SMME Sub-Contractors: Challenges in execution of Government Infrastructures

Siseko Bonelwa
4th Nov, 2020

INTRODUCTION

The Small Micro Medium Enterprise (SMME) firms include classifications such as micro-enterprises, survivalist-enterprises, informal sector enterprises, and formal small and medium-sized enterprises Gasa (2012). These contractors in the construction sector normally specialise in civil works, electrical work, concrete work, steelworks, glazing, etc. They may employ between 100 and 200 people.

The National treasury’s implementation guide (formally known as Preferential procurement regulations, 2019 pertaining to the preferential procurement policy framework ACT, ACT No 5 of 2000) requires public institutions to identify procurement opportunities for designated groups (SMME contractors) and apply the 30% compulsory sub-contracting provision where feasible for projects above R30 million.

CHALLENGES FACED BY THE SMME CONTRACTORS

It is evident that SMME contractors are one of the major contributors of delays in the execution of government projects in South Africa.  

The figure below highlights some of the factors that are affecting the SMME contractor’s performance and quality of work.

RECOMMENDATIONS

Below are some of the preventative measures that may be implemented:

• Government departments must ensure that the SMME contractors receive reasonable payments on time from the main contractor to avoid strikes and other distractions on site.
• Main contractors must engage with the SMME sub-contractors in terms of pricing criteria and select the sub-contractors that priced at market-related rates.
• The work to be sub-contracted to the SMME should not be of specialized nature and must be mostly labour-intensive work to reduce the risk.
• Development of diversified skills and expertise

CONCLUSION

With the factors highlighted above, it is vital that SMME development strategies be put in place to ensure that the SMME contractors fully understand the construction law, processes, and techniques. But to be successful, these investments need to be accurately targeted.

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