Regional Seminar Proceedings 1993

Small-Scale Contractors continue..

5. Introduction of Labour-based Contractors to the Bank: Some Pitfalls

6. Earth Roads: Team Task Calculation Aids

7. A Review of Recent Labour-Intensive Construction in South Africa

V. Introduction of Labour-based Contractors to the Bank: Some Pitfalls

In the earlier paper on "The Labour-Based Contractor, the Role of the Bank" the point was made on the need to introduce the contractor early to the Banks for the firm to derive maximum support/benefits from the contract.

This current paper takes a look at some possible dangers inherent in this association and possible ways out. Again, due to limited data in this field, the reliance will be on the Ghanaian experience.

As has been reported elsewhere, Ghana embarked on the use of the labour-based technology quite recently, around 1986/87. Unlike other countries, Ghana decided to develop the new technology around the local contractors. Since that time 55 local contracting firms have been trained and 26 of them have been fully equipped and working full time. This paper focuses on 26 fully equipped and the state of repayment of the loans.

The 26 firms have been equipped under two separate grant/loan agreements; that is:

(a) The Fourth Highway Project - IDA (a loan in US Dollars) - 21 Contractors.

(b) Programme of Action to Mitigate the Social cost of Adjustment (PAMSCAD) (a grant in Cedis) - 5 Contractors.

The Programme used to fund the Contractors

The 4^th Highway Project or Road Rehabilitation and Maintenance Project was aimed at supporting Ghana Government's effort at rehabilitating and maintaining the road network in the country. Part of the loan was used to equip local contractors to enable them perform well.

The project was US$ 40 million with only about US$ 6 million - US$ 8 million going into the development of the labour-based technology. The 4^th Highway Project was effective from 1/11/85 360 30/6/91.

The PAMSCAD: the PAMSCAD programme aimed at supporting Ghana Government's social programmes to alleviate social tension resulting from the adoption of structural Adjustment Programmes. Funding for the programme came mainly from donors. Part of the grant was given to the Department of Feeder Roads (DFR). DFR used the fund received to train and equip 5 contractors who now work full time. These 5 contractor now provide employment to between 600-800 workers daily, thus fulfilling the PAMSCAD objectives.

The funds were loaned to BHC by Ghana Government at 8% (in dollars). BHC used these resources to bring in the places of equipment and then hire-purchased these to the selected/trained contractors.

The PAMSCAD fund was a grant to DFR. DFR then contracted the BHC to manage the fund on its behalf for a fee.

Again BHC has the free hand to bring in the pieces of equipment and hire-purchased these to the contractors previously trained by DFR under prevailing banking terms and conditions.

Terms and Conditions under which Bank for Housing and Construction Hire-purchased the Equipment to the Contractors

Extracts from agreements signed with BHC show the following details among others:

The 4^th Highway Project

Foreign Exchange Risk

The contractors were made to bear the full foreign exchange risk. At the time of receiving the equipment in 1987/88 the cedi-dollar parity was one US$ to 175 cedis. In December 1992 that parity was one US$ to 519 cedis. An increase of 79%.

The full impact of the foreign exchange risk was softened through the insertion of contract price adjustment formula in each contract. The contract price was adjusted on monthly basis. This was the changes in prices of materials, labour costs and changes in US Dollar - Cedi parity were captured and corrected for the large extent.

Interest Rate of 20% on US Dollar Loan

The biggest change the Labour-based Contractors faced with the high interest rate of 20% on the dollar loan. The interest rate was so high that efforts to pay back the loan have proved futile as indicated in the Table 1A.

The high interest rate was what was agreed between the Government of Ghana (GOG) and international Development Association to charge the contractors as contained in the sub-loan agreement between GOG and the Bank for Housing and Construction (BHC). Thus the BHC did not have a hand in fixing the rate and therefore cannot be blameable. It is interesting however to note that, the sub-loan agreement between GOG and BHC on-lent the fund to BHC at 8%.

Table 1A: Repayment of Loans by Contractors

The PAMSCAD Project

Foreign Exchange Risk

There was no foreign exchange risk passed on to the contractor. The loan was wholly cedi. In addition, the contract price adjustment formula was inserted in every contract. Thus changes the prices of materials, labour and dollar Cedi parity were cushioned off to a large extent.

Table 1B: Repayment of Loan by Contractors

Payment of Loan

The 4^th Highway Project

Despite the dismal picture in Table 1A, two of the contractors - M/s Bekel and OPM - have completed the repayment of their loans.

A credit to their business acumen more than any thing else since the adds weighed heavily against them like every one else. The 19 have woken up to the danger they faced and are doing all they can to reverse the situation. A series of meetings have been held with the bank involved i.e BHC, and the outstanding debts have been re-scheduled:

It is proposed that those contractors who still have heavy amounts to pay will have their debt in dollars converted into cedis and therefore will remain fixed except for the interest.

