networking remains to provide support for the African Networks of the five Voluntary Associations which support the Built Environment Professions Export Council. Through its networking capability BEPEC also continuous to provide its members with access to its various stakeholder groupings, as follows:

    • Government/Agencies/Utilities:  DTI, Dirco, Other Departments, DBSA, IDC, AfDB, CIDB, commercial Banks, funding agencies, State-owned enterprises, etc.
    • International:  African countries (markets in Sub-Saharan Africa), regional bodies (SADC, ECOWAS, EAC), continental (Nepad, AU).
    • Export Councils: Engineering & technology erouping of export councils (ISF, SAEEC, SACEEC, STEASA, RRA), as well as other Export Councils.
    • Members:  Voluntary associations and their memberships (CESA, SAIA, ASAQS, ILASA, ACPM).Membership Survey

Membership survey

As was previously reported the mandate of the Export Councils has changed, and emphasis is now placed on transformation and export development at two levels: developing new exporters and increasing trade with Africa.

BEPEC has identified the need to understand emerging exporters in the Built Environment space so that the Council can develop a strategy to target and assist these companies to become members, in line with its new mandate. The membership survey proposal, previously only drawn up for current members, was then extended to include these changing dynamics.

BEPEC has applied for funding for these surveys under the dti Sector Specific Assistance Scheme (SSAS): Application for special project funding, and is currently awaiting approval or request for further amendments.

Early Intelligence on Projects

BEPEC has appointed an external service provider to monitor and unpick the websites of the major Development Funding Institutions so as to make relevant and practical early intelligence on project opportunities available to its members on an on-going basis.

In addition BEPEC has started liaising with the dti Foreign Economic Representative offices in certain selected and target countries in Africa, requesting continual updates of relevant country information as well as early intelligence on up-coming projects.

Engineering & Technology Grouping of Export Councils (ETGEC)

Originally BEPEC has played the leading role in the formation of the Engineering & Technology Grouping of Export Councils. The previously reported on informal and loose structure of this Grouping of Export Councils has now become more formalised to function as a strategic entity on its own, so that through the formation of relevant project and / or discipline clusters among the spread of their members, it can more effectively facilitate tendering for and participating in the larger development and commercial projects on the continent.

Through continual interaction with the dti the ETGEC also provides input to the African Business Council initiative in respect of export strategies for companies wishing to export Professional Services and Capital Goods.

Business Facilitation Agencies

Following on from the successful launch and operation of the Business Facilitation Centre in Tete, Mozambique in 2014, BEPEC aims to replicate this initiative and establish Business Facilitation Centres at relevant growth nodes along the North-South Corridor, providing member companies with access to projects information, a comprehensive range of administrative and secretarial services, storage facilities, etc.

Other On-going Initiatives

BEPEC provides a platform for discussion between the Private Sector and Government (dti) on policy development, which will affect the exporting of professional services and goods, as well as local industry in some instances.

BEPEC is planning to prepare a position paper for dti to fund BEPEC members for putting together bids on large infrastructure projects in Africa, and then to assist them onwards to be included on project shortlists.

BEPEC assists its members with the overcoming of trade barriers i.e. information on in-country professional registration, working requirements, permits, liaising with local governments and other industry bodies on contractual and legislative issues, financial regulations, medical requirements, etc.

Broadening of BEPEC Membership Base

In line with one of dti’s key objectives for export councils – that of increasing and diversifying the exporter base in terms of SME’s and Black Owned Enterprises, and approval obtained at the previous BEPEC Board of Directors meeting, BEPEC has commenced with the development of additional categories of membership to also accommodate companies which provide other disciplines of Built Environment related professional services, and which belong to their own respective Voluntary Associations or Umbrella Bodies, i.e. Land Surveyors, Logistics Companies, Town Planners, Contractors, etc. This initiative has also been included as Strategic Objective 6 in the new BEPEC Strategic Plan.

Also to be established is a realistic and equitable basis for the calculation of membership fees for all the approved new categories of membership.

