Building sector should be more black'

Posted On Thursday, 08 April 2004 02:00 Published by eProp Commercial Property News
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Construction industry will need to double its output in next 10 years

Stella SigcauRISING demand for its services and the sluggish pace of black economic empowerment in the construction industry are two key challenges highlighted in a report on the status of the industry released this week.

The report is one of the first products of the Construction Industry Development Board a partnership established by government and industry three years ago to improve the implementation of projects.

The construction sector is a strategic national asset, as it enables government to deliver economic and social infrastructure such as roads and schools.

Total construction spend exceeded R57bn in 2002. Government expenditure represented about 44% of this.

Public Works Minister Stella Sigcau said at the release of the report that the review provided a "sober assessment of the state of the industry and its preparedness for development challenges facing the country".

Chief among these is the need for the industry to double its output over the next 10 years to match rising investment.

Government intends to increase its fixed investment from 16% of gross domestic product currently to about 25%

"Since construction activity generally leads economic recovery, it is likely that the industry will be required to double its output," the report says.

The report calls for capacity building by both government and construction companies in preparation for this increase.

But the industry is facing a dilemma. The strong rand has led to large export earners such as mining companies delaying or cutting back big capital projects.

The South African Federation of Civil Engineering Contractors estimates that as many as 8000 jobs could be cut as construction firms adjust their operations in line with current demand.

The industry has some serious work ahead in terms of black empowerment. The report reveals that there are no black executive directors in this sector.

Empowerdex, which evaluates listed companies in this sector using the balanced scorecard approach, says it has a black ownership of 4,9%.

There are 16 construction firms listed on the JSE Securities Exchange SA.

They generate R40bn in revenue a year and employ 122000 people.

A construction summit planned for later this year is expected to provide a platform for a construction charter.

The lack of government capacity to deliver big projects is another issue highlighted in the report. It says that almost 25% of its total procurement budget is spent on consultants primarily providing information technology, policy advice and project management services.

Bottlenecks in port, rail and road services that hamper the movement of goods are testament to government's inability to keep up with infrastructure investment.

"(But) after two decades of below-average investment, the situation is now changing," the report says. "Government commitment to infrastructure investment signals a period of growth for the industry."

The construction industry has a high liquidation rate. The report says the unacceptably high rate reflects demand volatility and high levels of competition.

The "feast and famine syndrome" in the industry, which contributes to liquidation, is illustrated by government's "sudden release" of 50 school building projects in Eastern Cape at the end of 2002.

The industry rates third worst on safety after mining and transport, with 74 deaths recorded on site last year.

The report follows draft regulations for the creation of two registers: a database of contractors and one for all projects worth more than R3m.



Last modified on Tuesday, 22 October 2013 21:37
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