MBA North: 2.3% construction upswing not true reflection of the sector’s state

The 2.3% growth in the construction sector reflected in the StatsSA GDP Q2 2018 figures is not an accurate reflection of the state of South Africa’s construction sector, says the President of the Master Builders’ Association North, Musa Shangase.

MBA North, which represents members in Gauteng, North West, Mpumalanga and Limpopo, was reacting to a GDP snapshot that indicated slight growth in the construction sector in Q218, following up to ten years of slow growth and stagnation in the sector across the country, with confidence in the sector dropping to a 17-year low last year. “Although the construction sector showed a 2.3% increase in the statistics released by Stats SA, these are based on infrastructure projects that do not have any influence on the building industry,” says Shangase.

“Earlier this year, we noted that the entire sector faced a ‘state of emergency’, with even major construction firms living ‘hand to mouth’, and the situation has not improved. Confidence in the building industry is at its lowest level since Q3 2000. A number of large construction companies are in business rescue or have declared insolvency. As the construction sector is an important indicator of overall economic performance, this should be cause for concern across the country.”

Shangase notes several key challenges impacting the sector’s performance, including lack of payment, illegal protest action, skills shortages and the struggling economy. “Since 2013 the industry has been in the headlines for all wrong reasons. Most notable has been the finalisation of the Competition Commission enquiries,” he says. “Private investment in building has declined 16.7% for the first 6 months of 2018 versus the first 6 months of 2017. Government is not paying suppliers on time and has also slowed the number of projects that are being awarded.”

“Master Builders SA is actively interacting with treasury in an effort to get members paid. Lack of payment by government is negatively impacting many smaller players in the industry and also sub-contractors who rely on the larger companies for work. A lack of new work is further impacting architects, civil engineers and quantity surveyors,” Shangase says.

Compounding the situation is political and union unrest, as well as wave after wave of illegal protest action. “The financial impact of these protests is catastrophic – no business can sustain the continuous onslaught of work stoppages, delays in completing works, threats and intimidation to management, and employees living in constant fear of their lives.”

With too few trained artisans and skilled supervisors, some contractors are seeking skills elsewhere, only to be met with high salary demands, which add pressure to a sector already facing salary costs totalling 29% of operating costs.

As the value of the rand decreases, project costs and the price of construction materials rise. “Commodity markets are affected, with subsequent decreases in revenue being felt by major construction firms. Combined with this, a lack of clear political stability and a lack of political will in a number of provinces are not giving clarity to the way forward,” Shangase says.

More information from Boitumelo Thipe, Tel: 011 805 6611 / email: boitumelo@mbanorth.co.za