Connect with us

Investment Guide

Inaction And Ineptitude

Avatar

Published

on

South Africa needs a solid plan to deal with the more than $245 billion of backlogged infrastructure that is curbing industrial growth and social development.

A toxic cocktail of events and cruel circumstances continues to damage a hitherto world class industry that is vital for any planned economic revival.

The construction industry is suffering like never before. It is still shrinking from its 2008/9 peak, shedding several hundred thousand jobs, margins plunging to around 2% and little sign of relief.

The reality is that, despite political hot air, very little of the backlog of crucial infrastructure, needed to attract foreign and domestic industrial development, is being dealt with. As inaction continues, the capacity to deliver this crucial infrastructure is being destroyed, potentially leaving South Africa at the mercy of foreign influence.

The political influence that black business has in demanding an end to perceived white dominance of the sector, as well as the ratcheting of transformation demands and targets for black empowerment and black industrialization, drives a relentless, but necessary, agenda at a difficult time of negative growth.

In addition, many of the local construction groups have suffered reputational damage and have been heavily financially penalized by government for reported competition infringements.

The industry has suffered massive losses on major projects in South Africa, Africa and Australia, many of which are public sector projects which were poorly engineered and badly managed by both government and contractor.

Share prices have plummeted in recent years and skilled people have been eagerly sucked up by banks, consulting firms, mining and industrial companies.

The public view is negative, and notwithstanding the understandable loss of trust, the government has paid little attention to the damage to the South African economic revival that we all hope for.

The localization of the nuclear program and the infrastructure embedded in the National Development Plan are wishful thinking.

There is a new group of transformational CEOs appointed into many of the large construction groups. We realized a massive wake-up was required. The old guard had gone and we had to deal with the fallout and culture change required to root out historic anti-competitive behaviors and racist tendencies. We found we were not close enough to government and black business and we were not listening to the messages nor understood the outrage directed at the industry.

A few of us traveled a lonely journey trying to facilitate a new beginning and open dialogue between a diverse and relatively untransformed industry peer group leadership and the fragmented approach from four ministries that purported to have control or influence over the industry.

It was not until the chasm between traditional business and government claimed its first victims, through the heavy fines imposed by the Competition Commission and the threat of further action, that the attitudes of some of the diehard leadership among the peer group changed.

They had finally realized it could not be business as usual. Their anger was misplaced. Government and black business action was not about a perceived vendetta, it was fueled by the perceived exclusion of black business and broken trust in the construction leadership’s apparent lack of commitment to transformation and clean business.

After five years, the unproven remnants of the competition matter remains disputed. The Construction Industry Development Board (CIDB), the industry’s regulatory body, continues to threaten to impose blacklisting sanctions and state-owned corporations charged with implementing the major infrastructure works remain short of capacity and technical skills to be able to manage the projected infrastructure projects worth R4 trillion ($245 billion).

Yet the economy is screaming for the infrastructure to be built to attract regional and international trade and investment.

Construction leaders have fast tracked the inclusion of black business interests, cleaned house and retained capacity at great cost to support the national infrastructure agenda. Yet government remains distant and unengaged, while some black business structures continue to bark demands with self interest in mind.

It is suspected that tenders for much needed infrastructure are being withheld pending a resolution of the trust and empowerment issues. It also appears that cabinet is unsure of which politically acceptable route to follow. This is very worrying and is preventing the country’s progress.

Advertisement
Comments