On the other hand, who have little to pay back will do so in dollars

Comments

The lessons learnt are obvious. In an unstable economy such as we have in Africa generally, care should be taken to avoid the type of agreements we had; to load a small scale local contractor with a dollar loan at 20% was unfair! But in 1988, this was not obvious. Now this is known and all efforts should be made to avoid contracting this type of loan. Preferably, the loan should be denominated in local currency. This way, the contractor will only have the interest on the local currency to deal with and not the interest and the foreign exchange risk combined.

Scheduling and Repayment of Loan: PAMSCAD Project

Having ensured that the equipment loan agreement of the small-scale labour-based contractor is fair and just, let us turn our attention to the repayment of the loan in a situation where the fund belongs to the road agency and the bank has been hired to manage it. Table 2 below shows a real life situation involving one of the labour-based contractors in Ghana. Table 2 is to be studied together with Table 2B - Repayment Schedule.

Table 2B: Repayment Schedule

DFR-PAMSCAD PHASE 1

Item 1 in Table 2 is quite revealing. The contractor presented a cheque for c5 million to the bank and only a million cedis was taken out completely ignoring the repayment schedules attached to the loan. The net of the under-deductions is that the contractor's arrears to the bank stood at c28,804,421.00 as at 30/6/93.

The impression being created here is that the project is not viable. This is very far from the truth! What is presented here is a private unofficial arrangement between the contractor/Businessman and the Bank to manipulate the system.

The way out is for the road agency to:

(a) keep in constant touch with the Bank;

(b) request repayment schedules on each contractor. The schedules must be kept up to date at all times;

(c) prepare two (2) cheques each time. One cheque reflecting the amount due to the Bank.

This should go straight to the Bank. The second cheque goes to the contractor.

Conclusion

In this short paper, an attempt has been made to highlight some pitfalls inherent in introducing the private sector into the labour-based technology system. Firstly, was the type of equipment loan agreement that should exist between the contractor and the local bank. As far as possible, this should be denominated in Local Currency. Passing on the Foreign Exchange Risk to the contractor will create quite a problem for him, though this is not insurmountable. In this regard, the use of price adjustment formula in the contract for the civil works is crucial. The other area to watch is the repayment of the loan. Whatever schedule is attached to the repayment of the loan. Whatever schedule is attached to the repayment of the loan should be observed as far as possible.

In support of this, the road agency and the bank should meet from time to time to review strategies in support of the programme for the repayment of loan.

With these problem areas taken care of, I do not see why the loan cannot be paid back in four years or less.

The greater danger when it comes to repayment of the loan has to do with the attitude of the contractor and the large extent, that of the Bank Manager. As long as both have the commitment to clear the loan, this certainly could be done within four (4) years. Where there is no commitment on their part, then the Road Agency should extend its supervisory role to the bank as well to ensure full loan repayment.

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VI. Earth Roads; Team Task Calculation Aids

Introduction

The first labour intensive project in South Africa in modern times to the writer's knowledge was begun in 1985 near Durban. It was sparked by a visit by the writer to Botswana in 1982 where he saw the pilot road project between Serowe and Shoshong being build under the supervision of Robert Mc Cutcheon, who was then employed by the ILO. On arriving in Durban the writer suggested to The Valley Trust, an NGO outside Durban, that they should start a similar project in the Valley of 1000 Hills where they were located, to which they agreed. After two years of research funds were eventually obtained and the first road was built under the writer's supervision. The project was successful and since then The Valley Trust has continued to build roads using a formula which has not changed much. This type of project has since spread across the country.

1. The method which the writer uses is to work in teams and to set tasks for a whole team, not individuals tasks. The method of working is listed below:

2. Remove topsoil and grass and stockpile to one side.

3. Put in centre-line peg in peg at top of backslope at start and end of each team task.

4. Cut to fill until the correct cross-section is achieved. N.B. The centre-line height is unknown at the beginning. If the original ground is uneven some cut to fill in a longitudinal direction is necessary.

5. The camber of the road must be achieved toward the end by using two templates with a level and straight edge. The earth must be rammed to consolidate it a much as possible if a compactor is not available. The side drain shape must also be achieved by checking frequently towards the end with two side-drain template and a straight edge. Check that the transition with the next team is smooth.

6. Spread the topsoil on the fill slope and replant the grass.

7. Ask the supervisor to inspect the completed task. Permission to go home is given if the task is satisfactory.

The above method includes the following tasks:

Here L is the length of road completed by 1 person in 1 day

B,C, and T are defined in Section 8

The problem is to calculate L.

Slots must be cut at least one day before the task is set. From the slots the supervisor must estimate:

T the thickness of black topsoil unsuitable for the road

B the width of the topsoil

H, I, and J the proportions of the cut which are soft, medium and hard respectively

(H + I + J = 1,0)

Items 5 to 9 include quarrying, loading, hauling and spreading. These should be given to a separate team when required.

Determine whether the cut cross-section is more rectangular or triangular.

Calculate C = W.D. or 1/2.W.D = f

Area of topsoil in cross-section = B.T

Where C₁, C₂, and C₃ are constants and cross-section area = A.D.W.

Two sets of charts are produced, for A = 0,5 and 1,0. The Supervisor thus has to measure Depth D and W and decide whether the cut is more triangular (A = 0,5) or rectangular (A = 1,0).

