The South African National Roads Agency SOC Limited (SANRAL) recognises the critical role played by the small, medium and micro enterprises (SMMEs) in the construction sector and related industries – and the roads agency wants to see them empowered to take up work on mega projects.
In a bid to affirm its role in driving transformation and empowerment of SMMEs, SANRAL convened an information workshop in the Buffalo City Metropolitan Municipality at the Steve Biko Centre in Qonce recently.
The Construction Industry Development Board (CIDB) and the South African Revenue Service (SARS) were on hand to educate emerging contractors on how to navigate the sector to enable progress in their CIDB gradings, and how to be tax compliant.
SANRAL’s Regional Stakeholder Relations Coordinator, Welekazi Ndika, said the roads agency would be working in the Metro for the next five to 10 years.
“SANRAL’s transformation agenda is intended to ensure your participation as emerging contractors in all its road infrastructure development projects. We are invested in your growth as targeted enterprises and designated groups,” Ndika told the business owners.
During the workshop, SANRAL’s Regional Transformation Officer, Thandile Makwabe, informed SMMEs about several SANRAL programmes intended for targeted enterprises. One such development is the creation of a construction panels database, which would focus mainly on roads and emergency maintenance.
Makwabe said the SMMEs listed on this database would be given opportunities on a rotational basis to participate in SANRAL’s maintenance-related work… without going through the procurement process.
“This means when there’s emergency work, SANRAL is not going to follow the procurement process; we are going to look and select from our database,” Makwabe explained.
“This is going to work on a rotational process; when an SMME gets an opportunity, we remove it from the top and put it at the bottom so that the second SMME in line gets the next opportunity. We will try and give opportunities to as many emerging contractors on the database as we can,” he added.
Makwabe said SANRAL would soon launch its Contractor Development Programme, working with the CIDB for SMMEs with CIDB gradings between 5CE to 7CE. Members of those SMMEs would receive theoretical training and constant work for the period of five years to ensure growth and address the stagnation within this bracket.
“That’s the only way we can create meaningful opportunities for the companies in Grade 5CE upwards,” he added.
SANRAL’s ongoing Black Industrialists Scheme, said Makwabe, was intended to create opportunities for black material and yellow plant suppliers, in the main. Furthermore, SANRAL would be entering into a Memorandum of Understanding (MOU) with the Department of Military Veterans to ensure opportunities earmarked for this designated group were maximally leveraged.
The CIDB’s Lusindiso Nocha explained how its grading system worked and the requirements for elevating to higher CIDB grades. Nocha said the grading criteria includes measurement of financial capacity and work capacity. He stressed the importance of maintaining a healthy financial and work track record to enable advancing to the next level.
“It is important to ensure that you pay your annual CIDB registration fee as you will be deregistered after two years of non-payment. This means you will have to re-enter the system as a Grade One contractor, regardless of your previous CIDB grading,” said Nocha, adding that registration could be done online.
Outlining tax requirements and some intended benefits for SMMEs, SARS Tax Educator Boitumelo Ngcozelo said the biggest challenge for SMMEs was non-compliance, which disadvantaged them from doing business.
“One of the requirements when you are submitting your tender documents or applying for funding is your taxi compliance. You are required to submit your tax number and your tax pin, which SARS issues once in every 12 months,” Ngcozelo explained.
She said SMMEs with a staff complement paid within the tax threshold – which starts from R97 500 per annum or R7 800 a month – should deduct income tax and pay it over to SARS and give them IRP5 to submit their income tax returns.
Ngcozelo emphasised the importance of being tax compliant and warned SMMEs that they should still make tax submissions to SARS even if they have not traded at all during the financial year.
“You have to declare your income tax as a business by submitting your IT14 returns to SARS once a year. You must also submit your provisional tax return, IRP6 twice a year before 31 August and 28 February of each financial year,” said Ngcozelo.
Businesses generating over a million rand per annum should also register for value added tax, charge VAT and submit it to SARS monthly.
“SARS has changed its systems to keep up with the times. We have initiated a convenient e-filing system for a centralised approach that does not require physical contact with our offices,” Ngcozelo said.
Business owners failing to update SARS on their income status were treated as tax evaders and would face penalties for their non-compliance.
The SMMEs in attendance welcomed the move by SANRAL to take over the mentoring and training of targeted enterprises from the main contractors. Speaking on behalf of SMMEs attending the workshop, Buntu Mnyaka said much still needed to be done to reduce the SMMEs’ reliance on the main contractor.
“Most of us Grade Ones and Twos have cash flow problems and that makes us vulnerable for exploitation by the main contractor,” said Mnyaka.
He said emerging contractors didn’t have funds to buy their own materials, making them reliant on the main contractor to buy on their behalf from its chosen suppliers, and meaning they had no say with suppliers. Mnyaka said, “The problem is that the money goes from the main contractor to the suppliers and money does not reflect on our bank statements; it only reflects on payment certificates. This is problematic because to upgrade to the next level, you need that project value to reflect on your bank statements.”