Signs of new life in the SA construction sector
There are some green shoots in the local construction industry, despite the dire predictions that the sector is facing imminent collapse.
2023 will be a consequential year of recovery after the industry was hit by successive waves of adversity in recent times — a universal pandemic, a sharp economic downturn, ongoing energy woes and a regional conflict in Europe that threatens to deliver long-term, global consequences.
Construction is often a bellwether indicator of the health of the broader economy, even though it currently accounts for only about 3% of GDP.
If there is an uptick in construction activity it may well lead to a recovery in other sectors, such as manufacturing, retail and technology.
Several recently published reports conclude that there is an upward movement in construction activity that may have a ripple effect on the broader sector, including emerging contractors, black-owned and women-owned enterprises.
The SA Construction Market Report, published by Construct Africa, projects that the industry will stabilise at an annual average growth rate of 3% from 2023 to 2026. This will predominantly be as a result of expected major investment flowing from government’s R2.3-trillion infrastructure plan and the benefits flowing from the Economic Reconstruction & Recovery Plan.
The bulk of this spending will go towards catalytic public infrastructure projects in the fields of energy, transport, housing and digital infrastructure.
A construction project pipeline to the value of R340bn has already been announced.
The Afrimat Construction Index, published in September, is also cautiously optimistic. It reports that the construction sector increased the value added to the economy by 4.1% in real terms in the second quarter of 2022.
This was achieved despite the negative effects of events such as load-shedding, the floods in Kwazulu-natal and a sharply higher fuel price.
It notes increases in both the volume and value of construction materials — leading indicators of future construction activities — and an increase in employment, which is expected to accelerate once the infrastructure activities gather momentum. The findings of the two external reports match that of the Construction Industry Development Board’s (CIDB’S) own research conducted in partnership with the Bureau for Economic Research.
The CIDB was established in terms of the CIDB Act 38 of 2000 to lead the development and transformation of the construction industry.
Our most recent small and medium-sized enterprises (SME) business conditions survey reflects improved sentiment within the industry and optimism that the coming period will deliver higher levels of construction activity and growth in profitability.
These are important indicators for the CIDB, which plays a pivotal role in the sector as a regulator, facilitator and catalyst for development and transformation.
We have a vision of a construction sector that is inclusive, ethical and a primary contributor to a prosperous economy.
Although we have a broad interest in the entire industry, the CIDB’S primary focus has traditionally been construction activity in the public sector, which is highly dependent on the government’s investment in infrastructure — new roads, bridges, dams, schools, clinics, government buildings and housing projects.
One of the biggest concerns raised in most reports and surveys pertains to underspending by infrastructure client departments, at national, provincial and metro levels, as well as within state-owned companies.
It is of critical importance that the public sector improves its capacity to manage infrastructure projects under its control and addresses the lingering concerns within the industry about delays in the awarding of contracts, tardiness in implementation and late payments of contractors.
It is also imperative that emerging contractors benefit from an upswing in construction activities.
Public sector spending in the sector must create opportunities for new players to participate in major activities, improve their grading, and gain vital experience that will enable them to become eligible for future projects, service delivery and employment.
Focus should not only be on the public sector. The new direction is to also include the private sector.
The entire spectrum of the construction sector must benefit from the anticipated investment in public infrastructure.
Participation must be broadened to include emerging contractors — especially blackowned and female-owned enterprises — and attract a new generation of entrepreneurs to the sector.
The nature of construction has undergone rapid and irreversible changes in recent years. The adoption of new technologies in fields such as automation, modular construction and artificial intelligence has changed the future shape of the sector.
Care should be taken that such technologies are readily accessible to smaller participants in the industry and not lead to a widening of the gulf between dominant players in the market and emerging contractors.
Moreover, the focus must remain on training and skills development. There is an urgent need to close the gap between the skills South Africans have, and the skills our economy needs.
This is where the CIDB can play a critical role at the interface between the public sector, the broader construction industry and the growing number of emerging contractors who want to help build a futuristic SA.
Public sector spending in the sector must create opportunities for new players to participate in major activities, improve their grading, and gain vital experience