In the publication of its latest management information survey (MIS) results to June 2003, the South African Association of Consulting Engineers (SAACE) has highlighted that as many as 90% of its member firms reported that they are faced with increasing difficulties in recruiting good quality engineering staff. This is up 32% over the previous 12 months, with the last six months to June 2003 reflecting a 29% increase alone. In December 2002 only 69% of firms were reporting difficulty in finding engineering staff.
Says Graham Pirie, executive director of SAACE: "The high level of this statistic, and the pace at which it has been increasing is concerning for the industry. We are already aware that the South African consulting engineering resource is an ageing one, with the average age of professional civil engineers being over 50.
"Since there is already a shortage of young engineers, as our professional engineers reach retirement age, the industry could find itself in a crisis and consequently the capacity of the construction industry to develop new infrastructure will be severely inhibited."
Of additional concern, was the fact that the survey showed that new engineering entrants to the job market are also at an all-time low. Says Pirie: "For some time now the Association has been highlighting the fact that there is a shortage of black engineers, however, this survey has shown that firms are now finding it equally hard to recruit white engineers."
In addition, the number of partners and directors has decreased from 11% in 2001 to 9,8% of total people employed. While this reflects a change to less top-heavy structures, it also supports the fact that the most skilled engineers are a declining resource. Says Pirie: "In less than a generation, South Africa may no longer have a skilled consulting engineering base capable of maintaining the current infrastructure or of developing new infrastructure."
The survey also showed that employment in the industry is down, with total employment in all firms falling. Only 30% of members felt that they needed to employ engineering staff in the next six months, 18% were considering technical staff and only 5% were planning to employ support staff. This is of some concern, as more than half of the respondents said that their staff was running at full capacity or working overtime.
"As a result, we have seen the emergence of a growing trend to outsourcing, with the percentage of total turnover outsourced reaching an all time high at 22%. The prevalence of outsourcing appears to be strongest amongst small to medium size firms. Until recruitment difficulties are resolved this is a trend which is likely to continue."
While overall employment levels are down the survey showed that salaries and wages which represents 48% of total fee income earned is up 0,64% on the previous six months, although over 12 months compared to the previous 12 months it has declined by only 2,3%. "This indicates that more firms are being driven to pay a premium to retain and attract staff and whilst the pool of skills remains small we may see a continuation of this trend. Capacity levels have been rising gradually from the mid 70% in the 2000/1 survey to the lower 80% in 2002 and they have risen by 10% in the last 12 months to rest at 89% of respondents as at June 2003," says Pirie.
"With the strengthening Rand and good economic growth, we can expect the demand to increase further. With recruitment difficulties and marginal capacity available, we expect that unless some serious effort is made to recruit students to engineering, we are going to face a slow down in the industry's ability to deliver."
In the distribution of work across various sub-disciplines, building services reflected the largest gain, adding 1,8% points, while the greatest losses were experienced in transportation and project management. "This is likely to be related to the falling interest rates and with two further cuts anticipated, building services is likely to continue to gain ground."
Of interest, when it came to provincial distribution of work, the survey showed that the Eastern Cape was adding to its share of the work growing to 11,3% of the total fee income - up from 8% in the previous survey. The highest percentage of work in the Eastern Cape was reported as being civil works at 45% of the fee income earned. Conversely Gauteng lost market share and reflected a fall in share of total fee income from 40% in 2001 to only 28,7% of the fee income in the June 2003 survey. "This could be indicating a sharp increase in regional spending and when one considers developments such the industrial development zones like Coega, this could provide an explanation for why work seems to be coming from provinces other than Gauteng."
Work in Africa has increased over the previous 12 months and now rests close to 15% of total fee income, up on the 10% reported in 2000 and 2001. Larger firms average between 20 and 30% of income coming from Africa. Says Pirie: "The overall improvement is very satisfying, as it demonstrates that the Association's efforts to create an enabling environment - through the creation of an International Business Development Section for member firms - and its efforts to develop export opportunities has been working.
"Going forward, the challenge will be to find opportunities for more of our small and medium member firms to work in Africa. With the fragmentation of large projects into smaller portions, it is possible that smaller specialist niche firms would be able to make good inroads into Africa. We feel that as the Nepad initiative gains momentum there will be more and more emphasis on sourcing consulting engineers from Africa and this is where our South African small firms have the opportunity to form alliances and partnerships with our engineering colleagues in the north, offering capacity and specialised resources to supplement local skills."
Only 16% of the firms responding operate outside Africa and generate fee income from international clients. A small percentage of these firms reported earning more than 30% of fee income outside Africa, while the rest averaged between 1% and 22%.
"There is an area for concern when it comes to international clients, as the survey showed that delayed payments is recurring to a greater degree. In December 2002 about 8,4% of total fee income was outstanding for more than 90 days, this has now increased to 15,5% and specifically delayed payment by foreign clients has risen to an alarming 24% of total fee income earned outside Africa.
"We believe that this is due to the fact that international projects are often donor funded and that the delays are precipitated by inefficiencies in the processing of claims by client bodies. The Association has always taken the issue of delayed payments very seriously and we have already been liasing with the World Bank, through the International Federation of Consulting Engineers (FIDIC), on how this could be resolved."
Private sector remains the single most important client for consulting engineers forming more than 41% of the client base up from 37,7% in December 2002, with the next largest being local government at 20,8% up from 17,8% in the previous survey.
"The growth of the private sector as an important client is in line with international trends as it closely mirrors the privatisation of state resources. Continued interest rate cuts, however, will continue to fuel the growth of the private sector as a client. However, as infrastructure spending increases in the public sector, the private sector, which has enjoyed a period of discounted fees, could see upward pressure on professional fees. The increase in growth of the local government as a client is of interest, as it indicates that the transfer of funding from national government to local government is proceeding. However, we are aware that there are still cases of budgets not being spent at this level due to a lack of skill and capacity for delivery at local government level. As capacity is increased at local government level, we would expect local government to increase significantly in importance as a client."
The industry's efforts to transform are evident in the survey, which showed that across all employment categories black staff (not including Asians and coloureds) has risen from 22% of total people employed at June 2002 to 25% at end June 2003. Further, on average 1,5% of the payroll is spent on training and 0,6% on bursaries, with the smaller firms generally spending a higher percentage than their counterparts at an average of between 2 and 3% of total payroll. Across the survey respondents, 30% of firms are spending more than 2,5% of payroll on training.
"This is good news for the industry as it demonstrates that our member firms are committed to black economic empowerment (BEE) and considering the recruitment difficulties they face, we feel that firms are not doing badly in their efforts to transform. What would be disappointing for the industry would be if unrealistic empowerment requirements were put into place, as this would inhibit the firms' resources to transform. The engine of transformation is economic growth and it would be impossible for them to transform without sufficient levels of work."
For more information contact Graham Pirie, Executive Director, South African Association of Consulting Engineers, 011 463 2022.
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