Local construction sector continues to struggle

27th May 2022 By: Tracy Hancock - Creamer Media Contributing Editor

Local construction sector continues to struggle

THE GROOVE The construction of the 13-storey building for student accommodation is on schedule to be completed by the end of the year, despite inclement weather and ground conditions challenging its completion

The fragile South African construction sector is being further weakened by the continuing lack of implementation of the infrastructure delivery plan by government, as well as the demand for residential, retail and commercial buildings from the private sector, says diversified infrastructure and services construction company Concor CEO Lucas Tseki.

Owing to South Africa’s poor economic state and the consequences of the pandemic, significant projects have been cancelled or delayed over the past two years.

The ruling by the Constitutional Court on February 16 on the matter between the Finance Minister and AfriBusiness is further hampering infrastructure delivery by putting aside preferential procurement regulations under the Preferential Procurement Policy Framework Act, creating more uncertainty for the “already bleeding” sector, says Tseki.

“This uncertainty will lead to the demise of more construction sector players, as well as the loss of jobs, skills and expertise. We trust that our authorities are rational and competent and will exercise the appropriate diligence in resolving the matters arising from the Constitutional Court ruling with the required urgency.”

The construction sector is in a critical state, having shrunk considerably over the past two years.

“The construction sector was the worst-performing sector locally, quarter on quarter, in 2021, with less growth during the period compared with that of 2020, despite the relaxation of Covid-19 restrictions, and various media reports of potential investments by private investors and government.

“The news of public-sector projects, such as those mentioned in the State of the Nation Address, is being interpreted as potential propaganda by government, as the implementation of these projects, which include Strategic Infrastructure Projects, and various public–private partnership projects, have yet to materialise,” states Tseki.

Despite the difficulties created by the pandemic, there are matters that are in South Africa’s control and that should be acted on to unlock value through the construction sector, he explains, being of the opinion that the sector remains of national strategic importance.

“South Africa’s economic recovery must be structured around infrastructure spend and Concor believes that government is committed to using the sector to stimulate the country’s economy,” he says.

Project Outlook

Celebrating five years since being rebranded, Concor continues to deliver projects and secure new work regardless of the challenging local business environment, boasting a healthy order book, says Tseki.

“We have demonstrated strong performance in project execution and delivery while simultaneously protecting our employees during the pandemic, and our cash levels will improve for the year ending February 2022.”

Concor has been operating in an environment characterised by volatility, uncertainty, complexity and ambiguity – which Tseki expects to continue in the short to medium term – and has focused, and will continue to focus, on five key priorities.

These are ensuring an appropriate diversified order book mix; project delivery excellence; contract and commercial management excellence; cost control and the management of working capital to realise strong fiscal discipline of the organisation; and an energetic, engaged and motivated workforce.

“We are seeing much mining infrastructure activity on the back of strong commodity prices and expect significant activity in the renewable-energy space. We recently secured an early works order for the construction of the Koruson Main Transmission Substation in response to the Renewable Energy Independent Power Producer Procurement Programme Bid Window 5 project being developed by independent power producer EDF Renewables,” highlights Tseki, adding that Concor has constructed more than 11 wind farms.

Further, he sees opportunities in the delivery of education infrastructure, following a lack of projects in this space over the past three years.

“Education infrastructure is expected to be at the forefront of the public-sector agenda.”

Notably, Concor is constructing The Groove, an 899-room, 13-storey building for student accommodation on behalf of multidisciplinary investment holding company Vulindlela Holdings and real estate investment trust company Growthpoint Properties. The project is adjacent to the University of the Witwatersrand in Braamfontein, Johannesburg, and is on schedule to be completed by the end of the year, despite inclement weather and ground conditions challenging its completion.

In addition, the pandemic has created significant awareness of the state of South Africa’s healthcare facilities, particularly in the public sector. Therefore, the modernisation, upgrade, and occupational health and safety compliance of local hospitals is a “massive opportunity” in the short term, states Tseki.

Concor also sees opportunities in the transport sector, expecting delayed South African National Roads Agency projects to be awarded this year.

“As much as we are starting the year with significantly low levels of confidence, Concor expects to be awarded its fair share of projects, having received enquiries from clients equating to about R40-billion in 2021. We are optimistic that the sector can be viable and sustainable over the long term,” he enthuses.

Securing about R3.6-billion in work over the past few months has been “very positive”, he says. Concor’s new projects include further work for State-owned mining company African Exploration Miningand Finance Corporation, with Concor Mining Services supplying drill and blast services, as well as the R1.1-billion sewer diversion project in Buffalo City, in the Eastern Cape.