Construction at crossroads

Concerns about the capacity of South Africa’s depleted and financially distressed construction industry to deliver the government’s massive infrastructure investment plan have been debunked by industry associations and analysts.

However, there are concerns about how long it will take for any of the Strategic Infrastructure Projects (SIPs) unveiled and gazetted by the government to be awarded, as well as corruption in the tender process.

The government in July 2020 unveiled the first tranche of 50 SIPs and 12 special projects that have been fast-tracked to stimulate the economy post Covid-19.

These projects form part of the government’s larger R2.3 trillion infrastructure drive over the next decade.

The capacity concerns have been prompted by the decimation of South Africa’s listed construction sector.

The listings of Group Five and Esor were removed from the JSE in June after both went into business rescue, while the future of Basil Read, another former JSE construction sector heavyweight, is also uncertain after its construction business went into business rescue in June 2018.

Gautrain Management Agency (GMA) CEO William Dachs said last week the construction industry needs a steady supply of infrastructure projects it can bank on and tremendous localisation and transformation to avoid the “boom and bust” cycle of the past.

Dachs said once the industry can bank on a consistent supply of projects, it will be hiring, training and skilling up people and companies will be able to build up their balance sheets again.

He said South Africa must not allow the infrastructure investment plan to become another boom cycle followed by a bust cycle.

However, Dachs stressed he did not believe the Gautrain network extension “will be the silver bullet that will solve all the [industry’s] problems”.

SA Forum of Civil Engineering Contractors (Safcec) CEO Webster Mfebe said the issue is not only the capacity of the state to deliver these SIP projects, but also the capacity of construction companies to undertake these projects, because there has been “a skills flight” out of the country of tried and tested engineers to other lucrative areas.

Mfebe said some companies had plant and equipment but were unable to retain these assets because they were idle and sold them to settle finance deals, or they were repossessed, while some companies have gone into business rescue or been liquidated.

He warned that if the SIP projects don’t come to the market soon, the issue of the capacity of the construction industry will
be a problem.

Master Builders South Africa executive director Roy Mnisi said the construction industry still has the capacity to deliver the government’s infrastructure investment plan projects, despite the loss of a lot of professionals, especially now because there is currently insufficient work
for the industry.

“We still have big companies, like WBHO, that can build almost anything, both on the civil and the building side. The capacity is still there,” said Mnisi.

This article first appeared on Moneyweb and was republished with permission.

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