COVID-19 HAS RAVAGED SOUTH AFRICA ’ S CONSTRUCTION INDUSTRY , BUT IT CAN RECOVER
MOVING FORWARD
In the face of such calamity , how does the industry move forward ? What measures can be implemented to rescue the various affected stakeholders ? What can possibly help ensure the revival of the Construction Industry without compromising the needs of other industries and the nation at large .
A look at what other countries are implementing gives some ideas on how to possibly proceed . Many countries have experienced a fallout from the pandemic , some with the same challenges the South African industry has faced . Examples are provided below of varied Covid effects and government strategies to improve the economy and the Industry from Fitch .
Country COVID-19 Effect Moving forward
Uruguay
Philippines
Colombia
Brazil
Limited impact as the government managed to control the spread
Restrictions resulted in affected manpower numbers and supply chain challenges
Economic devastation from the pandemic and extensive quarantines
Construction works were largely allowed to continue but faced supply chain disruptions , logistical challenges and a weakening of macroeconomic conditions Residential and non-residential building expected to be impacted as builders slow down the launch of new projects , but infrastructure development will face reduced impact
Acceleration of major PPP projects for existing economic recovery needs and spotlight on private developments
Government likely to channel funds to immediate concerns such as the labour market and households
Implementation of Compromiso Por Colombia Plan which will focus on accelerating private initiative and public-private partnership projects . Government will focus spending on economic support to businesses and individuals while relying on private investment as the driver of economic recovery
While new projects could be limited , government is looking at the use of PPPs to help improve the industry
Fitch also notes that developed markets and China will be at the forefront of infrastructure stimulus by increasing public infrastructure investment . This will be possible through the low borrowing rates afforded them . This prioritising of infrastructure development has already been observed in countries like Germany and China . While the United States has the potential for stimulus measures , these may be put on hold due to elections and difficulties agreeing to terms of stimulus .
Developing markets on the other hand have limited potential for increasing infrastructure spend as they struggle to re-establish pre- COVID investments . Some governments like those of Kenya and the Philippines have already pulled back from major infrastructure spends .
South Africa ’ s recovery approach borrows from both categories . The Construction COVID-19 Rapid Response Task Team (“ CC19RRTT ”) is one of the task teams established as a means of assisting government with interventions to prevent a complete collapse of the Construction Industry . Two key interventions they suggested were keeping to previously proposed infrastructure spend and also fast tracking independent public projects which have proven effective in other countries .
Government has had to be circumspect in the manner they approach the current economic crisis as the Construction Industry is not the only affected party . For example , money has been redirected from the education infrastructure grant to schools needing water , sanitation and PPE . The revised budget also shows some R16bn from conditional grants redirected to provide Covid relief . Investment in residential and non-residential buildings has also shown a decrease of just over 10 percent .
It should be noted though that government is also prioritising infrastructure development . It plans to expedite 50 infrastructure projects worth US $ 20,2 billion ( R340bln ) as part of its focus on the reconstruction and recovery of the South African economy . The Development Bank of South Africa is funding construction to the tune of US $ 259 million ( R4.5bn ) in the Johannesburg and Tshwane metros , the Cooperative Governance and Traditional Affairs Minister , Nkosazana Dlamini-Zuma confirms that US $ 32 million ( R554 million ) has also been set aside for creating jobs through municipal infrastructure projects . During the Sustainable Infrastructure Development Symposium South Africa ( SIDSSA ) in June , 276 projects worth a combined value of $ 150 billion ( R2.6 trillion ) were identified as being under evaluation by government ; implementing even a fraction of these is expected to assist with boosting the industry and the economy .
According to Fitch , South Africa has a strong domestic presence in construction and financing . This private financing is expected to help cushion the construction industry preventing it from collapsing . This outlook provides hope that not all is lost for the industry , and government ’ s commitment to the sector as an economic recovery vehicle is already a huge step towards its revival .
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