CHALLENGING TIMES LIE AHEAD

Construction industry to reopen to an uncertain future for many

MONDAY will be a bitter-sweet day for the construction industry as workers are finally permitted to pick up their tools and restart their equipment.

But they will do so while remembering the number of construction enterprises that have closed down following financial loss during the national lockdown which was implemented on March 27.

Even those that survived will have to overcome challenges brought about by the two-month lockdown. This period has been “very difficult” for the industry, says John Matthews, president of Master Builders South Africa.

“The industry has suffered huge loss during lockdown. Many active sites were left without security, resulting in loss of material and building equipment. Many small, medium and macro enterprises have had to shut down operations due to lack of cash flow.”

In addition, says Deon van Zyl, chief executive at Alwyn Laubscher & Associates, many businesses tried to support their permanent staff during the lockdown through grants and cash reserves but that these are now depleted.

“More concerning, however, is the sub-contracting industry and labour teams that probably did not have surplus cash to see them through and who by now are in dire straits. We expect bronwyn.fourie@inl.co.za many of these small businesses will have to close down unless the construction industry is able to mobilise quickly from June 1.”

While company bosses are hopeful the sector will weather the storm caused by the lockdown – depending on the support received from government relief funds and infrastructure development projects – Matthews says the true extent of damage will emerge only as the industry gets back to work.

Many firms will open limping and some might open just to shut down a final time, says David Sedgwick, managing director of Horizon Capital.

“Only construction firms that are strongly capitalised and have had good balance sheet discipline will probably survive.”

One of the biggest challenges is going to be preserving the safety of the workers, the safety of the site and business continuity.

“We are under no illusions that the rate of infection is increasing and with that the likelihood of a worker contracting Covid-19. This is going to cause an interruption in the availability and supply of materials at all levels and the ability to continue working on site with unplanned shutdowns possible at any moment.”

Matthews says additional hurdles contractors and professionals have to clear as they go back to work include contractual issues relating to delays, renegotiation of contracts and payment terms. Above that, cash flow will be a major challenge, especially for SMMEs with limited credit profiles.

“We call on the government to support us. We are also hopeful that banks and other lending houses will assist the sector during these difficult times.”

While immediate tasks relate to the provision of safe working environments for employees, medium-term challenges include securing work for contractors to prevent job losses and securing household incomes for employees.

Matthews says the long-term challenge will be to ensure that the industry remains sustainable and competitive even at a global scale.

Ensuring productivity within the “new normal” of social distancing, smaller work teams and shift work will prove challenging, Van Zyl says.

“We also have to see how well the suppliers are able to mobilise to get production levels up again. Materials that are imported will have to be cleared at ports as soon as possible...”

Clients will also need to pay their invoices – or issue payment certificates, proactively, so that main contractors can pay sub-contractors.