The Minister of Finance’s pronouncements on measures to revive the construction economy have been welcomed as a step in the right direction by the building industry.
“We are pleased with the commitment to arrest criminal gangs that disrupt work on construction sites. It is a form of anarchy that has no place in any progressive society,” said John Matthews of Master Builders South Africa.
In his 2020 Budget Speech, Minister Tito Mboweni called on communities to expose those behind high jacking of construction sites in the form of radical economic transformation.
This followed President Ramaphosa’s 2020 State of the Nation Address announcement that the growing problem of extortionist criminal groups that target construction sites would be dealt with by specialised units of the SA Police Service and the National Prosecuting Authority.
“It is the first step that will provide immediate relief to contractors who have construction sites in limbo, and we most welcome the commitment. We will be following up with the SA Police Service on how to prevent further disruptions”, said Matthews.
Site invasions by armed extortionist groups have been cited as one of the leading causes of the decline in construction activity in the country, causing company closures and loss of employment.
In only the last 3 years, several large construction companies such as Group 5, Basil Read, Liviero, NMC and Essor Construction have closed operations, while many of the remaining ones have reported financial difficulties. Sluggish economic growth, a decline in government infrastructure spending, late payment of contractors by the state and the lack of capacity to undertake public projects with approved budgets have been recorded as other leading causes of the problem.
Minister Mboweni partly addressed these issues in his 2020 Budget Speech, announcing a government commitment of R10 billion towards the R200 billion blended finance infrastructure programme by the Development Bank of South Africa (DBSA).
While acknowledging the capacity challenge, little was said on how the problem would be addressed to ensure that bottlenecks in funding and implementation of public infrastructure projects would be cleared.
Matthews said that contractors expected to see more firm commitments towards additional infrastructure spending as the foundation on which the Minister would build his plan to increase the growth rate to above 1%.
“Construction has a large multiplier effect and produces essential economic infrastructure for further economic activity, so we definitely expected to see more spending on this and concrete measures to address capacity problems that are obstructing implementation of projects” he said.
“We remain optimistic that the industry will start growing again and continue to transform, and we are happy that the government is taking steps in the right direction”.