CONSTRUCTIONMONITOR

Q3 • 2015

Employment

CIDB CONSTRUCTION MONITOR; OCTOBER 2015 1.  Introduction _________________________________________________________________ 1 2.  Employment in the Construction Industry; Overview ________________________________ 2 

2.1  Context _______________________________________________________________ 2 2.2  Employment in the Construction Industry ____________________________________ 2 2.3  Employment by Industry Sector ____________________________________________ 3 2.4  Employment Index; Contractors ___________________________________________ 5 2.5  Employment in the Consulting Engineering Sector ____________________________ 5 2.6  Underspending by Government Results in Lost Employment Opportunities _________ 6 2.7  Expanded Public Works Programme (EPWP) _________________________________ 7 

3.  Construction Employment; Provincial Overview ____________________________________ 9 4.  Composition of Construction Labour Force ______________________________________ 12 

4.1  Composition by Gender ________________________________________________ 12 4.2  Composition by Skills Profile _____________________________________________ 12 4.3  Skills Shortages; Contractors ____________________________________________ 13 4.4  Skills Shortages; Consulting Engineers _____________________________________ 13 

5.  Wages and Earnings _________________________________________________________ 15 6.  Labour Unrest ______________________________________________________________ 17 

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CIDB CONSTRUCTION MONITOR; OCTOBER 2015

1. Introduction With effect of January 2015, the cidb restructured its cidb Quarterly Monitors to focus on individual themes each quarter. The schedule of themes is as follows: Quarter 1: Supply & Demand; Quarter 2: Contractor Development; Quarter 3: Employment; and Quarter 4: Empowerment. This cidb Construction Monitor – Employment (Quarter 3) examines employment and factors affecting employment. Details of employment are obtained from the Quarterly Labour Force Survey1, the Quarterly Employment Statistics2, the BER SME Business Confidence Survey3 and the Consulting Engineers South Africa (CESA) Bi-Annual Economic and Capacity Survey June 2015 report4. The employment data includes details of formal and informal construction employment, as well as employment at the national and provincial levels.

1 StatsSA (2015). Quarterly Labour Force Survey; July 2015, Publication P0211. Statistic South Africa,

www.statssa.gov.za 2 StatsSA (2015). Quarterly Employment Statistics (QES); Quarter 2 2015, Publication P0277,. Statistic South Africa,

www.statssa.gov.za 3 cidb (2015). cidb SME Business Conditions Survey, Quarter 3 2015, Construction Industry Development Board,

www.cidb .org.za 4 CESA (2015). Biannual Economic and Capacity Survey; January – June 2015. Consulting Engineers South Africa.

www.cesa.co.za

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2. Employment in the Construction Industry; Overview

2.1 Context South Africa’s unemployment rate currently stands at 25%5, and one of main goals that South Africa has set itself in the National Development Plan6 is to cut the unemployment rate to 6% by 2030. The construction industry is an important player in job creation, not only in the construction sector but in other sectors of the economy. The construction industry uses a wide range of inputs (such as construction materials) from many other industries to produce its goods and services7. As a result the construction industry also contributes indirectly to the jobs that are created in these sectors. Sectors that benefit from construction output include manufacturing, mining, transportation, real estate and business services. A 2006 cidb report estimated a direct job creation multiplier of around 4,2 jobs in the formal sector per R1 million invested, and 2,3 jobs in the informal sector per R1 million8. Furthermore, it was estimated that construction materials manufacturing and materials distribution sector contributed to a direct job creation multiplier of around 3 persons per R1 million. The total direct job creation multiplier in the construction and materials sector is estimated to be around 9 persons for every R1 million of investment!

2.2 Employment in the Construction Industry

Since 2008, construction has contributed around 9% to total formal and informal employment in South Africa, while the contribution of construction to GDP has been around 9%. Trends in infrastructure investment (or Gross Fixed Capital Formation: GFCF) and total formal employment is illustrated in the figure below in which GFCF is shown in real terms (2010 Rands), together with the total formal employment obtained from the Quarterly Labour Force Survey (QLFS). It is seen that the total construction works spend in 2014 amounted to about R300 billion in 2010 Rands (or R350 billion in nominal Rands), and the sector currently employs around 884 000 people in the formal sector and a further 450 000 in the informal sector.

