The construction sector still faces a tough year with delivery of projects related to the World Cup bringing about a drop in other construction activity. But infrastructure development in the medium to long term is expected to help the sector.

The building and construction sector had been hit hard by the global recession, especially in the residential market, where consumer spending was severely affected.

According to a global KPMG survey, profits in the sector are projected to be low this year due to the order backlog. Contractors in Africa, Europe and the Middle East were hardest hit, with 54% saying their projected profit rates had declined.

Competition has also increased, with companies bidding for fewer tenders.

Richard Williams, CEO of Gordon Verhoef and Krause, says the construction sector will be tempered by the after-effect of the worldwide economic crisis.

Williams says contractors are receiving fewer orders, which affects employment opportunities in the short term. The situation in SA is worsened by the return of skilled building industry professionals from the UK and Dubai, where the drop-off in projects has been more severe.

Many local construction companies had established successful operations in the Middle East and African countries. But tender prices had shrunk as margins were squeezed for a smaller base of work. Input prices have fallen with this trend. But the industry is expecting this trend to bottom out and expects a small increase in prices this year.

During boom times, construction professionals command lucrative packages, which have reverted to more realistic levels in the past few months.

“Remuneration of waged employees and the general labour force has traditionally been perceived to be low. This is in part due to noncompliance by employers with labour regulations,” Williams says.

Improved policing of the sector would ensure a living wage for workers, he says. In recent years a number of collective bargaining forums have negotiated increases above inflation.

He says the biggest challenge to the industry is attracting sufficient interest from school leavers to pursue a career in construction.

Transformation has fallen short of goals.

The construction sector charter has been gazetted and more companies are coming on board and being scored. “We are looking forward to seeing the charter adopted by state institutions as a scoring tool in awarding contracts. Although no time lines have been communicated, we hope it is imminent.”

The charter is seen as a more equitable scoring method than the previous black economic empowerment scoring tool, which was purely based on ownership. The charter considers ownership, management and control, employment equity, procurement, enterprise development, corporate social investment and training.

Williams says that many companies and industry organisations have taken on the responsibility of training due to the abandoning of the apprentice system and difficulties with the sector education training authority.