What government should do to save the construction sector

27-03-2019
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Moneyweb
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The investment industry bemoans the state of the construction sector while watching more and more contractors fold. Construction representative bodies are calling on government to help save the industry, but what can be done?

Many commentators have been voicing their concerns about the loss of construction capacity and scarce skills within the industry. Indeed, the sector has seen large names fall by the wayside, both in terms of building and civil contractors. To a large extent, the availability of viable local construction projects is being blamed, forcing contractors to look at riskier yet more profitable projects outside South Africa’s borders. However, when one works in new environments and things go wrong, they go spectacularly wrong.

The state of a construction company reflects both its pipeline of projects and its technical expertise to execute the pipeline – in other words, the health of a construction company is measured by both its projects and its people.

Some construction businesses that are still able to keep their heads above water are reporting the loss of key personnel to international destinations. South African construction expertise has always been known for getting the job done, making competent individuals very attractive to foreign employers. So not only are we seeing construction companies struggling to establish project pipelines in an already sluggish economy, we are also seeing them struggling to retain scare skills.

Add to this the recent spate of violent attacks happening on construction sites, and the crisis takes on an entirely new form. The South African Forum of Civil Engineering Contractors (Safcec) has sent a desperate SOS plea to national government in which it highlights the violent disruption of various construction sites throughout the country. Billions of rands worth of construction is being hampered and threatened due to physical attacks on contracting staff and equipment.

The most recent incident, and the one that appears to have prompted Safcec’s plea to government, involved an attack by armed gangs on the R2.4 billion German oil storage investment project being built in Saldanha Bay in the Western Cape. The plant was set alight and burnt to the ground, and those contractors and their construction workers on site had to run for their lives.

So when the call comes for government to intervene to save the industry, the question is: what should government do?

Government, in its three-tiered form, is the single biggest developer of buildings and infrastructure in the country. The private sector is a relatively small player when compared with the combined building and infrastructure spending power of these three tiers of government.

What we are seeing in the Western Cape, is that capital budgets are not being spent. As an example, the City of Cape Town underspent its own capital budget by 27% in its last financial year; money that should have been spent on housing and infrastructure via the exact same construction industry that is currently bleeding.

The excuse being given is that even government cannot get through the plethora of red tape and the audit culture of its own procurement processes.

The turnaround time of government procurement processes is just not acceptable, and relates to the procuring of services from professional consultants and contractors alike. If government is serious about the construction sector, let alone whether it really intends to deliver infrastructure to its people, then it is government’s obligation to spend the capital infrastructure and development budgets that it has allocated.

The private sector can certainly contribute its own support to the sector, but only if it can get decisions on land use and building plan applications. The Western Cape Property Development Forum (WCPDF) believes firmly that not every application deserves approval, but every application deserves a quick and transparent decision from whichever tier of government is dealing with the approval. Currently, applicants can wait for years for due process to be completed. By the time a decision is finally made, the market may well have moved on and the project as tabled is more than likely no longer viable.

So what can government do to support the construction sector?

It can remove the red tape and align legislation, policies and procedures so that the private sector can get on and do what it can do; namely, invest in buildings and infrastructure.

Lastly, government should do all it can to enforce law and order and to provide protection to contractors on construction sites, whether in urban or rural areas. Construction companies don’t only employ professional teams with university qualifications, they are also providers of work to some of the lowest income groups in society – the ones that really struggle to survive.

If we, as a nation, do not look after the physical safety of all those on construction sites, we have no respect for the families that these sites feed.

The WCPDF feels so strongly about these challenges and the impeding collapse of our industry that it has themed its upcoming conference in May ‘The Perfect Storm: Investment and Jobs or Bureaucracy and Stagnation’ in order to build the much-needed platform to enable talks and action between government and the industry.

Deon van Zyl is chairperson of the Western Cape Property Development Forum.