Group Five to cut more jobs as losses swell

By REUTERS Time of article published Oct 2, 2018

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JOHANNESBURG - South African construction firm Group Five will cut more jobs as it seeks to trim loss-making divisions, it said on Tuesday, highlighting an industry-wide slump in its home market that has left many companies fighting for survival.

South African construction companies have been hit hard in recent years as stagnant economic growth has hobbled public infrastructure spending, prompting some of them to file business rescues, similar to chapter 11 bankruptcy in the United States.

Group Five is going through a restructuring in which it has closed multiple non-profitable businesses in its local construction unit and cut 602 permanent staff in the 2018 financial year.

It is cutting more jobs in its money-losing Engineer, Procure and Construction (EPC) division, which already lost 175 employees last year. The EPC business suffered an 82.3 percent slump in revenue to 386.9 million rand ($26.91 million) in the 2018 fiscal year, which also widened the operating loss at group level.

“Numbers of workers to be retrenched are still a work in progress right now but the main areas affected will be our EPC business as we continue to resize for the current market,” said Chief Executive Themba Mosai. Group Five posted a full-year operating loss of 1.4 billion rand compared with 718 million rand loss the prior year, due to higher costs from the delayed Kpone power project in Ghana.

Mosai was cautiously optimistic about President Cyril Ramaphosa’s plan to launch a 400 billion rand fund aimed at re-igniting infrastructure spending even as the sector has suffered delayed payments of some government contracts. 

The fund is part of a long-awaited stimulus package seeking to revitalise an economy that recently slipped into recession. “The partnership between private sector and the government is important to bring infrastructure development into the country,” said Mosai. “The fact that the government is focused on that means that we can deliver quite a lot of infrastructure in a short space of time.” 

Mosai also said that the downsized local construction business was on the right path to return to profit in the 2019 financial year. 


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