Yearly contractor upgrades stall amid ‘challenging’ economics
Results from a report by the Construction Industry Development Board (CIDB) show a levelling-off in the number of yearly upgrades of contractors from a lower to a higher grade.
The organisation’s latest Quarterly Monitor, which provides an overview of the structure of the construction industry, the state of contractor development and construction employment in South Africa, attributes this to an industry labouring under insufficient levels of demand for contractual construction work.
“Notwithstanding the significant govern-ment infrastructure expenditure of R1-trillion or more that is planned over the next ten years, business confidence remains low in the general building and civil engineering sectors. “While tendering competition remains high, it has eased somewhat,” the CIDB says in a statement.
The report further shows that only between 3% and 5% of the Grade 7 and 8 contractors are currently upgrading to a higher grade every year, while around 10% of Grade 2 to 4 contractors are upgrading to a higher grade every year.
“Overall, there has been a general trend of a decreasing rate of upgrades over the past few years, in line with the difficult economic conditions,” the organisation surmises, adding that the continued decline in the upgrading of Grade 7 and 8 general building contractors over the last three quarters is of particular concern.
In contrast, the CIDB reports a “somewhat surprising trend” of increases in the number of contractor registrations over the last few quarters – between 3% and 8% a year in general building and between 6% and 12% in civil engineering.
“This suggests confidence in the future of the construction economy, but it is questionable whether growth rates in the number of con-tractor registrations that exceeds the growth rate of the economy can be sustained,” the organisation says, noting that this growth will also likely result in an increase in competition within the industry.
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