Note that if the tasks are not confidently known for each activity the table can be compiled empirically by selecting three values of L based on experience.

These are substituted into the equation to give three simultaneous equations with unknown C₁, C₂ and C₃, which are then solved. Then the equation is used to find the remaining values in the table.

Table 1:
5 Person Team Task for one day
Triangular Cross-section
Soft ground
L = 5/(0,2.DW + 0,22)m

Table 2:
5 Person Team Task for one day
Triangular Cross-section
Medium ground
L = 5/(0,27.DW + 0,22)m

Table 3: 5
Person Team Task for one day
Triangular Cross-section
Hard ground
I = 5/(0,6.DW + 0,22)m

Conclusion

A calculation method and resulting tabular presentation has been given for the basic road construction task. It can also be used for pure maintenance where there is no excavation required. It has been found suitable for supervisors with a low level education and training, and results in roads of a satisfactory standard.

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VII. A Review of Recent Labour-Intensive Construction in South Africa

On his return to South Africa late in 1987 the author began to explore the extent to which the success of the programmes in Kenya and Botswana could be replicated in South Africa. Initially the author assumed that replication would only e feasible in rural areas because South Africa was far more industrialized and thus heavy equipment was readily available together with the operation and maintenance systems for achieving high productivity.¹ Subsequent experience in South Africa has led to the conclusion that the degree of dislocation between the industrialized portions of South Africa and the remainder, means that the scope for labour-intensive methods in much greater than appeared at first sight, this view being strengthened by social and political factors.

Other conclusions have been derived from experience related to labour-intensive construction in South Africa itself. Through extensive involvement in some projects, limited involvement in others and observation of the remainder, the author has been able to gain a broad perspective of the recent development of labour-intensive construction in South Africa from its beginnings in a few brave initiatives to the present where hundreds of millions of rand are being spent on so called labour-intensive work.² The author will first provide a brief review and then focus upon the initiatives which have involved the greatest expenditure.

In the early to mid-1980s odd pilot projects of rural road construction were initiated in the Transkei and Kwazulu.³ These projects demonstrated that in South Africa labour-intensive methods could be used for low-volume rural road construction. However, none of these projects progressed beyond the construction of a short stretch of road. This is because they had been carried out on an ad hoc basis: the organizations responsible for the work were not linked into a regional or national institution, there was no programme for future work.⁴ Isolated pilot projects did not lead to programmes of construction.

During 1989 negotiations for a longer term programme were initiated in Kwazulu. Funded by the Development Bank of Southern Africa (DBSA) the Kwazulu Tribal Roads Maintenance Study was located within Kwazulu's institution responsible for Tribal Authorities with formal links to the Roads Branch of the Kwazulu Works Department (Roads Branch). The study led to the formation of the Kwazulu Tribal Upgrading and Maintenance Programme. Recently this has begun to develop along the lines of the programmes in Botswana and Kenya.⁵ The programme is now operational in over 20 Tribal Authorities and scheduled to expand to a further ten during the coming year and throughout all 230 over the next ten years.⁶ Policy is in place, funding has been committed, suitable posts in the process of being established and formal training will begin later this year. While progress is encouraging it must be pointed out that it has taken several years to establish the programme and many problems have had to be surmounted.

Similar initiatives elsewhere have not yet taken root in relation to rural road construction.

However, in the Transkei, starting in 1986, innovative work has been carried out using labour-intensive methods for the construction of a wide range of municipal public works in Ilinge (water supply and reticulation, sewerage reticulation and treatment, stormwater drainage and streets). Furthermore under the overall guidance of a consultant, small contractors were established and trained.⁷ In 1987 the consultant responsible for these innovations became involved in the upgrading of the water mains for the Soweto City Engineer's Department.⁸ Somewhat later this project became the Soweto Contractor Development Programme.⁹ Elsewhere one contractor has reported significant progress in relation to trenching for pipelines.¹⁰

This work has demonstrated that in South Africa labour-intensive methods may be used for a wide range of civil construction. In the case of replacement of water mains and pipeline trenching, it has been demonstrated that the quality, cost and speed are comparable to equipment-intensive methods. The work in Ilinge and Soweto has also shown that small contractors may be developed capable of using labour-intensive methods. The main weakness of the work in Ilinge and Soweto is that it was project based - there was no long-term programme (learning curve, training, overheads).¹¹

Turning from projects to research for a moment: research in the Department of Civil Engineering at the University of the Witwatersrand indicates that labour-intensive methods may be used for surfaced roads in urban areas and that significant employment opportunity may be created.¹²

In the meantime several public authorities and development agencies have attempted to increase the use of labour-intensive methods by putting the onus upon the contractor. The contract documentation has contained exhortations to use these methods "wherever feasible" or "whenever possible". There has been a singular lack of effect. Such conscience salving exercises have not only failed to understand that the greater use of labour-intensive methods starts with the design but also that at present the contractor is bound into a socio-technical system based upon the use of equipment and this cannot be changed overnight.¹³ On the one hand the designs, specifications and documentation hardly exist; on the other, the industry does not have organizational structures, planning, procedures and supervisors to handle highly labour-intensive construction works. However, we will see below that the industry may be influenced to move in that direction but this has to be from a national perspective and not from that of one contractor engaged on a single contract.

