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JOHANNESBURG - Statistics SA figures showing that construction sector liquidations increased by 32 per cent in 2022, compared to an overall decrease of one per cent across all sectors of the economy, construction market intelligence firm Industry Insight says this clearly highlights the difficult position experienced by the local construction industry. According to Stats SA, 94 construction sector companies closed their doors in 2022, with compulsory liquidations increasing year on year by 56 per cent and voluntary liquidations by 29 per cent.
In light of this, Master Builders South Africa (MBSA) executive director Roy Mnisi believes the struggling construction industry is at best likely to only experience a slight improvement in 2023, while still facing major challenges – including a lack of major contracts and disruption of work sites by business forums and the so-called construction mafia.
Issues
“It does not look like activity levels in (the) sector will be any different in 2023 …” he told Moneyweb.
“More so because of the issues around economic growth. Our economic growth projections are still very low and if you look at infrastructure development as well, the plans remain the same,” added Mnisi.
This is a reference to South African Reserve Bank (SARB) Governor Lesetja Kganyago’s admission late last month that GDP growth for the whole of the 2022 is expected to come in at 2.5 per cent, compared to 1.8 per cent in 2021 – with the Sarb now forecasting GDP growth of only 0.3 per cent for 2023 because of extensive load-shedding and other logistical constraints.
Industry Insight said the real story from the SARB’s monetary policy committee meeting was the sharp downward revision in the GDP growth expectation from an initial estimate of 1.1 per cent to 0.3 per cent in 2023 – ‘dangerously close to an economic recession’.
The SARB has also slashed its SA GDP growth forecast from 1.4 per cent to 0.7 per cent in 2024, and from 1.5 per cent to 1 per cent for 2025.
Mnisi said the construction industry is looking at phase two of the government’s infrastructure development plan ‘but we are not confident it will make any difference at all and that our members should brace themselves for another challenging year’.
Threat
He said construction firms will once again face the threat of closure because of financial challenges caused by insufficient work.
“The challenge is that the economy bedevils the sector because of issues such as the lack of sufficient work to keep many companies afloat, the construction mafia, Eskom (load-shedding), non-payment and so forth,” added Mnisi.
“It’s challenging and we see some companies closing shop. We see some smaller ones coming up as well but that doesn’t necessarily close the (capacity) gap that is getting created year on year.”
However, Mnisi said there are potential opportunities, particularly if the government declares the Eskom situation a state of disaster.
“That can release some economic opportunities that will assist in terms of boosting and bolstering the construction industry and enabling the economy to deal with the damage