The construction industry is more positive about the year ahead, with more government-led infrastructure spend on the cards and greater private sector investment likely.
These were some of the insights from a 2022 Construction Industry Outlook survey conducted by RIB CCS in Africa and the Middle East in the final quarter of 2021.
This is good news for an industry that has been under severe pressure over the past few years due to a dearth of government infrastructure investment, weak economic growth that has pared private sector spending, low business confidence and the impact of the pandemic on the sector.
RIB CCS chief executive Andrew Sukker said in South Africa alone, the total value of plans passed for building construction fell by 37 percent year-on-year in the first 11 months of 2020, preceded by annual declines of 1.1 percent and 11.8 percent in 2018 and 2019, respectively.
He said the picture had been similarly bleak for the industry in the Middle East and North Africa regions, which has been in decline since the fall in oil prices in 2014, exacerbated by the Covid-19 pandemic in 2020.
Looking to 2022, 68 percent of survey respondents - listed and unlisted companies - expected an increase in project revenue, with 17 percent of these anticipating an increase of 15 percent or more.
Only 10 percent of the respondents expected a decrease in revenues in 2022.
And 51 percent of respondents expected project margins to be relatively healthy, with 17 percent expecting them to be 10 percent or higher.
“Margin pressure was a theme in 2021, and these results clearly point to better prospects for 2022,” said Skudder.
The top four strategic initiatives that survey respondents would focus on in 2022 included digital transformation (24 percent), implementation of LEAN construction principles (23 percent), expansion of business offerings (18 percent) and expansion of geographic reach (14 percent).
Skudder said these initiatives provided a picture of how respondents aimed to enhance productivity and efficiency of their businesses.
“We also asked them what their areas of innovation are for 2022 are – 25 percent of respondents said they would be focusing on digital innovation, 19 percent on organisational innovation and 17 percent on process innovation.”
“Organisational innovation is not just about processes and technology, but about organisational models that need to evolve to deal with challenges the industry is facing at the moment,” he said.
Sixty-three percent of respondents said the pandemic had a significant impact on their businesses.
This was down from 2020 when an earlier survey by RIB CCS showed 85 percent of respondents indicated that more than 80 percent of their projects had been affected by delays or disruptions due to Covid-19.
“Looking ahead, there seems to be greater optimism, with less respondents (41 percent) indicating that they expect the pandemic to continue affecting their businesses negatively in 2022,” said Skudder.
The major industry challenges in 2021 were margin pressure (21 percent), lack of order book pipeline (19 percent), supply chain reliability (17 percent) and lack of productivity growth (15 percent).
Skudder said margin pressure and lack of an order book pipeline pointed to an industry characterised by numerous players all vying for a limited number of projects. The third issue – supply chain reliability – was a global issue, with supply chains around the world affected by lockdowns and work stoppages.
Concerns for 2022 were identical to the challenges identified in 2021, despite the respondents being more positive. Only 8 percent of respondents said they were excited about public-private partnerships (PPPs).
“While PPPs are a great way to unlock investment in the industry, the low score probably relates to an overall lack of confidence in PPPs and government’s strategy around them,” said Skudder.
When asked what digital technologies they intended to invest in, respondents singled out cloud computing (22 percent), building information modelling (BIM) (19 percent), mobile technology (17 percent) and integrated technology platforms (15 percent).
BUSINESS REPORT ONLINE