While the above projects involved several millions of rand we will now turn to those that deal in billions: the Special Employment Creation Programme, the Strategic Oil Funds and the Independent Development Trust's Sites and Services Programme.

The Special employment Creation Programme (SECP) was launched in 1985: "to provide temporary relief to the unemployed but to refrain from giving them handouts, and to deploy them as productively as possible". This led to the commitment of large sums of money to so-called labour-intensive construction and maintenance. From April 1985 to June 1990 R719 million was spent on the programme itself and R423 million on an allied Training Programme (but the training was not linked into the SECP). Funds were still being dispensed during the 1992/3 financial year. Thus well over a billion rand has been spent through the Programme.

The entire Programme has not yet been systematically evaluated. However, various reports allow the following overall observations.¹⁴ The structure of expenditure meant that, in relation to the Programme itself, at best only half the money was allocated to the poor; in relation to the training component considerably less. In relation to projects with short term and temporary objectives:

It has been reported that long-term projects did contribute to the creation of permanent employment opportunities and physical and social infrastructure. However, no evidence has been provided as to the balance of expenditure between the short-term and permanent aspects of the programme and there is no evidence that in the latter more employment was created per unit of expenditure. Thus, despite much bandying about of the phrase "labour-intensive", observation of several projects indicates that they were actually labour-extensive.¹⁵ Of greatest importance was the fact that this money was spent through at least 28 different institutions. Despite its title, the Special Employment Creation Programme was not a programme but mainly a number of poorly conceived, unplanned, unco-ordinated projects. Its major weakness is that it was not a programme situated within a firm institutional base.¹⁶

In 1991 the South African Cabinet decided to allocate one billion rand from the sale of strategic oil reserves to special programmes and projects which would benefit undeveloped areas in particular. The overall objective was "to achieve the greatest possible degree of involvement, employment creation, meeting needs and stability through the most cost effective allocation of funds possible".¹⁷ The funds were allocated to various government departments and public sector authorities.

Once again, no scholarly review of the expenditure of the Fund has been carried out. However, it is possible to discuss progress with respect to roads to which approximately R250 million was allocated.¹⁸ Less than three months were allowed for proposals to be submitted, work had to begin within three months of approval. A preliminary survey has shown that R125 million was allocated to authorities who used it for conventional equipment-intensive projects. Of the remaining R125 million well over half is being carried out labour-extensively, while the attempts to carry out effective labour-intensive work are severely hampered by the lack of the prerequisites enumerated earlier. Similarly, one of the objectives of the IDT's sites and services projects was to create employment opportunities through the use of labour-intensive methods - given the lack of lead-in time was a similar lack in effective use of labour-intensive methods. The ineffectiveness in relation to labour-intensive construction was not the fault of the executing agencies, apart from a lead-in time of 3-6 months. By contrast for a R100 million road project at least two years' planning and preparation would be allowed.

The above review reveals negative and positive aspects. The vast majority of the expenditure on job creation has been unsystematic and certainly has not made effective use of labour-intensive methods (no institution, no training). The majority of the so-called labour-intensive work has either been conventional construction (i.e. product with no extra employment created) or labour-extensive. However, developments in South Africa have shown that good quality, cost-effective and timely construction can be achieved for a range of work far greater than low-volume rural roads. Equally that contractors could play a role in the execution of the work, provided that preparatory work hd been done: designs, specifications, contract documentation and the training of personnel. Further expansion of employment creation in public works is limited by the lack of a long-term perspective, national planning and institutional development. Over the past year there have been some positive developments in this direction.

During 1992 a National Consultative Forum on Drought was initiated. The Forum decided to set up four Task Forces, one of which was the Employment Task Force. In tun this task force has explored short-term and long-term options. In relation to the long-term it has made recommendations as to the pre-investment work that needs to be carried out for a National Employment Creation Programme using Labour-intensive methods for the construction and maintenance of public works (water, supply, sewerage, roads, stormwater drainage and electricity). An intrinsic part of this proposal is the development of individual and institutional capacity (community, local, regional and national): extensive training is envisaged. While the full benefits of such work would be revealed in a long-term programme, the short term has not been ignored. The pre-investment work for this programme is hopefully about the begin.¹⁹

A second initiative is being championed by the National Committee of Labour-intensive Construction (NCLIC) and COSATU. Early in 1992 a member of South African Federation of Civil Engineering Contractors (SAFCEC) realised that greater use of labour-intensive methods of construction could alleviate unemployment and bring more work into an industry that had been crippled by recession, cutback in government spending and civil war. Representatives of several civil engineering industry associations (SAFCEC, South African Institutional of Civil Engineers, South African Association of Consulting Engineers, South African Road Federation) met and decided to convene a symposium on labour-intensive construction.²⁰ The author was invited take part in preparatory meetings and present a paper "Setting the Scene".²¹ The author advised that if the group were intending to take the subject seriously they should invite COSATU to take part in the symposium. This led to a series of meetings between NCLIC (which by this time included the Institute of Municipal Engineers in South Africa) and COSATU. In part this has led to the Executive Director of SAFCEC defining the industry as labour-intensive.²² More importantly this has led to the drafting of a Framework Agreement. The Framework Agreement consists of over 40 items. While each is important, in the first item the industry commits itself:

1.1 To maximize the se of labour intensive systems of construction within public works programmes, with due regard to economics.

