Construction companies will close without work
CAPE TOWN - Many more construction and engineering companies will have to downsize or go out of business if the pronouncements by President Cyril Ramaphosa on plans for a massive surge in infrastructure investment do not materialise in the immediate future, Consulting Engineers South Africa's Chris Campbell said on Friday.
He said some companies in the sector already had very little work even before the Covid-19 lockdown. South Africa’s construction and engineering sector had suffered great strain in the past decade, with for example even the large listed construction groups falling into bankruptcy because of declining investment on infrastructure and associated maintenance by the government, and due to the weak economy.
Campbell said on Friday, in response to BR questions, that some companies fortunately had work delayed through the lockdown, mainly because public sector representatives were unavailable through the period for clarification and other matters, and “essentially, this is what is keeping industry going at present.” The prevalence of tender validity extensions and tender cancellations of public sector tenders remained an issue, he said. So far, “there has not been any uptick in fresh tenders and even ones that have been continuously deferred still remain unawarded,” he said, adding, however, that they remained optimistic that infrastructure investment would receive fresh impetus from now on.
Ramaphosa on Thursday outlined a massive infrastructure investment drive, aimed at unlocking R1 trillion in fixed investment spending in a variety of sectors over 10 years. The state had identified 276 “catalytic” investment projects with a combined investment value of R2.3trln. In July, the government gazetted 50 “strategic integrated” and 12 “special” projects with a combined investment value of R340billion, that would have regulatory approvals processes fast-tracked for immediate implementation.
Absa SA Macroeconomic Research economist Peter Worthington said they believed that in many cases funding the projects might remain a challenge, given current regulatory and financial frameworks and the government's constrained fiscal position, and Ramaphosa’s plans did not say how this challenge would be overcome.
Campbell said it was no secret the local private sector had such resources and were in closed discussion with the government on this.
“Of course, we are not naive to believe that making such capital available will not hinge on better policy certainty, political stability, more action to root out corruption and greater improvement in the trust deficit which still exists between government and the private sector,” he said.
Investec chief economist Annabel Bishop said the government had indicated that projects already gazetted were at various stages of the project life cycle. Those already in construction would see the future phases implemented earlier, including some human settlements projects that had already received bulk financing to unlock them. The infrastructure programme will focus on social infrastructure such as schools, water, sanitation and housing, and critical network infrastructure such as ports, roads and rail.
Ramaphosa said also that rising incidences of violence at construction sites in KwaZulu-Natal and the Eastern Cape, would be addressed through dedicated capacity within the South African Police Service at the national and provincial level, working with Offices of the Premier, to immediately respond to incidents and manage relationships with surrounding communities.
The Federation of Unions of South Africa general secretary Riefdah Ajam said railroads, spectrum allocation and self-generation of electricity were key drivers of the infrastructure vision.
However, the overall success of the localised job creation further hinged on manufacturing enhancements for increased exports, which needed to remain a permanent feature of both economic recovery and economic development.