INTEGRATED REPORT 2015

Material issues

The culmination of the material matter determination process is the following list of our most material issues in no particular order. Each material issue is linked to its associated risks and our strategic objectives, which are discussed in further detail in the subsequent “Strategy” section.

MARKET DYNAMICS

Each of the various sectors and geographies from which the group sources its projects has its own inherent risk profile and corresponding margins, as well as being exposed to differing effects from both global and regional economic cycles at different times. Diversification is an important way of mitigating risk and reducing earnings volatility over the long term, but requires an equally diverse set of management capabilities.

Associated risks

  • Constantly changing trading conditions
  • Rapid growth or declines
  • Political instability
  • Rand volatility
  • Over exposure to individual sectors/regions/clients
  • Procurement and execution excellence
  • Over trading in economic upturns
  • Erratic earnings and margins
  • Payment risk
  • Working capital risk
  • Erratic investor sentimentProcurement and execution excellence
  • Over trading in economic upturns • Erratic earnings and margins
  • Payment risk
  • Working capital risk
  • Erratic investor sentiment

Associated strategic objectives

  • Flexibility and diversification
  • Procurement and execution excellence

SKILLS SHORTAGES AND CAPACITY CONSTRAINTS

The construction industry is faced with a serious skills shortage at various levels and so developing and retaining skilled personnel is critical to our ability to deliver projects and grow as a company. Ensuring efficient project execution requires experienced management teams, as such, keeping our teams intact is vital to achieving our short- and medium-term objectives.

Associated risks

  • Impact on quality, delivery and reputation
  • Additional costs and delays on projects
  • Capacity constraints/excess
  • Impact on company culture
  • Loss of key personnel

Associated strategic objectives

  • Capacity and talent management

LABOUR UNREST

The construction industry employs a sizable labour force and the labour environment is often highly politicised and volatile, particularly in South Africa where disruptions are common place.

Associated risks

  • Industrial action
  • Additional costs and project delays
  • Reduced productivity
  • Negative investor perceptions

Associated strategic objectives

  • Reputation and relationships
  • Capacity and talent management

SAFETY AND ENVIRONMENTAL MANAGEMENT

Construction is an inherently dangerous, high-impact activity. We have a duty to maintain the very highest health and safety standards to ensure employee and subcontractor welfare, morale and productivity, as well as legal compliance. We also have a moral and legal obligation to minimise our impact on the environment in the areas within which we operate.

Associated risks

  • Project delays
  • Reputational damage
  • Criminal prosecution
  • Financial penalties
  • Disqualification from tendering in certain sectors

Associated strategic objectives

  • Safety and environmental management

REPUTATION AND CULTURE

A positive reputation is critical to developing and maintaining the close relationships with clients that ensure repeat work and the credibility to tender on large projects successfully.

Associated risks

  • Damage to the WBHO brand
  • Loss of clientele
  • Inability to procure repeat business • Disqualification from tender lists

Associated strategic objectives

  • Reputation and relationships
  • Procurement and execution excellence

TRANSFORMATION

Transformation is a key challenge in South Africa. The construction industry benefits from significant public spending and, as a result, transformation within the sector remains high on the political agenda of the government.

Associated risks

  • Amendments to the Construction Sector Scorecard requirements
  • Lower BBBEE ratings
  • Inability to tender on public infrastructure projects
  • Failure to meet employment equity targets
  • Sanctions from the Department of Labour
  • Additional costs

Associated strategic objectives

  • Localisation and transformation

COMPLIANCE

The construction industry is highly regulated. Regulatory and legal compliance is top of the governance agenda for the group. Compliance with the relevant legislation and regulations in each of the countries and sectors within which we operate is essential.

Associated risks

  • Reputational damage
  • Legal prosecution
  • Financial penalties
  • Deregistration from government/industry bodies

Associated strategic objectives

  • Reputation and relationships
  • Localisation and transformation