Black owned construction firms are expected to see an annual turnover between Rand 21bn ($1.6bn) and Rand 27bn ($2bn) over the next seven years through their partnerships with established firms, says a report by Fin 24 today.

Minister of Economic Development, Ebrahim Patel, made the claim while delivering an update on the progress made following a the settlement agreement with some of South Africa's biggest contractors after an investigation into government contract awards.

Seven firms are pledged to change the way they operate after being heavily fined and ordered to review their sub-contracting process in South Africa.

“Should all the targets be reached in the Settlement Agreement within the seven year period, it would result in a very significant presence by black South Africans in the construction industry,” said Patel. More than 40 black-owned companies and investment vehicles are to benefit from the transformation commitments.

Last year, government and seven construction companies implicated in collusion in various projects, entered into a multi-billion rand settlement agreement. The settlement of R1.5bn is to be directed towards socio-economic development over a 12-year period.

This was in addition to a R1.4bn fine imposed on construction companies WBHO, Aveng, Murray & Roberts, Group Five, Basil Read, Raubex and Stefanutti Stocks by competition authorities.

Firms committed to promote transformation in the sector which involves partnering with developing smaller, black-owned construction companies. They also committed to taking steps to avoid collusion and corruption in their dealings.

By the end of seven years cumulative turnover should be between R104bn ($7.8bn) and R123bn ($9.2bn). These emerging firms should generate profits between R600m and R770m annually and cumulatively over the seven years profit should be between R3bn ($226m) and R3.6n ($271), he said.

Over the past four months the seven firms have been engaging with potential partners and they are expected to finalise these arrangements before the end of the quarter.