The big plan to turn South Africa into a construction site
President Cyril Ramaphosa and Public Works and Infrastructure Minister Dean Macpherson have said that they want to turn South Africa “into a construction site” in hopes of improving economic growth and revitalise
“We must become obsessed with infrastructure-led economic growth that will ignite job creation throughout South Africa,” said Macpherson, and echoed by President Cyril Ramaphosa’s at his opening address of Parliament.
The South African construction industry is pivotal for socio-economic development and GDP growth, contributing significantly to both employment and the national economy.
According to StatsSA’s Quarterly Labour Force Survey for Q1 2024, there are around 1.22 million people employed in the construction sector, which is around 7.25% of the country’s employment.
However, the industry has taken a hit in recent years. Between Q4 of 2023 and Q1 of 2024, the sector shed an estimated 106,000 jobs alone.
Recently, BusinessTech reported a warning from the Master Builders Association (MBA) North, which said that the country construction industry is up against the ropes due to (among other factors) shrinking margins, unfair practices, and rampant delays or outright refusal to pay subcontractors.
Delayed and non-payment plague South Africa’s construction sector causes severe financial strain. Waiting months or years for payment after completing work has continued to jeopardise their viability and force them into debt, and many layoffs.
“The industry is bleeding – it’s in dire straits,” said Mohau Mphomela, Executive Director of MBA North.
“The industry has experienced a relatively long period of decline in growth,” wrote Infrastructure South Africa (ISA).
According to StatsSA, the construction sector’s GDP contribution has dropped from 4% in 2016 to around 2.3% in 2023.
This is “due to a variety of external shocks as well as internal challenges in the country [including] policy uncertainties, governance challenges and structural challenges within the industry amongst others,” said ISA.
ISA also identified some other pressing challenges, which include:
- Budget constraints;
- Economic stagnation;
- The impact of COVID-19 regulations;
- Issues like to do with energy and logistics;
- High inflation driving up material costs;
- Non-payment by subcontractors;
- and disruptions caused by construction mafia extortion.
One of the most widely publicised woes in the industry in South Africa is that of the construction mafia.
According to the State Investigating Unit (SIU), the “construction mafia refers to extortion groups that typically seek to forcefully extract protection fees from local construction companies and contractors or extort a portion of the cost of an infrastructure project or that specific individuals affiliated with the mafia are recruited to work on the site.”
This is estimated to cost the economy around R68 billion.
Macpherson declared “a war on” this in his first speech as minister, saying that “anyone who seeks to hold back infrastructure projects must be treated as an enemy of the State, and they will be dealt with appropriately.”
Ramaphosa said that the Government of National Unity wants to “turn our country into a construction site” through “pursuing a massive investment in infrastructure.”
Macpherson expressed DPWI’s intention to prioritise infrastructure development, as well as aiming to establish new public-private partnerships to facilitate the development of energy, communication, infrastructure, water, and transport systems.
For this, he has set a target of raising R10 billion in direct private-sector investment for the state’s property portfolio over the next ten years.
Additionally, said that they want to enhance the maintenance and utilisation of state-owned property assets, streamline bureaucratic processes to support the growth of small businesses and “eradicate corruption, criminal activity, and sabotage” within the construction sector to ultimately boost job creation and the economy.
However, this may be easier said than done.
Roy Mnisi from Master Builders South Africa (MBSA) welcomed promises to transform South Africa into a bustling construction site in a recent interview with Moneyweb.
Although he expressed concerns about tackling the entrenched construction mafia, highlighting the need for cooperation with Police Minister Senzo Mchunu, numerous sectors within law enforcement, and the judiciary to address this issue effectively.
Additionally, he welcomed Macpherson’s initiative to form an infrastructure advisory committee and encourage PPPs to help drive long-awaited strategic projects.
While some are optimistic about the plans, others wonder if they have seen it all before.
Chris Campbell, CEO of Consulting Engineers South Africa (CESA), expressed scepticism regarding the minister’s ambitious plans, highlighting the necessity for inter-ministerial cooperation and political stability to attract private investment.
“It sounds like an overly ambitious plan because the fact of the matter is not all of these areas are within his control and it’s going to take him getting cooperation and collaboration across various ministries so that they don’t work in silos,” said Campbell.
Like Mnisie, Campbell also pointed out challenges in dealing with construction-related crime, emphasising the importance of support from law enforcement agencies.
He said that a programme was in place, but it did not bear much fruit under his predecessor, Patricia de Lille.
“One wonders what he is going to do differently,” he said.
CESA president David Leukes said that if these goals want to be achieved, “there must be collaboration across government departments to effectively address critical infrastructure issues, including dealing with the construction mafia.”
He added that collaboration between government entities and the private sector is key to achieving success.
Ramaphosa said that government is looking at “simplifying the regulations on public-private partnerships to enable greater investment in both social and economic infrastructure development.”
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