Firm on the ground
Roadcrete Africa is a company that does what its name says: its core business is roads and its focus is on the fundamental infrastructure essential to South AfricaÔÇÖs future. John OÔÇÖHanlon spoke to managing director Gregory Badenhorst.
Twenty-one years after its foundation in 1987 at Boksburg near Johannesburg, Roadcrete celebrated last year by joining Basil Read, one of South AfricaÔÇÖs leading construction groups. The company had built a strong brand identity and sound reputation as a low cost, high quality road and infrastructure contractor, and its ÔÇÿfamilyÔÇÖ culture was shared by the larger group. Today it is a wholly owned subsidiary, operating as an independent entity. While it frequently carries out the infrastructure part of larger projects with Basil Read either as a subcontractor or a joint-venture partner, it continues to tender independently.
With the upswing in the economy in the 2000s, Roadcrete was well-positioned to capitalise on the resultant infrastructure spend and has shown consistent year-on-year growth over the past five years. In August 2006, the company entered a partnership with Sangena Investments to form Roadcrete Africa. The merger transformed Roadcrete into a BEE (black economic empowerment) construction company and after the entire equity was purchased by Basil Read, two Sangena executive directors remain on its board.
Most people outside of South Africa would expect a construction company operating in the northern part of the country to be single-mindedly focused on getting the country ready to host the FIFA World Cup next year. ThereÔÇÖs a lot of activity around that highest-profile of events, but it has rather distorted the worldÔÇÖs view of South Africa, which is enjoying something of an industrial and social boom despite the recession.
Undoubtedly, Roadcrete has picked up a certain amount of work directly connected with the World Cup; for example, it is building access roads at the remarkable new ÔÇÿgiraffeÔÇÖ stadium at Mbombela near Nelspruit. This work is part of a joint venture with Basil Read, but as RoadcreteÔÇÖs managing director Gregory Badenhorst points out, infrastructure development will continue long after the World Cup is over. As indicated in South AfricaÔÇÖs 2009 budget, the government expects to spend around R787 billion (Ôé¼70.7 billion) over the next three years on its Public Infrastructure Investment Programme.
Much of this is being spent on improving the national trunk road system through the South African National Roads Agency (Sanral). Sanral raised more than R4.6 billion in 2008 to fund current projects including the Gauteng Freeway Improvement Programme (GFIP), and will raise a further R25 billion in debt finance over the next two years to support its continuing drive to upgrade and improve critical road networks.ÔÇ£We are busy at the moment with some fairly large national projects,ÔÇØ says Badenhorst. ÔÇ£We have three current at present: rehabilitation of the N1 between Orange River and Springfontein, worth about R250 million; and part of the GFIP, which is worth R380 million. The third is the R30 from Glen Lyon to Brandfort, with a value of R330 million.ÔÇØ The first of these involves upgrading a section of South AfricaÔÇÖs main north-south highway; the second is a joint venture with Basil Read to carry out a 29-month contract to widen and upgrade two sections of the N1 included under phase one of the GFIP.
Sanral is also the customer for the work Roadcrete is carrying out on the new state-of-the-art Zebediela Traffic Control Centre ┬áin Limpopo Province, worth some R120 million to the company. ÔÇ£Sanral is one of our two biggest customers; the other is the Gauteng Department of Public Works,ÔÇØ says Badenhorst. ÔÇ£We are doing two projects for them at the moment, which are basically different sections of the same road, the K29 and its continuation up towards Lanseria Airport.ÔÇØ The two projects alone for Gautrans, as the department is known, have a value approaching half a billion rand, emphasising the importance of the core business to Roadcrete going forward.
But as road building declines and SanralÔÇÖs budget gets smaller, Badenhorst fears that some of this business may disappear. Strategically, roads will always provide a large element of the turnover, but much of the companyÔÇÖs future growth will come from infrastructure development, particularly in association with housing. The recently appointed housing minister Tokyo Sexwale has pledged to build 2.5 million homes by 2014, a promise that has gained BadenhorstÔÇÖs attention. ÔÇ£To build houses you need infrastructure and we are going to position ourselves to get a piece of that action.ÔÇØ Most of this will be in Gauteng, South AfricaÔÇÖs most populous province around Johannesburg. But other areas need to be looked at too, he says. ÔÇ£I am interested in the Eastern Cape because there is a huge housing backlog there as well. One thing is certain: we canÔÇÖt rely totally on road works. Of course we have always taken on infrastructure projects but I would eventually like to see fifty per cent of our income coming from that department.ÔÇØ
Commercial development will have its place too. Basil Read has its own development arm, and Roadcrete is involved in two such projects, one at Cosmo City, a massive mixed development north of Johannesburg, and the Klipriver Business Park, where Roadcrete is providing water runoff and sewerage facilities as well as roads. ÔÇ£It makes sense to keep business within the group if we can,ÔÇØ he says.
Roadcrete is autonomous both financially and from the point of view of purchasing and HR. It employs around 500 people at any one time, hiring locally as contracts are started, and using its own capital equipment in conjunction with rented plant. ÔÇ£We tend to purchase the more specialised equipment like graders and soil stabilising milling machines: at this moment I have probably about R50 million-worth of equipment on the books. But we hire the more run-of-the-mill plant like tipper trucks, for example. Then when itÔÇÖs not needed we can hand it back and not carry the cost on our books.ÔÇØ
Roadcrete continues to expand at a rate that its counterparts in Europe would envy. Badenhorst expects turnover to rise 50 per cent this year. ÔÇ£And I expect us to continue to expand as we diversify our market strategy.ÔÇØ
As expansion gathers pace, the company will benefit from its policy of developing management through intensive in-house training, internal promotion and the provision of bursaries at universities and technical schools. ÔÇ£Our people give us our competitive edge. You can buy the right equipment, but your people have to buy in too. I want our people to have space to develop their individuality and interests, to actually want to come into work and not just think of it as a chore.ÔÇØ With 18 years of service to Roadcrete under his belt, they could surely find a worse role model than Greg Badenhorst himself.
