1. An MBA will never change the world – we leave that to our graduates Business School Barriers Towards the Development of Emerging Contractors in the Limpopo Province Lawrence Tshivhase (DTech Student) Outline of oral presentation Introduction and background of study Objectives of study and research questions Literature review Construction Industry Development Board Study design, sample size and sampling techniques Results of data analysis Recommendations

2. An MBA will never change the world – we leave that to our graduates Business School Introduction and background of study A review of the literature shows that more than half of all new and emerging contractors in the construction industry in Limpopo Province fail and go out of business for various reasons (Tshivhase, 2007). Thus, they are not viable. The literature shows that over 75% of all emerging contractors in the construction industry in Limpopo Province are black, and that their market share is below 65% (Construction Industry Development Board, 2010). The study was conducted in 2010 in the 5 districts of Limpopo (Capricorn, Vhembe, Mopani, Waterberg and Sekhukhune). Objectives of study and research questions The key objective of study is to identify key barriers that adversely affect the viability and market share of emerging contractors in the construction industry in Limpopo Province. The study aims to propose feasible and suitable remedial actions that are helpful for supporting emerging contractors in the construction industry in Limpopo Province.

3. An MBA will never change the world – we leave that to our graduates Business School Research questions What factors affect viability in the construction business among emerging contractors? What factors affect market share in the construction business among emerging contractors? How effective is the Construction Industry Development Board (CIDB) grading system in terms of promoting emerging contractors in the Limpopo Province? Underlying theory of DTech study This research is designed to test whether or not the claim (null hypothesis) that only resources and technical skills that are relevant to construction works determine the successes of emerging contractors in the construction industry in Limpopo Province. The research will also find out how much entrepreneurial skills are important for viability and market share.

4. An MBA will never change the world – we leave that to our graduates Business School Dependent variables of study (Y1 and Y2) The 1 st dependent (outcome) variable of study (Y1) is viability. Y1 is a dichotomous variable that has only 2 possible values (Yes, No). The financial track-records of each of the n=104 contractors were examined. The 2 nd dependent (outcome) variable of study (Y2) is market share. Y2 has only 2 possible values (Moderate if market share is 0.25% or above, Low if market share is less than 0.25%). See Tshivhase (2007). Literature review Agumba (2006), Tshivhase (2007), Phaladi & Thwala (2007) and Limpopo Development Enterprises (LimDev, 2010) have reported that emerging contractors in Limpopo and in South Africa in general are not progressing well in their core business due to lack of skills and access to finance Construction Industry Development Board (Objectives) To promote strategic leadership to construction industry stakeholders, encourage sustainable growth, restructuring and development of the construction sector. Promote continue growth of the construction industry and the involvement of the emerging sector.

5. An MBA will never change the world – we leave that to our graduates Business School Method AMethod B GradeMaximu m Tender value (R) Best Annual Turnover (R) over 2 years Available capital (R) Largest Contract over 5 years Available capital (R) 20.6m000.15mN/A 32.0m1.0m0.1m0.5mN/A 44.0m2.0m0.2m1.0mN/A 56.5m3.25m0.65m1.6m1.3m 613.0m7.8m1.3m3.25m2.6m 740.0m24.0m4.0m10.0m8.0m 8130.0m90.0m13.0m32.5m26.0m 9No limit270.0m40.0m100.0m80.0m Table 1: Financial & Works Capability Requirements (Source: CIDB, 2010a) Source: CIDB (2010b)

6. An MBA will never change the world – we leave that to our graduates Business School Study design, sample size and sampling techniques The design of the study was cross-sectional and descriptive. A random sample of size n=104 emerging contractors was drawn from the 5 Districts of Limpopo Province based on stratification. Figure 1: Locality map of Limpopo Province Table 2: Number of participants per district District Number of contractor s in Limpopo Number of contractor s selected into sample Percentage Capricorn2103028.85% Vhembe1542221.15% Mopani1261817.31% Waterberg71109.62% Sekhukhun e 1682423.08% TotalN=729n=104n=14.27% of N

7. An MBA will never change the world – we leave that to our graduates Business School Results of data analysis (Cross-tab analysis, Quantitative) The Pearson chi-square test of association was used for identifying significant two- way associations among categorical variables. At the 5% level, significant associations have P-values that are smaller than 5%. Table 3: Pearsons chi-square of associations (n=104) Variable of study associated with barriers to emerging contractorsP-value Poor human resources0.000 Inadequate information technology0.000 Poor financial resources0.001 Poor marketing conditions0.004 High rate of tax0.006 Inadequate institutional support0.000 Adverse socio economic conditions0.000

8. An MBA will never change the world – we leave that to our graduates Business School Logistic regression analysis (Quantitative) Table 4: Odds ratios obtained from logistic regression analysis (Model 1) At the 5% level, significant odds ratios are characterized by odds ratios that are significantly different from 1, P-values that are smaller than 0.05, and 95% confidence intervals of odds ratios that do not contain 1 Factors that affect market share Odds RatioP-Value 95% Conf. Interval Lack of entrepreneurial skills 11.150.000[3.82, 31.86] Lack of initial capital7.980.001[2.37, 26.39] Intense Competition6.850.002[2.19, 19.55] Lack of engineering skills 5.880.006[2.12, 17.84] Lack of access to finance 4.140.008[1.69, 10.31] Poor spending capacity 4.010.019[1.47, 9.86]

9. An MBA will never change the world – we leave that to our graduates Business School Table 5: Odds ratios obtained from logistic regression analysis (Model 2) At the 5% level, significant odds ratios are characterized by odds ratios that are significantly different from 1, P-values that are smaller than 0.05, and 95% confidence intervals of odds ratios that do not contain 1. Factors that affect viabilityOdds RatioP-Value (95% Conf. Interval) Shortage of technical skills15.950.000(2.58, 28.02) Lack of joint ventures13.870.001(2.15, 24.45) Low level of competence in engineering 9.540.003(1.97, 13.77) Shortage of capital resources8.510.004(1.74, 10.34) Institutional challenges6.830.006(1.55, 9.71) Economic constraints4.170.012(1.34, 7.04)

10. An MBA will never change the world – we leave that to our graduates Business School Recommendations There is a need to increase infrastructure investment to address the backlogs. There is a need to review CIDB regulations requiring professionals when emerging contractors want to upgrade to grade 7. Assess the level of entrepreneurship as a prerequisite for emerging contractors to participate in the Contractor Development Programmes. There is a need to encourage construction entrepreneurs to invest into business operations. It is recommended that more funds should be injected into provincial agencies that finances SMMEs Introduce regulations that restrict unnecessary entry into the construction industry in the Limpopo Province.