5 StatsSA (2015). Quarterly Labour Force Survey; July 2015, Publication P0211. Statistic South Africa,

www.statssa.gov.za 6 The Presidency (2012). National Development Plan 2030: Our future -Make it Work National Planning

Commission. nationalplanningcommission.wordpress.com 7 UK Contractors Group (2009). Construction in the UK Economy: The Benefits of Investment, www.ukcg.org.uk 8 cidb(2007). The Building and Construction Materials Sector, Challenges and Opportunities. Construction Industry

Development Board, 2007. www.cidb.org.za

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Gross Fixed Capital Formation and Formal Employment

2.3 Employment by Industry Sector

Data from the Quarterly Labour Force Survey (QLFS) shows that the formal sector (excluding agriculture and private households) employs around 10,8 million people, of which the construction sector accounts for 11% of total formal employment. The informal sector employs around 2,6 million people, of which the construction industry accounts for 17% of total informal employment. The contribution of the construction sector to informal employment is significant.

Total Formal and Informal Employment by Industry Sector

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Informal Employment by Industry Sector (excluding agriculture)

For the 2nd Quarter of 2015, all industries experienced year on year gains in total employment, except the trade (-60 000) and transport (-25 000) which experienced significant job losses. Over this period, the construction industry delivered the highest gains in total employment, namely 219 000 jobs, of which 135 000 were in the formal sector and 84 000 were in the informal sector. The year-on-year growth in the construction industry is shown in the following figure, from which it is seen that employment in the construction industry currently out performs the average for all sectors (excluding agriculture).

Year-on-year Growth in Employment

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2.4 Employment Index; Contractors

The cidb/BER Employment Index9 obtained from surveying Grades 2 to 8 cidb registered contractirs is shown below. Notwithstanding that the QLFS shows a growth in construction employment, the cidb/BER employment index shows a negative net balance – i.e. more contracting enterprises surveyed indicated that they would be reducing staff than employing staff. It can be seen however that the rate of labour shedding or job losses is reducing.

Employment Index (Net Balance): cidb Registered Contractors (Grades 2 to 8)

2.5 Employment in the Consulting Engineering Sector

The provision of professional services such as planning, architecture and design, quantity surveying, project planning and management are part of the construction industry value chain. Occupations in the consulting engineering sector include managers, professionals, technicians and associate professionals and clerical support workers. The Consulting Engineers South Africa (CESA) currently reflects the majority of the larger consulting enterprises, but many small and micro-enterprises are not members of CESA. As illustrated below, CESA members currently employ around 23 000 people10.

9 cidb (2015). cidb SME Business Condition Survey; Quarter 3. Construction Industry Development Board, October

2015. www.cidb.org.za 10 CESA (2015). Bi-Annual Economic and Capacity Survey June 2015, at 2015Q2. Consulting Engineers South

Africa. www.cesa.co.za

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Employment by Members of CESA vs. GFCF

Employment by Members of CESA vs. Fee Income

2.6 Underspending by Government Results in Lost Employment Opportunities

An analysis of municipal and provincial capital expenditure for South Africa is given below11, in which the variance against phased linear capital budget is shown for provincial departments and municipalities.

11 cidb (2015). cidb Construction Monitor – Supply and Demand; April 2015. Construction Industry Development

Board. www.cidb.org.za

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Variance Against Capital Budget; Municipalities and Provincial Departments From the analysis of the municipal and provincial expenditure, it can be seen that as at the end of the 2013/14 provincial financial year (2014Q1), the total underspend by provincial

departments against linear phased budget amounted to around R3,6 billion; at the end of the 2014/15 municipal financial year (2014Q2), the total underspend by municipalities

against linear phased budget amounted to around R14,2 billion In total, municipalities and provincial departments under spend by around R20 billion per year, which results in significant lost employment opportunities.

2.7 Expanded Public Works Programme (EPWP)

The Expanded Public Works Programme (EPWP) was launched in 2004 as one of the policies aimed to reduce unemployment, with a specific focus on women and the youth. The EPWP currently operates in four sectors, namely infrastructure, environment, culture and social and non-state (non-profit organisations and community work). Within the infrastructure sector, work opportunities are created largely through increasing the labour intensity of government funded infrastructure projects. A work opportunity in infrastructure has an average period of four (4) months. It is seen from the table below that the EPWP is currently creating around 410 000 job opportunities in the infrastructure sector per year, or around 140 000 full-time equivalent opportunities. Noting that total formal and informal employment is construction is currently around 1 400 000, the EPWP accounts for around 10% of total construction employment.

