Webster Mfebe, CEO of the South African Forum of Civil Engineering Contractors, says the “bloodbath” in the construction industry contradicts President Cyril Ramaphosa's claims and February state of the nation address (Sona) that the government's infrastructure rollout programme is well on track.
He cites the latest Afrimat construction index, showing the industry declined by 2.2% in the fourth quarter, linking this to Stats SA, which reported that construction industry liquidations rose by 32% in the past year and 94 companies closed.
Chief factors contributing to the sector's plight include load-shedding, rising input costs, violent site disruptions by construction mafia and abrupt tender cancellations.
But the fundamental issue is a lack of infrastructure development, says Mfebe.
“There's no doubting the good intentions of government, especially the president, who has declared infrastructure development will lead the economic recovery of the country and who refers to construction as the flywheel of economic activity.
“As we know, no traction is possible without the flywheel turning, and it is turning very, very slowly.
“The problem is implementation, implementation, implementation. To all intents and purposes, it is not happening.”
Especially, he says, at local government level.
“The chain breaks at its weakest link and this is at municipal level, where services are most needed, where the visibility of delivery is most realisable in terms of no potholes, proper roads, sewerage systems and the like.
The number of construction companies that closed in 2022, according to Stats SA.
— IN NUMBERS: 94
“Instead, we have a crisis of potholes, no roads, no sewerage services to increasing numbers of communities, lack of maintenance of existing infrastructure, the rollover of budgets for intended infrastructure and the misappropriation of funds meant for infrastructure, to salaries and other areas.”
All of this points to an absence of consequence management by the government, he says.
“What is the government doing that will serve as a deterrent for those who are not spending infrastructure budgets meant to create the jobs which should be leading economic recovery? Nothing.”
Finance minister Enoch Godongwana announced in his budget presentation speech in February that the government would spend R903bn on infrastructure over the next three years, but the reality is the public sector doesn't have the capacity to spend it, says Mfebe.
“We have a serious mismatch between the skills sought by the public sector and the skills actually possessed by public sector employees.”
This is a result of the “huge exodus” of technical and engineering talent from the sector, especially at municipal level, where, for example, there is a disastrous shortage of civil engineers.
“Very few municipalities have any qualified civil engineers and these are the people who are supposed to oversee the implementation of the infrastructure programmes that have been announced.”
Without the requisite skills capacity at municipal level there is no way the president's infrastructure development goals will be met, he says.
Unless the government pays urgent attention to the capacity of municipalities in particular to deliver this infrastructure, coupled with effective consequence management at local, provincial and national government levels, these infrastructure projects the president says are in the pipeline are not going to happen
— Webster Mfebe, CEO, South African Forum of Civil Engineering Contractors
“The president himself has bemoaned the fact that there is a need to capacitate the state. This speaks to the availability of the right talent in the right jobs at the right time to implement the big infrastructure projects he talks about.”
Unless the government pays urgent attention to the capacity of municipalities in particular to deliver this infrastructure, coupled with effective consequence management at local, provincial and national government levels, “these infrastructure projects the president says are in the pipeline are not going to happen”.
“We need the implementation of projects with zero cancellations, zero rollovers and prompt payment of service providers.
“The lived experience of contractors is lack of work, site disruptions, delayed tender awards, tender cancellations and late payments.”
When projects are completed it takes “donkey's years” for contractors to get their money.
Government officials at all levels don't appreciate what a high-risk, complex and low-margin industry construction is, or they don't care.
“There's no margin for error. If you go wrong you go wrong big because there's a huge investment in capital expenditure and plant and all that. You have facilities with funders to service, so when cash flow and liquidity is at stake, you can understand why 94 companies closed their doors last year and why liquidations in the construction sector rose by 32%.”
Ramaphosa was correct when he said in his Sona that infrastructure would lead to economic recovery, says Mfebe, a former trade unionist and ANC MP.
“But infrastructure does not build itself; you need contractors to build infrastructure.”
He points out that South Africa's construction sector is the biggest employer of entry-level skills after agriculture.
“Our unemployment levels can be attributed in part to the bloodbath in the construction sector where ordinary, poor South Africans get laid off as a result of companies not being able to carry them any more, while we have these big projects that have been announced.
“Our industry desperately needs results-orientated leadership from government to achieve results in terms of promised infrastructure.”
He says unless the government provides the right enabling environment, the National Development Plan's much-hyped goal of 30% of GDP fixed investment in infrastructure a year by 2030 is “pie in the sky. The last time I looked it was around 13%.”
This is not because of any “private sector investment strike”, as the government alleges, he says. It's a result of the state's failure to create an enabling environment for investors.
“There is willingness by the private sector to invest this kind of money in the country, but if the environment is not correct, it's not going to happen, in spite of pledges made at the president's investment conferences.”
This includes the regulatory environment, which remains a serious impediment to infrastructure investment.
“At the level of the Presidency there have been a lot of commitments to make it easy to do business. But look at the permit and licensing system at municipal level. If companies have to wait for years to get permission to set up a factory, for example, they're going to take their capital elsewhere, as they're doing.
“Getting a water licence can still take three to five years, despite the government saying it should be issued within 90 days at most.”
The net result for the government's infrastructure development programme is that “at ground level, nothing much is happening. There is very little recognisable traction,” Mfebe says.
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