Covid-19 ‘catastrophe’
WORST CRISIS: UP TO 140 000 JOBS COULD BE LOST IN CONSTRUCTION
Activity levels in the building sector will decline by 27.7% in the worst-case scenario.
The impact of the coronavirus on the construction sector will be catastrophic, unlike any economic shock the sector has previously had to endure and result in it shedding an estimated 120 000 to 140 000 formal jobs, according to construction market intelligence firm Industry Insight.
David Metelerkamp, senior economist at Industry Insight, said not only is the Covid-19 pandemic going to be the worst crisis since World War II, it is now widely expected to be the worst economic crisis/recession since the Great Depression of the late 1920s.
Metelerkamp has outlined three scenarios for the industry based on Industry Insight’s belief that the sector will likely return to work on 14 May, two weeks after the initial five-week lockdown period, and operate only at 50% capacity for the first few months at a minimum.
These scenarios also assume that the construction sector will operate during the builders’ holiday at the end of the year, that the outbreak peaks in early September as forecast by the department of health’s panel of doctors and industry experts, and that there is no major global resurgence of the virus after the economy is slowly reopened.
In terms of these scenarios, activity levels in the construction industry will, at best, decline by 14.5% in 2020 and by 27.7% in the worst-case scenario.
Metelerkamp’s scenarios for the construction industry over the next few years are based largely on the levels of alert as proposed by government, with construction falling under lockdown Level two and therefore being one of the worst-affected industries because work will only resume fully in the second-last of the five phases.
He said road construction and maintenance, on the other hand, falls into Level three and will be able to return to work sooner, although this will differ by province.
Metelerkamp stressed that forecasting in the time of Covid-19 has become difficult because there are so many factors to consider that can change on a daily or weekly basis, which can then drastically alter the forecast.
Scenario 1: In terms of Industry Insight’s baseline scenario, which it estimates as a 60% probability, construction sector activity levels are forecast to decline by 22.5% in 2020, with a recovery to 4.8% growth in 2021 but followed by annual declines in activity of 2.1%, 2.9% and 2.4% in the next three years.
Scenario 2: In the more optimistic scenario, which Industry Insight believes has a 30% probability, construction activity levels will decline by 14.5% in 2020 but grow by 3.4% in 2021. However, activity levels will then decline by 1.9% in 2022 and 0.8% in 2023 before growth of 3.7% in 2024.
Scenario 3: The more pessimistic scenario, which it believes has a 55% probability, anticipates construction activity levels declining by 27.7% in 2020, growing by 5% in 2021 but then declining by 2.1%, 2.9% and 4.5% in the next three years.
The SA Forum of Civil Engineering Contractors, SA Institution of Civil Engineering, and the Construction Covid-19 Rapid Response Task Team comprising several industry bodies, all previously called on government to declare the industry an essential service and allow it to return to work.