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EPWP Work Opportunities in the Infrastructure Sector

Year Number of

Work Opportunities

Youth % Women % People with Disabilities

%

Year on Year

Change 2005 109 712 39% 35% 0,4% 2006 108 365 38% 49% 0,2% -1% 2007 146 974 32% 45% 1,9% 36% 2008 250 104 39% 40% 0,8% 70% 2009 397 984 46% 36% 1,1% 59% 2010 263 457 45% 25% 0,6% -34% 2011 277 100 46% 47% 0,1% 5% 2012 374 591 47% 49% 0,1% 35% 2013 340 676 47% 47% 0,1% -9% 2014 391 555 44% 47% 0,3% 15% 2015 409 209 49% 50% 0,2% 5%

EPWP Job Opportunities in Infrastructure Sector

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3. Construction Employment; Provincial Overview

A breakdown of employment by province obtained from the Quarterly Labour Force Survey is given in the table below.

Provincial contribution to construction employment (*1000) yyyyqq SA EC GP KZ WC NC FS MP LP NW

2015Q2 1401 170 371 260 206 30 53 92 156 62 2015Q1 2014Q4

1322 1334

150 131

335 366

283 280

181 190

18 29

57 54

97 110

139 118

61 56

2014Q3 1280 149 364 241 169 25 53 112 115 53 2014Q2 2014Q1

1182 1199

154 122

307 358

241 247

158 154

22 22

48 52

88 80

113 107

51 56

2013Q4 1204 151 310 221 163 23 47 98 132 59 2013Q3 1145 149 283 227 156 24 53 92 108 54 Of the nine provinces in South Africa, four provinces stand out in terms of their contribution to employment, namely Eastern Cape, Gauteng, KwaZulu Natal and Western Cape which collectively account for around 73% of total formal and informal construction employment. Of these, Gauteng alone accounts for close to 30% of total construction employment.

Provincial contribution to construction employment (%) yyyyqq SA EC GP KZ WC NC FS MP LP NW

2015Q2 100% 12% 27% 19% 15% 2% 4% 7% 7% 4% 2015Q1 2014Q4

100% 100%

11% 10%

25% 27%

21% 21%

14% 14%

1% 2%

4% 4%

7% 8%

7% 8%

5% 4%

2014Q3 100% 12% 28% 19% 13% 2% 4% 9% 9% 4% 2014Q2 2014Q1

100% 100%

13% 10%

26% 30%

20% 21%

13% 13%

2% 2%

4% 4%

8% 7%

8% 7%

4% 5%

2013Q4 100% 13% 26% 18% 14% 2% 4% 8% 8% 5% 2013Q3 100% 13% 25% 20% 14% 2% 5% 8% 8% 5% The dominance of Eastern Cape, Gauteng, KwaZulu Natal and Western Cape in terms of construction employment is a direct reflection of the construction spend by province shown below12.

Construction Spend by Province (2014) Province Building Civil Total Eastern Cape 16% 19% 17% Gauteng 43% 15% 31% KwaZulu Natal 10% 29% 18% Western Cape 12% 9% 10% Northern Cape 3% 2% 2% Free State 4% 8% 5% Mpumalanga 4% 5% 5% Limpopo 6% 8% 7% North West 3% 5% 4% Total 100% 100% 100%

Quarterly gains and losses in total informal and formal employment by province is given in the table below. Notwithstanding the quarter-on-quarter variations, all provinces have shown gains in total employment over the past four quarters.

12 Industry Insight (2015. Investment Map Monitor. Industry Insight, March 2015, www.industryinsight.co.za

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Quarter-on-quarter gains/losses in construction employment (*1000) yyyyqq SA EC GP KZ WC NC FS MP LP NW

201502 79 20 36 -23 25 12 -4 -5 17 1 201501 201404

-12 54 

19 -18

-31 2

3 39

-9 21

-11 4

3 1

-13 -2

21 3

5 3

201403 98 -5 57 0 11 3 5 24 2 2 Total 219 16 64 19 48 8 5 4 43 11

201402 201401

-17 -5

32 -29

-51 48

-6 26

4 -9

0 -1

-4 5

8 -18

6 -25

-5 -3

201304 59 2 27 -6 7 -1 -6 6 24 5 201303 -4 15 -20 -5 -8 2 3 8 -1 3

Total 33 20 4 9 -6 0 -2 4 4 0 Details of employment for the provinces with the major contributions to construction employment in South Africa are shown in the following graphs.

