AK-47-hijacked construction industry crying out for intervention
THE construction industry and investor confidence is going down in flames, and two key industry organisations have written to President Cyril Ramaphosa requesting urgent intervention.
South African Forum of Civil Engineering Contractors (Safcec) executive director Webster Mfebe said in letters to Ramaphosa, Finance Minister Tito Mboweni and leading government ministries on Wednesday, that given the “graveness… and profound impact on the economy”, a plan of action was urgently required from the Cabinet.
Also on Wednesday, Roy Mnisi, the chairperson of Master Builders South Africa, which represents more than 4 000 contractors, called for “urgent” intervention from the government, not only to save the companies, but also their employees – the sector makes up about 11 percent of the national workforce.
Mfebe said projects worth R25.5 billion were currently being violently disrupted and halted in South Africa, and this was causing harm to investor confidence.
For instance, European-based Strabag International had pulled out of a joint venture with Aveng on the R1.65bn Sanral Mtentu Bridge project in the Eastern Cape due to site disruptions by armed gangs demanding to be part of the project.
The incidents were reported to police and arrests were made, but the site continued to be disrupted by AK-47-wielding gangs.The project is part of the N2 Wild Coast road construction.
In another example, on March 13, a R2.4bn German oil storage investment project being built by WBHO Construction in Saldanha Bay was halted due to properties and plant being burnt down by armed gangs demanding to be part of the project.
Again, police arrived on the scene, but claimed there was nothing they could do as only the public order police from Paarl could handle the situation – it took them three hours to arrive.
On November 1, 2018, and in January this year, another Sanral project in Stutterheim, Eastern Cape, being constructed by Tau Pele Construction, was disrupted by armed gangs and plant was burnt down. There were no arrests, even though police were on the scene.
Safcec also listed the names of 110 engineers and other highly skilled technical personnel, who had left the country due, mainly, to these incidents.
Mefebe said that while contractors were being faced with these situations beyond their control, and had laid charges at police stations and obtained court interdicts, public sector clients were nevertheless charging the contractors penalties for project delays, driving many companies to the brink of bankruptcy.
Mnisi said it did not help contractors to get court interdicts, as new disruptors simply appeared on the site the next day. Foreign companies needed the security of their investment when they are building in this country, he said.
The SA Reserve Bank said on Wednesday that foreign direct investment levels had more than doubled last year to reach R70.7bn from R26.8bn the previous year, its highest level in five years.
But this was not enough to save struggling construction companies, which have suffered from weak trading conditions for about a decade, mainly due to falling infrastructure spending by government agencies and departments, including municipalities.
Anaemic economic growth has also weakened business and consumer confidence levels resulting in lower private sector investment in new projects.
Last week, construction company Group Five filed for bankruptcy protection, the fifth major construction company to do in less than a year.
Construction company shares on the JSE have crashed.