Construction companies take business abroad to survive

South Africa’s major construction companies are taking flight from their home market to secure cross-border work, with negative implications for employment and job creation. The shift has been caused by major infrastructure project bottlenecks, resulting in delays, a reduced number contract awards, surplus construction capacity, fierce competition for work and margin pressure. About 30 000 jobs are believed to have been lost in the civil construction sector last year. All the major listed construction companies have reported a shift in focus away from the South African market to Africa and other global markets, particularly Australia. Roger Jardine, Aveng’s chief executive, said yesterday that the government’s National Planning Commission had indicated that public sector infrastructure spending had declined by 30 percent since 2008, which was concerning. Jardine said the group’s two-year construction and engineering book was now weighted 80:20 in favour of the private sector, despite the private sector not lifting its spending.

Louwtjie Nel, the chief executive of Wilson Bayly Holmes-Ovcon (WBHO), said a turnaround in the local construction market was not anticipated in the short term and an increasing proportion of the group’s turnover and order book was for work in Africa and Australia. Nel said work outside South Africa had just tipped the scale for the first time, accounting for 52 percent of group turnover compared with 48 percent from South Africa. The proportion of work outside the country would rise next year because of an expected increase in civil projects in Australia and larger projects in Africa, he said. Similar to a year ago, WBHO employs about 6 000 skilled and unskilled workers on its sites in South Africa. But Nel warned that with its local order book declining, employment would suffer. WBHO had been engaging the government for the past two years through the SA Federation of Civil Engineering Contractors (Safcec) about possible initiatives to resolve this problem, but “it seems to be a very tedious process”.

Safcec senior economist Henk Langenhoven said the initiatives involved “new models” to get municipal and provincial government “spending going”. Nel said public-private partnerships were a problem and their viability was in doubt because the process was “so long and drawn out” and it cost so much to bid on them. Graham Pirie, the executive director of Consulting Engineers SA, said the impact of the significant downturn since the World Cup was less severe on consulting engineers because design work was still taking place. But Pirie said consulting engineers had gone from working at 100 percent to 85 percent because of a lack of qualified and experienced people in government at the right level to interact with the consulting engineering sector. Stephen Meintjes, an analyst at Imara SP Reid, said the civil construction industry would be in crisis if it had not diversified into businesses such as steel and construction products, which had enabled it to survive.