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| 1. |
GLOBAL ECONOMIC CRISES |
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| a. |
Contraction of international growth opportunities, particularly in developing markets, places business growth plans at risk.
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The Construction Global Underground Mining and Construction Australasia operating platforms are well positioned to participate in the global commodity boom.
Operating platforms have been mandated to build the necessary business development capacity to drive growth.
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| b. |
Reduced international shareholding revenues and earnings may also result in a lowering of the Group’s broad-based black economic empowerment (BBBEE) ownership rating, which may impair domestic competitiveness and expose the Group to client sanction.
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| c. |
International investors withdrawing from emerging markets may cause deterioration in Murray & Roberts’ market rating, reducing our market capitalisation and perceived worth. This could affect our options in the capital and project markets. |
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Group chief executive and Group financial director actively engage with international and potential investors, building confidence in the Recovery & Growth strategy, supported by operational delivery. |
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| 2. |
MAJOR PROJECT DELIVERY |
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| a. |
Losses suffered during the year have highlighted the risk associated with the delivery of major projects. These complex, high-value projects require a level of project leadership and management that is not scalable from traditional projects.
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Retention of core skills and capabilities developed on current major projects to deliver similar future projects.
Dedicated steering committees for all major projects now responsible for governance on such projects.
OMS and performance monitoring support project portfolio management.
Executive risk committee interrogates key bids prior to submission, based more clearly on recent lessons learned.
Executive project oversight committee will independently review major project performance.
Integrated assurance model will promote project performance through enhanced risk management, regulatory compliance and internal audit. All projects are now required to follow a process no less comprehensive and regimented than that set out in the Group’s framework for standardised project delivery. This will support project assurance.
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| b. |
Resource and financial capacity may constrain the Group’s ability to take on additional major projects. |
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Secure advance payments ensure that cash flow remains neutral or better and that project finance has been secured prior to project commencement. |
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| 3. |
DECLINING ORDER BOOK IN SADC/UAE |
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| a. |
Declining contracting opportunities lead to declining resources and a loss of skills and experience, which become expensive and difficult to replace.
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Build relationships with key clients to negotiate longer-term programmes of work.
Although the building markets in SADC and the UAE are highly competitive, there are significant project opportunities in the pipeline. Innovative alternative bids could offer clients better value without compromising performance aspirations.
Invest in a core team and in driving skills development. Utilise spare capacity to prepare unsolicited proposals, particularly for the public sector. |
| b. |
Declining contracting opportunities lead to lower employment opportunities, resulting in the Group not being able to attract the talent it requires to sustain its development through growth periods. |
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| 4. |
LATE ENTRY INTO AFRICA |
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| a. |
European and Asian contractors have accessed Africa during its early period of limited development. As a continent of abundant resources, unless Murray & Roberts implements a co-ordinated plan to enter Africa in a measured and concerted manner, in partnership and on its own, a delayed entry may be detrimental to our ability to grow at a desired pace in Africa.
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The Group’s development of a co-ordinated Africa strategy is at an advanced stage.
Key regional hubs from which we will identify, develop and implement opportunities have been identified.
Operating companies will also follow strategic clients into Africa, on a ring-fenced project-by-project basis. |
| b. |
Murray & Roberts is considered the leading South African contractor. Our inability to mobilise effectively, efficiently and successfully into Africa could have a negative impact on this reputation. |
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| 5. |
HEALTH & SAFETY |
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| a. |
The Group has a duty to provide employees with a healthy and safe working environment. The nature of the work conducted by companies in the Group is to mobilise a large labour force to work on construction sites and underground mining sites. Prevailing conditions present health & safety risks.
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The Group has implemented the STOP.THINK campaign, and appointed a Group safety executive.
DuPont Sustainable Solutions has been appointed to conduct a health & safety evaluation for the South African operations, and assist with improvement plans.
Planned implementation of fatal risk control protocols will address common causes of fatal and serious incidents.
Recent bid submissions by Construction Global Underground Mining operating platform in South Africa have included a mechanised shaft sinking methodology, utilised by the operating platform in North and South America.
An outside service provider has evaluated the wellness programmes at South African operations against best practice and has made recommendations for improvement. Policies, standards and guidelines will be developed for implementation in our operations. |
| b. |
Poor safety performance damages the Group’s reputation, which may have an increasing impact on our ability to procure new work. It may also invoke Government reaction and result in industrial action. Penalties and financial sanction may also arise from safety incidents.
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| c. |
Societal health risks including HIV/Aids and TB have the potential to negatively impact productivity, absenteeism and costs associated with hiring and training new employees. This is a particular concern in our South African and SADC operations. |
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| 6. |
HUMAN RESOURCE CAPACITY & CAPABILITY |
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| a. |
The required commercial and contract experience to deal with contract administration, change management and control systems are a challenge in the context of the Group’s current capacity.
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All operating platforms to perform a critical assessment of the leadership and critical skills talent within the operating companies.
All identified gaps to be filled with skilled and experienced resources.
Development programmes to be put in place for high potential and critical skills talent.
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| b. |
A number of the Group’s recent project difficulties relate to build-only projects where design is incomplete and to design-build projects in an environment requiring a deep skills pool but suffering from a dearth of project management and engineering capability.
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Early client engagement to assist with scope definition.
Build-only proposals to clearly articulate design assumptions and baselines utilised in compiling bids.
Design-build organisational structures fulfil a project management function, including design integration, as opposed to the traditional construction management function for build only projects.
An extended focus on commercial experience and contract administration to ensure effective mechanisms for change management.
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| c. |
Contracting with state-owned entities places projects at greater risk as variations due to vague and/or incomplete client specifications are seldom agreed and almost never paid outside of a formal dispute process.
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| d. |
A healthy and safe working environment is dependent on a unified, clear and consistent leadership drive and commitment to health and safety performance excellence. |
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Identify critical leadership competencies and design appropriate programmes to develop these.
Stratify the leadership competency development by frontline, middle and executive leadership.
Incorporate progress into performance contracts and personal development plans.
Review performance and provide assistance and coaching. |
