Fikile Construction: A Blue Print for Expansion

Whilst much of the construction sector in South Africa has seen a significant slow-down in recent years, Fikile Construction has very much bucked the trend. The Centurion-based business is currently enjoying phenomenal growth, as it embarks on an important new chapter in its long history.

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Jacques De Waal, Managing Director, has worked for Fikile for nearly 2 years now, but had long established links with the company, dating back 17 years, while he worked for Stefanutti Stocks. He is currently overseeing the transformation of the business:

Basically we are a construction company and our main focus is on commercial projects like hospitals, offices, retail and schools. “Fikile Construction has been in existence for 27 years and was founded by Mandla Ndlovu. He sadly passed away in 2007 and the business remained family-owned, when his daughter Hlami took over.

Because the business was (and still is) black-owned, it received a number of Government concessions and has worked on a wide range of Government projects over the years. A couple of years ago the family was considering ending its construction arm and myself and 4 other Stefanutti members joined Fikile to help restructure and reposition the business.”

With the family committed to maintaining the construction side of the business, the new board at Fikile took shape, retaining Hlami from the previous senior management team.

Each board member who was previously part of the Stefanutti core team, brings vast and unique experience to Fikile – we all have different skills and individual strengths, but it is essential that the mix is right,” says De Waal.

We have grown our annual turnover from R90 million 2 years ago to R160 million in our first year. We are now working towards the next financial year in February and turnover will exceed R350 million, with books secured up to R500 million,” he continues.

Such accelerated growth is very much against the trend in South Africa’s construction industry, which felt the force of the economic downturn in 2008 and is only now gradually starting to recover.

We are feeling very good about our achievement,” De Waal admits, “our vision is to become the biggest and best construction company in South Africa that is black-owned. It took the Big 6 companies over 60 years to get to their current levels and we want to be competing with them in the next 8 to 10 years,” he underlines.

De Waal suggests that much of the growth has resulted from a combination of restructured procurement and operational strategy. Much of the procurement work has been based around networking and ensuring that sub-contractors and suppliers meet Fikile’s BBBEE requirements.

Our short term focus is on public sector projects (at present approximately 70 per cent of our work is for the public sector and 30 per cent for private – although that figure is gradually changing and should be 60/40 next year. Ultimately we will aim for a more balanced 50/50 split between the two).

We currently operate to a BBBEE level rating of 2 which makes us very competitive for our short-term aims. Sub-contractors and suppliers do have an impact on BBBEE ratings and we have worked very closely with our suppliers to coach them and help them to understand the importance of Black Economic Empowerment in the context of work opportunities”.

Fikile has seen its numbers swell to almost 300 today – according to De Waal, an increase of 400 per cent on 2 years ago.

We have 60 permanent employees and we are trying to create a culture to attract young and ambitious candidates who will be exposed to a variety of real business situations. We want to give our employees a variety of experiences to help them grow and we felt that by recruiting guys who are more open-minded and exposed to valuable experience, we will build a workforce for our longer-term that feels very much a part of the team.”

Further evidence of Fikile’s expansion can be seen in its footprint; De Waal says that typically the business used to focus on projects in the Gauteng area, with 90 per cent of projects in joint venture with bigger companies and only 10 per cent of business being independent:

We have now down a complete 180 degree turn on that and the company works across South Africa. Whilst our head office is in Centurion, Pretoria, our medium term plan is to open offices around the country,” he states.

The biggest flagship project undertaken by Fikile was an upgrade at the Oliver Tambo International Airport in 2000, while the company also carried out work to deliver a technology centre for Sappi.

Today’s order book looks very different – part of De Waal’s strategy to focus on smaller projects that are achievable and lend themselves to valuable experience for his workforce:

We are pitching ourselves at projects totalling R60-R70 million and have 10 projects underway at present,” he says.

These vary from a mixed use development to medical warehouses, schools, hospitals and housing projects. The Government’s pledge to deliver on education infrastructure has definitely provided opportunities for us not only in construction but design.”

Compliance is important and we are in the process of attaining ISO14001 accreditation which we hope will be approved in the next 6 months,” he indicates.

As to the future, it appears the Fikile is well on the way to adding another string to its bow: civil projects. About a year ago the company formed an alliance with Big 6 player WBHO, who are helping the company to develop a civil division.

The partnership is beginning next January with a R1 billion project in Johannesburg’s Central Business District – by far the biggest project Fikile has ever worked on.

Our agreement should last around 3 years and our partnership has been forged through enterprise development which is a big focus for WBHO. At the moment our grading is 7C which allows us to bid for R40 million projects but over time we aim to increase this.

The future is something close to all our hearts; we say that the market is never good or bad – we will always focus on where the opportunity lies.

We want to compete with the Big 6 companies and we want to establish our own source of competitive advantage over the next 8 years. For that reason we are starting with the smaller projects and will position ourselves and our people with experience. We expect our employee numbers to double annually for the next 3 years and then to increase by 50 per cent a year thereafter.

As we grow, we will look to overseas opportunities – the bigger companies with R2 billion on their books have to look beyond South Africa and margins can be better in other countries. We will certainly look elsewhere in time – and Australia might offer one route. But in the shorter-term, our black-ownership gives us a local advantage,” he summarises.