Construction Employment; South Africa (2012Q3 to 2015Q2)

Construction Employment; Eastern Cape Construction Employment; Gauteng

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Construction Employment; KwaZulu-Natal Construction Employment; Western Cape

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4. Composition of Construction Labour Force

4.1 Composition by Gender The construction industry currently employees around 1,4million people, of which 89% are male and 11% female. In comparison with other industries, the construction industry has the highest proportion of male employment. Male representation in the construction industry is high (89%) compared with the industry average of 56% for all industries. Trends in the employment by gender are given below. The breakdown in the composition in employment by gender has remained reasonably consistent over the past 7 years or so, namely around 89% male and 11% female.

Composition of Construction Employment by Gender Male domination is also prevalent in the consulting engineering sector, but employment by gender within CESA member shows some gains form 3,6% in 2008 to 6% in 2014.

4.2 Composition by Skills Profile

An estimate breakdown of the labour force profile in the contracting sector is given below, obtained from the Workplace Skills Plan submissions and the CETA database13.

Occupational Major Group % of Total Managers 10% Professionals 8% Technicians and Associate Professionals 10% Clerical Support Workers 4% Service and Sales Workers 1% Trade Workers 19% Plant and Machine Operators and Assemblers 21% Elementary Occupations 28%

13 CETA (2013). Sector Skills Plan Update: 2013/2014. Construction Education and Training Authority, Pretoria.

13

It is seen that the semi-, low and unskilled occupations of trade workers, plant and machine operators and assemblers, and elementary occupation account for around 70% of the total construction workforce and only around 28% account for the skilled workers such as managers, professionals, technicians and associate professionals. Of interest is that the construction worker skills profile aligns with the median skills profile of the country, namely 46% of the workforce is semi-skilled and 29% of the workforce is low- and un-skilled.

4.3 Skills Shortages; Contractors

Contractors report that access to skilled labour is becoming a significant constraint to business growth. This is illustrated below where the constraints of access for work and access to skills are compared (weighted index) for General Building (GB) and Civil Engineering (CE) classes of work14. It is seen that access to work opportunities as a constraint is softening, but that access to skills is increasing as a constraint.

Constraints to Growth of Contractors; Access to Work and Skills Note that shortage of skills is also driving up the cost of labour, resulting in decreased profit margins for small and medium contractors. Small and medium size emerging contractors are likely to be bearing the brunt of these skills shortages, and are least able to attract and train skilled labour. Notwithstanding this, while shortage of skilled labour is apparent, there is however, an oversupply of low and semi-skilled workers.

4.4 Skills Shortages; Consulting Engineers

According to Consulting Engineers South Africa (CESA) the CESA member organisations are reporting that they are experiencing difficulties in their recruitment for engineers and technical occupations15. The percentage of firms experiencing difficulties in recruiting engineers is around 74% and has been increasing in the last four quarters, as shown below.

14 cidb (2015). cidb SME Business Conditions Survey, Quarter 3 2015, Construction Industry Development Board,

www.cidb .org.za 15 CESA (2015). Biannual Economic and Capacity Survey; January – June 2015. Consulting Engineers South Africa.

www.cesa.co.za

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CESA Members Experiencing Shortages of Engineers

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5. Wages and Earnings

The average earnings of employees in the formal sector of the Construction Industry in Q2 of 2015 were R13 015 per month, obtained from the Quarterly Employment Statistics16 (QES). The earnings in the construction industry earnings were marginally lower than the average for all industries which was R16 796.

Average Monthly Earnings, Including Bonuses and Overtime Payments, by Industry

A comparison between construction employment and earnings is shown below. (Note that the QES was rebased in 2014 Q4, and hence the information after this period is not included here.)

Earnings (Including Bonus and Overtime) (Constant 2000 Rands) and Employment

Overall, it is seen that earnings have increased in real terms. Between 2007 and 2011, earnings increased at a nominal rate of around 17% per annum on average. From 2012 onwards, growth in earnings slowed

16 StatsSA (2015). Quarterly Employment Statistics (QES), Publication P0277. Statistic South Africa,

www.statssa.gov.za

16

down, and earnings increased marginally at a nominal increase of around 8% per annum – which is largely in line with inflation. Note that an increase in earnings or income as a result of construction employment leads to an increase in spending and output in the general economy

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6. Labour Unrest

Labour unrest and work stoppages, result in lost production and lost wages, and the total number of days lost due to industrial action by industry sector is shown below for 2013 and 201417. The dominance of industrial action in the mining industry is seen (with 12,9 million days lost between 2012 to 2014), followed by manufacturing and transport. The total days lost in construction industry from 2012 to 2014 amounted to 271 000 days.