In turn COSATU has agreed to the linking of payment to production in public works. Both of these commitments have been made within the context of community involvement in the definition of what has to be constructed, where, and in the construction process itself (not just employment creation but also skills: i.e. as much emphasis upon process as product). Training is an intrinsic part of the Agreement.²³

Are these not fundamental components of the long-term programme advocated by the Employment Task Force? Is this not the same as the long-term programme? Yes and No. All aspects of the Framework Agreement would be either critical or useful for the long-term programme. But the industry is currently equipment-intensive. Despite its assertion "to maximize the use of labour-intensive systems of construction..." it cannot restructure itself overnight. This is explicitly acknowledged in the first item of the Framework Agreement by reference to "... with due regard to economics", supplemented by the examples provided by the industry to support this position which indicate that it has yet to appreciate the extent to which equipment can be replaced by labour.

However, the author considers that, for example, in road construction the Framework Agreement could lead to the proportion of cost going to labour increasing from 10% to 15% in the short term. For example, in relation to the N1 between Johannesburg and Pretoria there were two options: 6% or 15% to labour. At that time the 6% option was chosen. The fact that there was a 15% option shows that within existing civil engineering practice it would be possible to generate employment opportunities. The author considers the Framework Agreement, if signed and implemented, could lead to such developments.¹

While not to be sneered at, it pales by comparison to the proportion of cost that could be achieved by labour-intensive methods (60%-70%).

Nevertheless the author considers the language of the Framework Agreement is sound and as such this initiative would be an ally of the long-term programme: together with other sensible and organized short-term work it would form part of the lead-in phase thus creating some employment and public works, and responding to social needs and political demands.

Nevertheless the author considers the language of the Framework Agreement is sound and as such this initiative would be an ally of the long-term programme: together with other sensible and organized short-term work it would form part of the lead-in phase thus creating some employment and public works, and responding to social needs and political demands.

Conclusion

In conclusion there are several implications for South Africa of labour-intensive construction throughout sub-Saharan Africa (i.e. including South Africa).

Specifically: rural roads may be constructed and maintained by highly labour-intensive means: 5 to 7 times more employment being created per unit of expenditure. It is also possible to create a significant increase in employment opportunities per unit of expenditure across a wide range of civil construction including most municipal or urban engineering services and using contractors. Research at this university indicates that there is a high employment potential in urban road construction, for example.

The national programmes of rural road construction indicate how to establish a national employment creation programme for the construction of public works: the process resulting not only in greater employment but also in the generation of individual and community capacities in technical and institutional terms.

National programmes have been established through:

In order for greater success to be achieved in the long run a four phased approach should be adopted:

The above approach has to be located within an institutional framework: national, regional, local.

A "lead-in" time is necessary. During this lead-in period phases 1 and 2 are carried out. Below the components of the different phases are listed.

Phase One

Education and agreement at national regional and local levels as to:

(i) Concepts and Objectives: asset creation plus significant additional employment opportunities per unit of expenditure;

(ii) Nature of long-term "programmes";

(iii) Conditions of employment, wages and linking of payment to production. Brief local and national authorities as to type, standard, funding and method of construction; the importance of training, institution (local and national), long-term political and financial commitment.

Agreement that labour-intensive public works programmes are not emergency or drought relief projects.

Draft long-term programme.

Phase Two

Analysis: institution (local and national); organization; levels of funding; specific technical analyses; criteria for staff recruitment; identification of initial communities and training sites.

Preparatory Work: design, specification, documentation; administrative, technical and training manuals; selection of trainees; briefing of communities; priorities.

Revise forward plans.

Phase Three

Orientation and training of trainers; start pilot projects and embryonic training programmes; revise training and national programmes; revise manuals and reporting systems prior to initiation or large-scale national programmes.

Phase Four

Expand initial training programmes within each sub-sector into a national programme. But the expansion should only be allowed to proceed in the following manner:

(i) at the rate at which the training programme can produce skilled site supervisors and managers (training must pay as much attention to character as technical competence);

(ii) to the degree to which local communities have the capacity to absorb the trained personnel;

(iii) to the degree to which the national institution is able to absorb the trained management personnel and maintain its overall planning, co-ordinating, monitoring and evaluation role.

Through the "programme" approach (as opposed to "project") the institution is established together with the human resources required to implement the work from site level through to national planning and co-ordination.

The four-phased approach, outlined above, is the result of many years of experience and analysis.

