Future of SA’s construction sector bleak

South Africa’s construction sector is facing a prolonged downturn, in spite of the government’s planned massive infrastructure expenditure programme that aims to stimulate the economy post Covid-19.

David Metelerkamp, senior economist at construction market intelligence firm Industry Insight, says the outlook remains dim, although there is hope for a marginal improvement in civil investment in the medium term.

The SA Forum of Civil Engineering Contractors (Safcec) is “cautiously optimistic” about the industry’s prospects and Master Builders South Africa (MBSA) is “optimistic”.

Both highlight several problematic issues, though. Metelerkamp is not optimistic.

“As private sector sentiment continues to deteriorate, any recovery relies solely on the successful implementation of the infrastructure programme.

“Realistically such implementation is unlikely to materialise in the short term, underlying our view that the local construction sector will continue to be hampered by negative growth in the medium term and as economic growth deteriorates so will the downturn in the industry simply be prolonged,” he said.

He is more positive about the announcement by the SA National Road Agency that it is ready to implement construction projects valued at about R30 billion.

The 50 projects identified and gazetted as the next step in the implementation of SA’s infrastructure investment plan are already in the system of several local and provincial departments.

These projects are apparently ready for implementation. The terms “shovel ready” or “bankable” does get up the hopes of industry stakeholders but he believes this “is unwarranted”.

Dr Kgosientso Ramokgopa, head of the investment and infrastructure office in the Presidency, said in July “in the next three months we will be able to go into the ground … and ensure that we are able to stop the hemorrhaging of jobs in the economy”.

Safcec chief executive Webster Mfebe described these comments as “wishful thinking” because “it’s a process and it can take 12 to 24 months”.

He stressed the sector’s biggest problem is the implementation of infrastructure plans and programmes.

Projects are hampered by permitting and licensing, but he admitted there appeared to be a greater commitment by the government to address concerns raised about the technical capacity of the state to oversee projects.

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

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