The State of the Construction Industry in 2019

Less than two months into 2019, the construction industry can no longer carry the weight of the tremendous burdens it bears. While many could write about why the industry is in the intensive- care unit (ICU), my intention is solution-driven, aimed at identifying how the industry can move beyond this low point. As Minister Tito Mboweni and his team in Treasury cross the ‘i’s and dot the ‘t’s of the 2019/20 budget allocations, allow me to present the expectations of the construction industry on the budget.

Economist, Peter Perkins describes the relationship between an economy and its construction sector as follows: ‘Economic infrastructure may be compared to the foundation of a building. It plays a supporting role, facilitating the multitude of productive economic activities that constitute the bulk of the economy ….’ With this understanding, there has never been a greater need to prioritise investment into infrastructure development, as a catalyst to economic growth. Simply put – large national infrastructure development projects are what the construction industry needs to move off its knees and stand firmly as an economic driver.

As a point of departure, Minister Mboweni, the industry is looking to you, that in the reprioritising of the national budget, you have put infrastructure investment and delivery under the microscope, as a means of bringing the Economic Stimulus and Recovery Plan to life in a tangible way.

It must be noted that we fully support governments direction towards stimulating township and rural economies through the re-establishment of township industrial parks. Ours is a labour- absorbing industry, and through the allocation of investment into infrastructure development in these peri-urban and rural areas, government can achieve both economic growth, and lowered unemployment rates. We look forward to budget allocations towards this investment that match the anticipation of the industry in this area, as a first tangible step towards energising the construction industry.

Our industry has continued to tighten its belt each year, with fewer funds allocated to infrastructure development with each budget speech. In September 2018, President Ramaphosa spoke of the establishment of the South Africa Infrastructure Fund, valued in excess of R400 billion. Min Mboweni, we hope your speech will address how the Infrastructure Fund will be rolled out, particularly as it relates to the ‘blended finance’ model; and demonstrate bold allocations of budgets to all provinces, in order to restore confidence in the construction industry.

We would also request that National Treasury must issue an instruction to all public sector client bodies, to award contracts within a three-month period, from the closing date of submission, which could be tracked through the eTender Portal. Minister, delays in awarding these contracts will continue to keep the construction industry in limbo, with the ripple effect of impeding economic growth.

Let me draw your attention to the need for an additional layer of accountability as pertains to the spending of public funds. It is a disgrace that the South African public would continue to live in inadequate and unsafe conditions when funds are available to improve this situation. We would therefore suggest that through the office of the Auditor General, the accounting officers of public sector clients who fail to spend their infrastructure and maintenance budgets must be brought to book.

Minister, the industry continues to bear the burden of funding government projects due to late payments of contractors. Many public sector project completion deadlines are missed, as scheduled payments are late, and contractors down tools, sometimes for months at a time. There are innumerable black-owned construction businesses that have closed down, due to late payments by government entities. Through your office, Minister, can we recommend that a clause be introduced into the imminent Public Procurement Bill, that would make provision for government to issue Payment Guarantees, in lieu of Performance Guarantees issued by contractors on public sector projects.

You will also be aware, Minister, that local business forums have become a significant risk to the implementation of projects nationwide. SAPS must develop a strategy to deal with this problem – key to which would be the need to ensure that construction work continues whilst concerns from the local business forums (which ordinarily are beyond the minimum thresholds as set by legislation) are being negotiated by the relevant stakeholders.

Minister, we are confident in our industry’s ability to support the national agenda of growth, and we anticipate a budget that emphasizes large-scale infrastructure development at all levels – so that South Africa’s economy can be reinforced on a solid foundation of a fully functional construction industry.

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