Although it has a proven track record that does not mean that it will be adopted in South Africa. The World Bank has recommended that where no previous experience exists a start-up period of at least three years should be considered.²⁴ But in the present political climate even policy makers who are sympathetic towards labour-intensive construction are reluctant to face the reality of the need for a lead-in period. Policy makers who are only concerned with jobs and have little interest in product have even less appreciation of the need for a start-up period. It is recommended that the dilemma be resolved through (i) initiating a long-term employment creation programme and (ii) at the same time taking advantage of the Framework Agreement and other sensible, short-term initiatives for immediate impact. And that the programme is not treated as emergency-relief. In this way the process of labour-intensive construction could indeed make a contribution to alleviating unemployment and generating individual and community skills in technical and institutional terms.

So much for specific conclusions. More generally, the author wishes to close with the following comments.

The review of the projects and programmes in South Africa that have purported to use labour-intensive methods reveals that they were largely unplanned, resulting in the labour-extensive production of ill-defined products of doubtful value through processes which did not lead to individual, community or institutional capacities. This darker side is partly the result of the unplanned nature of the projects and programmes, but on reflection it seems to be based upon a fundamental lack of appreciation of the worth of manual labour and the need to develop individual and community skills. Frequent exposure to these attitudes has led me to conclude that one of the major stumbling blocks is the perception that labour-intensive work is simple work by simple people in simple places using simple tools and, therefore, there is no need for sophisticated people to take the matter seriously - consequently no need to plan; no appreciation of the need for development of skills. Putting it another way, to consider a person who can move 5 to 7 tons of material in a day 'unskilled' is a measure of the lack of understanding of: (i) the individual skill necessary to achieve such a task; and (ii) the commitment, training and organization required to enable a worker to become so productive.

In South Africa a long-term 'programme' approach to labour-intensive construction and maintenance of public infrastructure could alleviate the unemployment problem (not solve it), and contribute to individual and institutional capacity building at local, regional and national levels.²⁵

1. R.T. McCutcheon, "Labour-intensive Road Construction and Maintenance: the Implications for South Africa of Other Sub-Saharan Experience", Developing Countries: Civil Engineering and Transportation Convention, Financing and Managing of Road Resources, Vol. 4c (Pretoria: Organizing Committee SAICE ATC88, CSIR 1988), 31-22.

2. R.T. McCutcheon, "Employment Creation in Construction in South Africa: The Potential and the Problems", Annual Transportation Convention 1993, vol. 3b Labour-based Construciton (Pretoria: ATC, June 1992) 1.1-1.41.

3. S.B. Solinjani, S.D. Sadoro, M.Y. Addae and M. Vunguvungu, The Transkei Labour-based Access Roads Construction and Maintenance Programme Main Findings (Umtata; UNITRA Bureau of Development Research and Training, June 1989).
   R. Geddes, Guidelines: Road Layout for Developing Communities. Literature Review, technical Report RTV/21 (Pretoria: CSIR NITRR, 1985).
   R. Little, "Labour Intensive Road Construction in the Valley of a Thousand Hills", Annual Transportation Convention, CSIR, Pretoria, Vol. 2A (Pretoria; CSIR, 1987).

4. R.T. McCutcheon and . Veldman, "Tribal/Rural Access Roads: the Development of an Institutional Framework of Labour-intensive Road Construction and Maintenance", Tenth Annual Transportation Convention 1990, CSIR Convention Centre, Third World Issues, 3C Papers (Pretora: ATC, August 1990), 8.1-8.16).

5. R.T. McCutcheon and R. Little, "Practical Guidelines for the Establishment of a Rural/Tribal Capacity to Construct and Maintain Roads by Labour-Intensive Methods", Annual Transportation Convention 1991 Developing Areas 4D (Pretoria; ATC CSIR, 1991), 2.1-2.19).

6. Personal Communication. C. Ware, Kwazulu Engineer, to author, 1993.

7. J. Croswell, "Labour-based Construction at Ilinge, Republic of Transkei", Labour-intensive: Practical Details for Success 31 October and 1 November 1989 (Johannesburg: University of the Witwatersrand Department of Civil Engineering/CEE, October 1989), 14pp.
   S. Phillips, D. Meyer and R.T. McCutcheon, "Employment Creation, Poverty Alleviation and the Provision of Infrastructure: Lessons from the Labour-based Construction and Municipal Services in Ilinge", Urban Forum, Vol. 3 No. 2 1992, 81-113.

8. J.Croswell, "Proposal for the Construction of Certain Works at Soweto Using Labour-based Methods", Croswell September 1987 included in readings for Labour-Intensive Construction: Practical Details for Success 31 October and 1 November 1989 (Johannesburg: University of the Witwatersrand, Department of Civil Engineering/CEE, October 1989), 14pp.

9. R.B. Watermeyer (ed.) Contractor Development in Labour-based Construction (Johannesburg: The Contractor Development Team, 1992).

10. T. Loots, "Report of Practical Experience in Labour-intensive Construction", Labour-intensive Construction: Practical Details for Success 31 October and 1 November (Johannesburg: University of the Witwatersrand, Department of Civil Engineering/CEE, October 1989), 4pp.

