‘Crisis’ of crime at building sites

The government must tackle corruption head-on and speed up infrastructure tender processes if the construction industry is to be a part of plans to stimulate economic recovery and improve services, says Roelof Botha, compiler of the Afrimat construction index.

The government must tackle corruption head-on and speed up infrastructure tender processes if the construction industry is to be a part of plans to stimulate economic recovery and improve services.

This is according to Roelof Botha, compiler of the Afrimat construction index on behalf of the JSE-listed open-pit miner for the first quarter of 2022.

The composite index of nine different indicators paints a picture of an eager sector muzzled by a combination of high interest rates, low economic growth, state capture, public sector incompetence and high levels of violent crime.

The index, released on Thursday, came in at 114.7 points for the first quarter of 2022. It recorded its highest score of 143.8 points in the third quarter of 2016.

While the construction sector is also battling supply chain constraints and increases in the prices of energy commodities, especially oil, the index marginally outperformed GDP growth year on year.

“What the Afrimat construction index tells us, in a nutshell, is that we are still paying the price for the ‘lost decade’,” said Botha. “The government needs help because of the incompetence during the Zupta era.”

The index outlined that after the lifting of the strictest lockdown regulations in the latter part of 2020, construction and most key sectors of the economy saw a V-shaped recovery.

But while some sectors have fully recovered and expanded, construction lags.

Botha, who is also an economic adviser to the Optimum Investment Group, said red tape, public sector inadequacies and organised crime are stifling the industry, which according to his calculations should be growing at about 10% a year.

The index showed construction has grown a mere 14.7% since 2011, with intimidation, extortion and violence on construction sites reaching “crisis levels”, according to Botha. He called for a specialised police unit to get rid of the construction mafia.

Simultaneously, the state should form an interdisciplinary body made up of both public and private sector representatives that will speed up tender processes in a controlled and efficient manner.

“With the National Treasury there are just so many regulations that one has to comply with before you can start mixing concrete,” Botha said.

“They really need to look at the whole construction industry regulatory pipeline and see where can they intervene with the assistance of experts to just speed it up. In other words, reduce the red tape.”

In his state of the nation address, President Cyril Ramaphosa announced the appointment of business personality Sipho Nkosi to lead the presidency’s red tape team, signalling a reduction for the benefit companies. But the work of that unit has yet to be felt.

“Ramaphosa is taking us on a new path towards closer cooperation with the private sector, but there are still too many government organisations where incompetence is having a huge negative impact on construction,” Botha said.

Ramaphosa’s ambitious R1.2-trillion investment drive achieved 95% completion by March 2022, a year short of its five-year target, but the slow rollout of projects has thrown a spanner in the works.

“As long as the value of construction works represents only 4% of the country’s infrastructure project pipeline, new jobs will not be created at scale in the construction sector,” Botha said.

“There is enough money in the kitty to significantly expand construction sector activity, but the government’s promises of closer co-operation with the private sector need to be fulfilled post-haste for this to become a reality.”

The only subindicator that showed positive growth between the end of 2021 and the start of 2022 was the value of wholesale sales of construction and building materials. The worst performer quarter on quarter was labour remuneration, which fell more than 15%.

On a year-on-year basis, however, the picture is rosier, with four of the nine subindicators improving and two falling less than 1%.

THE GOVERNMENT NEEDS HELP BECAUSE OF INCOMPETENCE DURING THE ZUPTA ERA