The Dying Star – So What Now for the South African Construction Industry?

According to the laws of physics, when a star begins to die, the progress from collapse to super nova and ultimately rebirth as a black hole, is irreversible. I have in a series of articles referred to the collapse of the South African construction as a dying star. It’s appears though that our dying star is progressing through stages which defy the laws of physics.

In 2019, the industry was already in its death throws. 2020 saw a mind numbing 78% decline in investment in new projects. Contraction in industry output in 2020 topped - 20% with some analysts reporting that the overall industry contraction was closer to -35%.

Sector growth for 2021 to 2024 looks sluggish with annual growth of 1% to 2% predicted. The industry trends are clearly toward cheaper, innovative materials and the increased use of technology.

Headwinds include a stagnant, declining economy, sovereign ratings downgrades, a decline in state owned enterprises and load shedding. The most impactful negative factor will be the unconstrained and unrelenting rise of construction “mafias”. This problem is exacerbated by the failure of the government to address the flawed legislation that has enabled the widespread immersion of criminal elements in the construction process.

The litany of adverse influences on an already failing industry would be expected to trigger the final and inevitable collapse of the sector. Many of the industry’s long established behemoths are gone. The supply chain is in tatters.

So what now? Well, despite the seemingly endless challenges, the fundamental drivers of the industry remain strong and in many areas are strengthening. The country’s demand for new or restored infrastructure remains high. More roads, bridges and other transport infrastructure are needed. The country’s housing crisis is deepening, much the same as its water and power supply challenges.

Whilst the State has allocated substantial funding to infrastructure projects, intended to accelerate the post-pandemic recovery, there are a growing number of opportunities in the private and PPP sectors too. Absent of the large scale firms that historically consumed the greater part of the annual construction output, there are opportunities for smaller to medium sized firms to capitalize on the demise of many major players.  

There is an old African proverb that says that "everyone wants to be a lion, until it’s time to do lion stuff". Presently, the South African construction industry, rather than collapse, has defied the odds. It has adapted. The old prides are gone. New young lions and lionesses have taken over. Prey has become less; competition is fierce and the savannah of the industry is more dangerous and perilous than ever.

The status quo, where professional teams controlled the industry and contractors fought for scraps is no more. As I predicted several years ago, South Africa now has an over-abundance of professionals, whilst established contractors who are able to perform, are far scarcer.

A major contributing factor in the decline of the industry before COVID19, was the subjective practice of industry professionals, who habitually, and often unfairly, sided with employers and other professionals against the interest of contractors. The “us v them” culture that pervaded the industry.

As the industry rebuilds and molds itself into a new structure that may shine brightly once again, the old ways must be set aside. Contractors must take their rightful place at the center of the industry.  Their voices must speak the loudest, their words must have meaning, and be heard and acted upon.

It is contractors that will revive the dying star. No longer the lambs, but the lions. These lions must do as lions do. They must protect themselves from the criminal elements seeking to pray on the weak.  They must push back against clients and professionals who seek to exploit them by driving prices down to unsuitable levels. They must know when to stand together with other prides to fight for their industry and their common good. They must realize their worth and use that knowledge wisely.

The South African construction sector, by its own mismanagement, has developed into a situation where contractors are needed many fold more than any other stakeholders. That demand gives power, influence and control. Seize the day; act like lions; do what lions do. Circumstances have dealt contractors a hand of aces. Let’s hear the roar. Don’t wait for opportunity to come knocking, hunt for them. Drive the process; initiate, instigate. The possibilities are there for capable contractors; bare your teeth and grab them. When you take your seat at the table, know that you have the power.