Government needs to up its game to stimulate the construction industry

The decline in government spending, together with its failure to pay contractors on time or even not at all, are among the main factors contributing to the decline of South Africa’s construction industry, according to Databuild CEO Morag Evans. But, she adds, there is much that government can do to provide the stimulus the sector so desperately needs.

“Government can begin by actually spending the funding that has been allocated in the national budget, specifically on new infrastructure such as roads, reservoirs, and low cost housing. And while priority must also be given to areas such as health and education, hidden within these ministries is the need for the building of new schools, hospitals and clinics.

“Additionally, the maintenance of existing infrastructure needs to be prioritised. The large number of government buildings requiring urgent renovation is just one example of how numerous construction projects could be generated which could provide work for hundreds of people.”

Another area requiring government’s immediate attention is the late or non-payment of contractors, which Evans cites as one of the major causes of job losses in the construction industry. “National Treasury regulations stipulate that contractors should be paid no later than 30 days after invoicing, yet a report issued by the Construction Industry Development Board states that 60 per cent of payments are made after the 30-day deadline. As a result, businesses incur severe financial difficulties, and many are forced into liquidation which leads to job losses.

“Consequently, government needs to work more effectively with private sector companies to improve the market. The recent appointment of the Presidential Economic Advisory Council, the Investment Advisory Council and the State-Owned Enterprises Council should go a long way towards improving government and private sector interaction.”

Evans also echoes Minister of Public Works and Infrastructure Patricia de Lille’s sentiments that the tender process needs to be more transparent and open. “While the adherence to official regulations and formalities is necessary to prevent corruption, it’s equally important to have balance. Government needs to ensure that projects are not impeded by unnecessary red tape and complex regulatory measures, no matter how well-intentioned.”

Positive outlook

Despite the sluggish economic climate, Evans remains cautiously bullish about the future of the construction industry. “All economies fluctuate between periods of expansion and contraction and the improvement in business confidence between August and September is one of several signs that the construction market is beginning to turn.

“The steady flow of construction projects being put out to tender, of which many have been successfully awarded, also bodes well for the industry and we should soon start to see a further increase in momentum.”

In the meantime, Evans advises construction companies to look for innovative ways to weather the current downswing. “Databuild is transforming to meet the construction industry’s future knowledge requirements. This has resulted in several new offerings designed to enable our clients to improve their sales process, while providing more opportunities for them to ensure they get the most out of the project leads we provide.

“By working smarter rather than harder companies will be able to not merely survive but thrive in the current market contraction,” Evans concludes.