Master Builders Association North is calling for urgent action to save the construction industry.
This follows the recent announcement that Basil Read Construction is applying for business rescue. According to Mohau Mphomela, Executive Director, Master Builders Association North (MBA) this is a clear indication of the critical state of the construction industry.
“Basil Read is the second principal contractor to apply for business rescue since NMC Construction in December 2017. Others that have applied for debt-freezing agreements include Group 5 and LBC Lenco Construction, and indications are that there are still more to come,” he says.
“The writing is on the wall unless we unite as an industry to discuss the challenges we all face and come up with solutions. There is no time to be lost – if we lose our big construction companies, we lose not only many jobs but also our national capacity to build the infrastructure a growing economy needs.”
Construction industry declines again
Basil Read’s announcement comes in the wake of the news that the South African Gross Domestic Product (GDP), and more specifically the construction industry, declined during the past quarter. This is the fifth consecutive quarter in a row that the construction industry has declined, reducing its value from R110 billion to R108 billion.
Mphomela believes the low investment by government in infrastructure development in the 2018/2019 budget means the sector is set for further decreases. He says that a wide range of factors have played a part in the industry’s decline, among them shrinking margins, increased penalties, and non-payment or delayed payment by clients (in both the private and public sectors).
Pressure from professional teams
In particular, Mphomela singles out the relentless pressure from professional teams representing clients who insist on continual cost reduction.
“Contractors frequently give in to their demands in order to keep the business, but reduced margins and lower profits means they are never able to build up capital for investment or to survive lean periods,” he explains. “As a result, even the biggest companies are living from hand to mouth.”
“Urgent action is needed by all of us in the industry,” he concludes.