11. Phillips, et al., 1992, op. cit.

12. S. Phillips "The viability of reintroducing water bound macadam as a base course for roads in South Africa using labour-based construction methods."
    (Johannesburg: University of the Witwatersrand, Department of Civil Engineering, Unpublished M.Sc (Eng.) Project Report, 1992)

13. S. Phillips, R.T. McCutcheon and D. Meyer, "The Viability of Re-introducing Water-bound Macadam as a Base-course for Roads Using Labour-based Methods", Annual Transportation Convention 1991, Vol. 4b, Pavement Engineering. (Pretoria: CSIR 1991), 2.1-2.18.
    S. Phillips, R.T. McCutcheon and D. Meyer, "The Use of Waterbound Macadam Basecourses for the Labour-intensive Construction of More Heavy Trafficked Roads in Developing Areas", paper presented at the 12^th International Road Federation World Highways Conference held in Madrid, Spain, 16 to 21 May 1993.
    S. Phillips and R.T. McCutcheon, "Theoretical Analysis of the Comparative Cost of Labour-based and Machine-based Construction of Primary Distributors", in preparation.

14. McCutcheon, June 1993, op. cit. 12-30.

15. F.V. Viljoen, et al., Evaluation of the South African Special Programmes for Creating Employment. Research Report No. 8. (Sandton: DBSA, 1987).
    L. Kritzinger-Van Niekerk, "Public Works Programmes in South Africa", paper presented at a COSATU Seminar, "One Million Jobs by 1992", Park Lane Hotel, Johannesburg, 22-23 August 1991.

16. See for example: P.A. Pienaar, M.S. Phupheli and A.J. Pienaar, "A Comparison of Management Approaches on labour-intensive Porjects". Annual Transportation Convention 1993 Volume 3B Labour-based Construction (Pretoria: ATC, June 1993), 2.1-2.19.

17. C. Cook, M. Beenhakker and R. Martwig, Institutional Considerations in Rural Road Projects World Bank Staff Working Papers Number 748 (Washington: World Bank, 1985).

18. State president F.W. de Klerk, Speech to Parliament, Cape Town, 29 April 1991.

19. S. Phillips, M.R. Greyling and R.T. McCutcheon, Labour-intensive Road Construction Funded from the Sale of Strategic Oil Reserves: The Vital Issues. Project Report PR 93/780 (Pretoria: Department of Transport, May 1993).

20. Employment Task Force, "National Employment Creation Programme for the Provision of Public Infrastructure using Labour-intensive Methods of Construction. Draft Proposal for Pre-investment Work". (Johannesburg: National Consultative Forum on Drought, Unpublished, February 1993).

21. National Committee for Labour-intensive Construction (NCLIC) The Search for Guidelines on the Appropriate Use of Labour-intensive Methods in Construction. Proceedings of the Seminar held at the University of Cape Town on 14 April 1992 (Cape Town: NCLIC, April 1992).

22. R.T. McCutcheon, "Setting the Scene" in NCLIC ibid.

23. W. Vance, "Towards a Policy for Developing Labour-intensive Costruction', in Outlook for Costruction: A Mini-seminar o Address Construction Opportunities and Strategies in the Year Ahead 9 September 1992 (Midrand: BIFSA, 9 September).

24. NCLIC-COSATU-South African National Civics Organization (SANCO), "The Framework Agreement for Public Works Projects using Labour-intensive Construction Systems", (Johannesburg; NCLIC-COSATU-SANCO, 22 June 1993).

25. B. Coukis (Principal Co-ordinator and Contributor), Labour-based Construction Programs: A Practical Guide for Planning and Management (London: Oxford University Press for the World Bank, 1983).

26. R.T. McCutcheon, "Employment Creation in Public Works. Labour-intensive Construction in sub-Saharan Africa: The Implications for South Africa", Inaugural Lecture, University of the Witwatersrand, 25 May 1993, Urban Forum, Volume 4, No. 2, 1993 (forthcoming).

27. The Framework Agreement between NCLIC, COSATU and the South African National Civics Organizatio (sanco) was signed on 22 June 1993.

Introduction

Most labour-based road works have previously been public works schemes carried out by force account. In recent years, there has been a move towards an increased involvement of the domestic private sector in the execution of road construction and maintenance works using labour-based methods.

When involving the domestic private sector in the execution of labour-based road works, there are several important issued which need proper attention during project design and implementation. Contractors will not provide an easy solution to road construction and maintenance problems. Caution should be taken so as not to be pushed too fast by Thatcher-like ideas. The development of small-scale contractors entails a series of new activities such as training in business management, development of user-targeted training material, development of contract procedures, streamlining of payment procedures and developing banking facilities.

Experience has also shown that while the involvement of the private sector may come easily in some countries, there may be an initial reluctance towards this concept in other places. People's mentality towards these concepts is governed by the political and economic environment which results in a totally different environment from one country to another.

Training is a key element in the development of small-scale contractors for labour-based road works. The training programme usually includes both government staff and personnel from the contracting firms ranging from general management staff, plant operators, store keepers and site supervisory staff.

Training of contractors is usually provided by the Government with financial assistance from a donor. The contractor receives the training of his/her staff free of charge. In addition to staff salaries and accommodation, they are usually only obliged to pay an enrolment fee (approximately US$ 100). This serves as a guarantee for the full commitment of the contractor to the training programme.

