Construction crane in Sea Point, Cape Town as seen in a file photo. Photo: Armand Hough / Independent Newspapers
By Beth Amato
Consulting engineers' confidence in the construction sector rose to more than 80% in 2023, possibly signalling better times for the industry.
Speaking at MDA Construction and Technology Attorneys’ annual Collective Wisdom conference, Elsie Snyman, the CEO of Industry Insight, presenting an outlook of the sector, yesterday said that while the improved sentiment was off a low base of 50% surveyed for 2022 and 2021, consulting engineers’ satisfaction with the state of the industry was a litmus test for the broader infrastructure and development landscape.
Snyman noted that consulting engineers had more work in 2023, with civil contractors and architects expressing positive views, too.
“We see better perceptions of the industry. Perhaps it can be attributed to the increased planning in economic infrastructure. There is also much discussion about infrastructure and development investment. It has been acknowledged over and again that investment is needed in infrastructure for all economic sectors to grow,” said Snyman.
She noted that estimated civil tender values rose by 29% and the value of construction projects rose by 50% last year.
While the government had announced it would spend R943.8 billion on public sector infrastructure in the next three years, not all sub-sectors would benefit equally.
“The government will be spending money on fixing critical infrastructure and constraints first. While it’s really good news that water infrastructure and development has been allocated R139.1bn, there is less for the transport sector, for example,” she said.
Snyman said she believed the slump the construction industry had found itself in for some time could be drastically improved with greater private investment.
“Business confidence has deteriorated since 2007. In fact, the industry has recorded a 36% loss in investment in real terms since 2015 and 2016. We just can’t seem to get out of this stalemate.”
She said private sector investment in big infrastructure projects could work well in South Africa.
Snyman referred to the recent memorandum of understanding signed between Hive Hydrogen South Africa and Genesis Eco-Energy to implement 372MW of wind power in the Western Cape to support the green ammonia project at Coega in the Eastern Cape.
“This project didn’t take long to actualise. South Africa can set a global example with the right partners and investors,” said Snyman.
Meanwhile, Dr Allison Anthony, a public procurement law researcher, reiterated the importance of infrastructure as an economic driver in South Africa. Understanding construction procurement law in terms of the public procurement bill was necessary to achieve the transformation goals envisioned by large infrastructural development projects.
“The bill presents a lot of opportunity for transformation in the construction procurement process, but there are just too many cooks boiling the broth. There are a plethora of legal rules that may be difficult to apply,” said Anthony.
Her criticism of the bill extended to its lack of clarity about e-procurement and its skirting of the alignment to the sustainable development goals.
“For our construction sector to be internationally relevant, the bill should be more explicit about these two things,” she said.
Anthony noted that international relevance and a clearer procurement bill would entice private investors.
It is not only the legal framework stifling the growth of the construction industry.
Snyman noted that building approvals were at a near-record low, with less than 12 million square metres approved in 2023. “More and more projects are being postponed. The rate is currently at its highest since Covid-19.”
The government admitted in the Budget speech that public sector capital investment had been about 5.4% of gross domestic product between 2012 and 2022, while private sector investment had averaged more than10%. It is why the R943.8bn infrastructure budget allocation could kick-start increased spending alongside better infrastructure structural reforms.
* Amato is a freelancer for Business Report.
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