For many South African companies involved in construction and project management, recent times have proved tough. Projects costs and materials have at best stalled and in many cases increased, while the cost of rentals has fallen. The resulting melee is one of smaller margins, making many projects much less viable than say five years ago.
At Focus Project Management, the answer has been simple and effective: diversity into the public sector and the support that comes from a family of related businesses within the Crowie Holdings Group.
The Johannesburg-based project management business is a part of the highly successful Group that was established by brothers Clinton and Rowan Crowie back in the year 2000, as the former, Managing Director for Focus Project Management (FPM), explains:
“Our function (as a holdings group) is to look at the entire property value chain and FPM strategically forms our specialist project management arm. Crowie Holdings provides integrated property solutions for companies who are able to undertake various aspects of the property supply chain but may need help with other areas. We find leases and structure development opportunities and land.
“FPM will carry out all aspects of project management and the design work and feasibility studies are all done in-house. Then when a project is ready to commence, we are able to utilize Enza Construction, another subsidiary of Crowie Holdings, for the build phase.”
Today the business is embroiled in major capital construction projects across South Africa, having opened offices in Durban and more recently in Cape Town. FPM has worked on private and public sector projects including the R2.2 billion Cape Town International Airport Rail Link, the R750 million Bridge City Shopping Centre, the R650 million Orlando Ekhaya Project (which converted an old power station into a 40,000 square metre shopping centre and the R830 million Dube Rail Station in Soweto.
Crowie says that the holding group had to grow in order to acquire successful bids on these projects:
“When the business started out, we quickly realised that it was hard to acquire large capital projects as a consulting business, so in 2003 we started to do property development on our own as we felt that we could package projects in their entirety. A year later we realised that we were creating work for other construction companies and thought that this was something else that we could achieve with the right people in place, so we added construction to our portfolio.”
Today the business is thriving, with a balance of contracts coming from the private and public sector, often won through FPM’s excellent track record and because Crowie Holdings can provide an all-in-one solution from start to finish.
Crowie cites the completion of the MTN Innovation Centre several years ago as a big turning point: “We went from a small project management team to one with a platform to illustrate our capabilities on bigger projects, although we are still quite happy to work on smaller projects that may last a little as 6 to 8 weeks,” he indicates.
The longevity of each project is varied, depending on the size and complexity, but Crowie says that historically FPM has had a bias towards retail: “We have certainly developed skills across the Crowie Group on retail projects like shopping centres but we have also completed successful large office block work for MTM and FMB. “Another recent development has been our work with local universities like the University of Witswatersrand where we developed student accommodation, the University of KwaZulu Natal and the University of Zululand and we currently have a number of other bids out there in the universities space.”
As a 100 per cent black-owned entity, which has carefully selected its suppliers and procurement chain, FPM is well-positioned to work on Government projects as the nation strives to build infrastructure.
This has perhaps been FPM’s – and Crowie Holdings’ greatest avenue of success in recent years and it is one where a proven track record, puns aside, can prove invaluable, given the current focus on improving South Africa’s railways.
“In the past 3 years we have undertaken quite a few projects in the rail space,” Crowie says, “initially we built two rail stations and the work has snowballed into several rail infrastructure projects. Undoubtedly Government spending in PRASA makes this sector one of great potential and interest to us at present and we are now starting to develop good relationships as we complete projects,” he continues.
“The Bridge City Retail Project was initiated by us and included building a station for PRASA and then a rail link. We had to bring the rail tracks to the centre and projects like this can involve different parts of the holding company,” Crowie adds.
To date, this project has cost in the region of R2 billion but Crowie suggests that there are further phases involving the shopping centre and residential aspects that could ultimately mean that the project costs R3 billion upon completion. FPM hopes to have completed the rail link by May 2013, but Crowie believes the entire project will take nearly another 5 years to finalise.