Contractor development programmes in the region have followed two major training approaches. In Ghana, the Department of Feeder Roads decided to train the contractors in all types of labour-based road works ranging from routine maintenance to new construction in one training programme. In Lesotho, the strategy chosen has been to follow a step-by-step training approach by first training the contractors in executing routine and regravelling works, where only the best performing firms are awarded the larger regravelling contracts. The involvement of the private sector in rehabilitation works is only expected after the road maintenance training programme has been completed.

The Improve Your Construction Business Programme has produced a series of publications which are relevant for small-scale road contractor development programmes. This material was originally developed for the building construction industry and therefore needs to be modified before it can be used in training programmes for labour-based road sector programmes.

ILO's three volumes on Interactive Contractor Training were used in the small-scale road contractor development programme in Kenya. The training material used for the small-scale contractor development programme in Lesotho is also based on literature development for the Improve Your Construction Business Programme. However, this material is not suitable for the training of local consultants for involvement in labour-based road programmes.

A key element in small-scale road contractor development programmes is the involvement of the government line agency at all stages of implementation and training. When the contractor training programme commenced in Ghana, ministry officials were always present, thus facilitating their integration into the programme.

In the Kilimanjaro contractor training programme in Tanzania, the Government as yet has not provided any counterpart staff for training, and is therefore in no position to play its full role yet. In the mean time, the National Construction Council (NCC) has been engaged to manage the trained contractors. The daily supervision of the road works is now carried out by the NCC in close collaboration with ILO technical advisers. Eventually, a contracts management capacity will have to be established in the Regional Engineer's Office. At that stage the NCC, which has been the counterpart agency for this training programme, can revert to an advisory capacity. It is expected that the ATATAP project may improve this situation.

The involvement of domestic consultants in labour-based roads works is still an area which has not been looked into very much. There is considerable scope for involving local consultants in the implementation and monitoring of road projects executed by small-scale contractors. For this purpose, specific guidelines for the consultants need to be developed. However, when such initiatives are taken, it is important to do this in a co-ordinated manner, in the same way as the approach has been for the training of contractors where the ILO has provided a co-ordinating role.

In South Africa, several local consultants have already been involved in the implementation and supervision of labour-based projects. The University of Witwatersrand has produced interim guidelines for consultants on how to manage labour-based construction projects.

It is important that newly established labour-based road contractors are registered by the Government and certified to carry out a certain type of contractors. Experience show that in some countries it is easy to accommodate the labour-based contractors in the existing classification of construction firms, while in other countries it is necessary to establish new categories of contractors for this purpose.

As an example, the licensing procedures in Tanzania are very flexible, allowing for a wide range of contractors, while in Ethiopia the procedures are very rigid and require a high liquidity from the contractors. In Ghana, the labour-based contractors were not originally classified, and a special category had to be established before they could be certified.

Payment Procedures

Due to a limited access to capital, small-scale contractors are vulnerable to cash flow distortions caused by late payments. on labour-based projects a considerable portion of the total costs are related to labour wages. When the contractor is unable to pay the workers on time, site productivity is seriously hampered. This is an issue which must be seriously addressed by the project management in order to ensure that the contractors achieve the expected productivity rates, in the worst cases, are not forced into bankruptcy.

In Lesotho, an important part of the pilot project has been to establish efficient procedures ensuring that the Government process payments to the contractors in time.

In exceptional cases, when Government fails to pay a contractor in time, the contractor can obtain short-term loans with security in the payment certificate. However, this is only possible once the contractor has established a good business relationship with a private bank.

Selection of Contractors

In Ghana, the size of the contractors was crucial for the identification and selection of contractors to receive training in labour-based technology. the programme targeted contractors who would use labour-based methods as a source of livelihood. The large contractors were not interested in the labour-based road contracts since these contracts were considered to be too small.

Kenya used the same criteria for selection of contractors, namely:

Some of the contractors had previous experience from the building industry, others were transport contractors.

During the first trial contracts, the contracts were given fixed rates. the second batch of contracts were distributed after competitive bidding. Six contracts were offered to 10 bidders.

Firms providing bids which were 50% below or above the original estimates, or if they did not comply to tender specifications, were disqualified.

Supply of Contracts

When developing small-scale contractors to implement labour-based roadworks, it is important that the road authorities would be able to supply a steady amount of works to the newly established construction firms. In order to defend their investments in staff and equipment, a firm Government commitment on future work prospects is required.

When the contractors are well established, they will also look for assignments in other sectors, thereby reducing the dependency on the roads authorities. Secondly, it is envisaged that the labour-based contractors will eventually be able to bid successfully on works which are not embarked for labour-based methods, competing with traditional equipment-intensive firms.

The Role of Private Banks

From the experience in Ghana, it is evident that the project management should be fully involved when negotiating the loan conditions offered to the contractors by the private banks, thereby avoiding unreasonably high interest rates being claimed by the banks.

Furthermore, the banks may insist on a repayment schedule which is in conflict with the interests of the project. it is thereby strongly recommended that the project staff closely monitor the schedule of repayment of the equipment loans.