BEPEC is currently in the process of identifying and establishing working relationships with all the institutes, VA’s, and other bodies from which future members can be sourced, i.e. SAFCEC, BBCBE, SABTACO, MBSA, Institute of Planners, etc. With regard to SAFCEC, BBCBE, and MBSA facilitation assistance is provided by the Construction Industry Development Board (CIDB).

Successes & Achievements

Extracts from correspondence received from Architectural member company:

  • The most important aspect of being a BEPEC member is that BEPEC can open doors no one else can. Members can access any of the South African Embassies or High Commissions across the world via BEPEC’s links with the DTI and DIRCO. This alone makes membership worthwhile.
  • The value of BEPEC initiated and led missions to especially the African Development Bank in Tunis, the World Bank in Washington, and to various African countries, cannot be underestimated and is definitely one of the main reasons why we are still members of BEPEC.
  • The frequent “Show me the Money” and “Show me the Projects” workshops arranged by BEPEC is the first step in getting to know the ins and outs of working outside our borders better.
  • As a practice that traditionally has done 60% of its work outside South Africa over the past 22 years, we know the pitfalls of doing so and strongly recommend membership of BEPEC to any company wishing to acquire professional appointments outside our borders.

BEPEC assistance provided to large Multi-disciplinary Consulting Engineering firm in Ghana, which resulted in highly relevant discussions and meetings which were necessary for the securing of appointments for professional services.

Fees earned by BEPEC member companies through participation in the dti CPFP programme, first the securing of grant funding from the dti for the conducting of the required project feasibility studies, and thereafter actual participation in some of these projects. Some examples listed below:

  • Tete Industrial Park – Mozambique
  • Water & Wastewater Master Plan – Zimbabwe
  • Logistics Activity Precinct – Namibia
  • Industrial & Logistics Park – Zambia
  • Port and Rail Linkages – Mozambique
  • Masindi Airport Project – Uganda
  • Development of 30000 houses – Ghana
  • Zim Parks Development – Zimbabwe
  • Musami Dam and Water Development project – Zimbabwe

International projects won through participating in BEPEC led missions, which resulted in the exporting of Professional Services.

Challenges Ahead

The main reason for members joining BEPEC is to gain a competitive advantage when attempting to export their professional services & capital goods into Africa and beyond. Hence BEPEC needs to remain very innovative by constantly creating new products and alliances which are attractive to its membership.

With stagnant growth in South Africa, BEPEC members see expansion into Africa as the next step and they expect BEPEC to lead the way in taking them to these markets.

To effectively address the expectations of its members BEPEC aims to improve its expertise in the following areas:

  • Market entry techniques
  • Identification of export opportunities
  • Gathering of market and early projects intelligence
  • Business leads generation

The creating of partnerships (clustering) by project promotors / sponsors with BEPEC member companies as well as those of the ETGEC to contribute business experience, skills, and knowledge when preparing business proposals and feasibility studies in order to access funding from the major DFI’s.
Current relevant opportunities which can be exploited and which will result in value-add delivery to BEPEC’s membership base, include the following:

  • Oil and Gas Sector
  • North-South Corridor transport infrastructure & industrial projects
  • Mining Sector
  • Agriculture & Agri-Processing Projects

Conclusion

As per the World Bank and African Development Bank approximately $ 93 billion is required annually, for the next 10 years, to address the infrastructure backlog in Africa. The PIDA Priority Action Plan estimates that approximately $ 68 billion is required for project implementation until 2020, whilst an additional $ 300 billion is needed for the implementation of projects through to 2040.

Seven of the world’s most rapidly expanding economies, for the foreseeable future, are located in Sub-Saharan Africa (IMF 2010). This and above underlines the need for urgent infrastructure transformation.

It therefore becomes evident that there is immense potential for the exporting of Professional Services from South Africa to the rest of the continent. BEPEC is looking forward to exploring this potential with the support from its members and other stakeholders.

It remains the aim of BEPEC to retain and expand its strategic relevance towards its members, the South African Department of Trade and Industry, and the South African economy in general. I would like to once again thank the BEPEC Board of Directors for their active support of the Export Council over the past year.