Cumulative Working Days Lost by Industry Sector; 2012 to 2014

A breakdown in the days lost in the construction industry is given below, from which the industrial action in the run-up to finishing of the 2010 World Cup stadiums can be seen and the industrial action at Eskom’s Medupi and Kusile power stations in 2013.

Working Days Lost: Construction Industry; 2008 to 2014 17 DoL (2015). Annual Industrial Action Report 2014. Department of Labour, Pretoria, www.dol.gov.za

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The dominant cause of industrial action in the construction industry is largely wage settlements, with more than 95% of strikes due to wage disputes. It has been suggested that the increased wage demands, in excess of inflation are attributed to perceptions of increased company profits, exorbitant executive pay scales, and the increased cost of living. Other causes of labour disputes are working conditions, disciplinary action, grievances, and retrenchments18. Recent Strike Action in the Construction Sector. February 2013: NUM members at Polokwane Bricks PTY LTD downed tools in February demanding an increase of

R10 an hour on their current rates. The employer was offering R1.50 per hour. An agreement was eventually reached where a person who earns R5.50 an hour would earn R7.00.

March 2013: From 13 March to 29 of April, NUM members employed by Corobrick went on strike demanding

34% salary increases while the employer was offering 7.5%. On 29 April parties agreed to a salary increase of 7.5 %.

June 2013: Workers employed by Rumdel Cape/EXR Joint Venture in Durban, downed tools at the road construction

site alongside the Umgeni road, demanding a R12 000 project bonus. Metro police said they were trying to contain the protesters under the N2 bridge with the help of the Public Order Policing Unit after the situation went chaotic. One of the workers, who had been part of a handful of those protesting said they had had no joy regarding their unmet demands as they were being sent from pillar to post by SANRAL and Rumdel Cape/EXR Joint Venture. The protest called for angry commuters to abandon their taxi transport and to start walking to work.

June 2013: On 7 June, both parties Medupi Kusile and ESKOM signed a partnership agreement at its Medupi and

Kusile power station construction projects after an outcry for bonus pay. August 2013: Nationwide, NUM members in the construction sector downed tools on 26 August over a wage

demand. The strike came after workers were demanding a 13% wage increase for the year 2013 and a 14% increase for 2014 whiles the employers tabled a 6% wage increase for 2013 and an inflation-linked increase for the next year. It is reported that about 90 000 members of the NUM did not report for work after negotiations with employers reached an impasse.

September 2013: The South African Federation of Civil Engineering Contractors (Safcec) and the National Union of

Mineworkers (NUM) on Monday signed a two-year wage agreement, ending prolonged strike action in the construction industry that halted major build programmes, including the Kusile and Medupi projects, as well as the Durban Port expansion project. The substantive agreement allows for a wage increase of 10% for employees in Task Grade 1 to 4 and 9% for employees in Task Grade 5 to 919.

June 2014: Nearly 500 members of the South Africa’s Nation Union of Mineworkers went on strike at building firm

Group Five, for higher wages and reduced hours. The union said it also wanted representation by a full-time shop steward. Separately, the

Association of Mineworkers and Construction Union, the main union in the platinum industry was considering a government proposal to resolve the walk-out.

May 2014: More than 450 workers at a Group Five project in Durban had gone on strike on May 26 for a

R10 000 bonus and a three-hour reduction in their working day on Saturdays20.

Source: Annual Industrial Action Report 2013 & 2014. Department of Labour Unless otherwise identified

18 cidb (2015). Labour and Work Conditions in the South African Construction Industry; Status and Recommendations.

Construction Industry Development Board (to be published). www.cidb.org.za 19 Engineering News (2013). Construction Strike Ends as Safcec, NUM Sign 2-year Wage Deal. Natalie Greve,

Engineering News, 16 September 2013. 20 IOL (2014). Group Five: NUM on Strike at Durban Project. Business Report, 4 June 2014.

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