The Future of the South African Construction Industry
As can be expected, the South African construction industry is struggling. There has been a steady decline in construction projects and money spent in this industry from as early as 2017.
Reduced government infrastructure spending, a depressed economy, less foreign investment, and the rising costs of materials are some of the factors which have immensely impacted the construction industry even before the pandemic hit.
More than a decade of state looting is another factor that continues to affect the construction industry’s growth.
When considering economic recovery, South Africa’s level of debt, largely caused by its state-owned entities such as Eskom and South African Airways, are of great concern.
Even though the government has vouched to focus on infrastructure development programs such as the R340bn infrastructure pipeline, two major human settlement projects in Gauteng, and other similar projects, the government will not be able to fund these projects on their own. The government will need the cooperation and funding from private sector companies and investors, as well as foreign investments, to help turn their plans into a reality.
The problem however remains that these investors are not convinced that the government and President Cyril Ramaphosa can solve the problems which contributes to the state of the construction industry as well as the state of the South African economy.
The recovery plan, which was revealed by President Cyril Ramaphosa in October of 2020, mentioned possible investment opportunities worth 1 trillion Rand. In the same recovery plan, the President committed to improving the capability of the state and to remove barriers for doing business or investing in the country.
If the President can succeed with the roll out of this recovery plan, it should be expected that the public and private sector investments in transport infrastructure and electricity projects will drive growth over the medium- to long-term.
The following are other elements that can be expected to help drive the construction industry:
- Safety, which is always paramount in the construction industry, may improve in certain respects due to heightened safety measures surrounding the pandemic.
- Alternative materials that are more sustainable and environmentally friendly are introduced to replace the traditional methods and materials which might be more expensive and labour intensive. Some examples include plastic roads and self-healing concrete.
- Alternative methods of construction such as prefabrication, enables the contractors to reduce their costs and to shorten the time of completion. New technology such as 3D printing for concrete laying is another example of how contractors are attempting to think outside the box.
- Smaller private sector developments should continue.
Even though the projections of the construction industry in South Africa does not look great for the next year or even the next three years, all has not been lost. Many opportunities remain, the main obstacle to overcome to pursue these opportunities remains funding. However, if the government can restore the faith of these investors, there will be major room for growth and prosperity.
Disclaimer: The information contained in this article is for general educational information only. This information does not constitute legal advice, is not intended to constitute legal advice, nor should it be relied upon as legal advice for your specific factual pattern or situation.