For a company like FPM, acquiring the right skills can be extremely challenging; Crowie Holdings employs approximately 300 people, while FPM has around 30 project managers – most of whom have been hand-picked, as Crowie explains:
“Our workforce is experienced in engineering, construction and urban planning and whilst there is a real dearth of skills, we have been in business for 12 years and have been able to identify talented individuals along the way, who we feel will fit well into our culture. We also have a loyal workforce and many of our staff have been with us for most of the journey.”
In recent years one of the biggest changes in the property market has been the influence of environmental design. Crowie says that FPM and Crowie Holdings have formed some key strategic partnerships that have helped both entities to embrace green design.
“We work with Liberty Properties who we know well and can trust – and together we can solve any environmental issues on projects and reduce environmental risks,” he asserts. “We are working on a couple of Green Star projects at the moment and we do expect the environmental issue to develop further.
“Within the Crowie Group we own 50 per cent of Standard and Electrical and they have also been an important partner to FPM, as their energy department assists us with energy efficiency solutions,” he continues.
FPM’s commitment to the environment has had a significant recent benefit, with the company being awarded preferred bidder status for the project management of a brand new government-run solar power plant on the Northern Cape, set to start in the second quarter of next year.
“This is a huge project and will help us to build up capacity within the group for future solar projects,” Crowie suggests. “We are linking up with a Spanish partner on this project but it is giving the rest of the group further internal capability and we hope this is the platform for us to move on to bigger projects.”
Another exciting new development is the award of a project to deliver a R600 million new High Court in Nelspruit, which is likely to take 24 months to complete. Crowie feels that public sector projects like this offer an exciting new avenue for FPM:
“This is the first project of this kind that we have worked on and we have not worked with the IDT of Department of Justice previously. If you are able to provide the right type of service for government and can focus on delivery it gives you a good reputation and we want to continue to be seen to deliver.”
Investment in two software packages plays an important role in making sure the company’s efforts are seen in real-time by the client.
“We run two collaboration project tools – one called Teamwork and the other supplied by a local company called Onsite IMF. Both packages provide critical data that helps us to decide margins on projects and improve our communication with the customer,” Crowie explains.
Those margins are critical to determining whether a project is viable, in a market that became depressed with the global economic downturn and more stringent risk assessment by the lenders.
“Access to funding in more challenging but we have found that many of our commercial projects are viewed as less of a risk than perhaps residential,” Crowie reveals. “With commercial work there are often leases signed by blue chip companies and large retail tenants, which offers the banks a little more sense of security and can improve funding accessibility.
“A bigger concern to us has been the rise in costs which have affected margins. There is any amount of competition out there meaning tenants have a choice and rentals came down with the downturn in the economy. The problem was that construction costs went up at the same time which has meant we have to scrutinise finances on each project more closely, to ensure viability.”
Despite the pressures, Crowie remains extremely upbeat, while diversifying into government work has allowed FPM to enjoy growth.
“As a group we are able to drive prices down through our vertical approach and all the time we are adding new knowledge through new ventures like the solar power project. We were able to switch our focus to a hybrid of private and public sector projects, especially on the rail side. Government spending has kept us alive and allowed us to grow not only with PRASA but also the universities.
“We continue to hire people and recently completed the acquisition of a business called Rutherford, which was formed in partnership with Archie Rutherford Construction – and offers us new capabilities in the civil engineering infrastructure market.”
The future is very bright for FPM and having completed a project (in collaboration with Liberty Properties) in Lusaka, Zambia, Crowie says the company has further ambitions across the sub-Sahara region:
“Given the cultural challenges of overseas work, we will look to form partnerships and collaborations with companies, but the Zambian project, a mixed use development on behalf of the National Pension Fund, was a terrific success.
“Our intention as a group is to expand beyond South Africa and we have been awarded another project in Ghana, while Eastern Africa also offers opportunities.”
FPM has come a very long way since its days as a consultancy. Whilst Crowie doesn’t rule out additional acquisitions that would further strengthen Crowie Holdings, he ends the conversation with a contented summary of how effective the business is:
“One of the strengths of FPM is our alignment to construction and development companies and sub-contractors within the group. Clients can easily see that we aren’t just a project management company and that we have much more to offer.”