DARYL SWANEPOEL: Seize on the uptick in construction jobs to push for growth
A multifatected approach should give priority to building state capacity and improving public sector performance
In the grand theatre of SA’s economy, where load-shedding is a recurring plot twist, the construction industry finds itself cast as the underappreciated sidekick. This once mighty industry has seen better days and is now desperately attempting to rewrite its storyline.
Luck has not been on our side on the global stage. Long periods of low commodity prices and the devastating Covid-19 pandemic have added to the economy’s woes. Moreover, the intricate dance of geopolitical complexities and shifts has added new layers of uncertainty.
Closer to home, stark statistics paint a grim picture. In 2022 the construction sector was 23.1% smaller than its prepandemic self, witnessing its sixth consecutive year of economic contraction — a sure sign of the economic pains to come.
Moreover, a new villain has entered the stage, the dramatic collapse of the country’s rail infrastructure, which is limiting exports and threatening jobs and investment across the mining, agriculture and manufacturing sectors.
Statistics underscore the severity of the situation, with the volume of freight transported by rail plummeting 31% since 2017. The resulting inefficiencies are estimated to have imposed a whopping R250bn cost on the economy in 2022 alone.
Amid these challenges, chronic power shortages cast an ever-present shadow, impairing SA’s potential, while elevated crime rates in the form of the construction mafia, increasing cash-in-transit heists and violent attacks further destroy investor confidence and the wider community’s hope for SA’s future.
Behind these statistics lie countless stories of job losses and shattered dreams. But every great narrative has its turning point. The construction industry stands as both a reflection of SA’s problems and a symbol of the country’s economic potential.
During the course of 2023 there has been an uptick in construction sector employment, driven mainly by investment in solar power and other renewable energy projects due largely to the pro-investment reforms in the electricity sector driven by President Cyril Ramaphosa over the past few years.
The Inclusive Society Institute believes now is the time to build on this, particularly in electricity, logistics and security. To create more employment and opportunity SA should aim for a 4%-5% economic growth rate.
In our recent dialogue with the construction industry the need for a multifaceted approach was highlighted. This approach should prioritise the development of state capacity, the professionalisation of the public sector and improved efficiency in supply chain management and procurement practices. These changes will create an environment for efficient project design and execution — the key to growth and success for the construction sector.
Fulfilling commitments to infrastructure projects is not just a governmental obligation; it is the linchpin in stimulating SA’s construction industry. Simultaneously, we cannot overlook the role the private sector plays in capital formation. Rebuilding infrastructure and the economy requires concerted and complementary action by the state and private sector to restore confidence in the country and rekindle optimism about its economic prospects.
Finance minister Enoch Godongwana’s recent medium-term budget policy statement outlines a proactive strategy to mobilise private sector financing and technical expertise at scale. His commitment to amending Treasury regulations and municipal legislation in line with the recommendations of a review of the public-private partnership framework is a step towards addressing challenges that have historically undermined infrastructure projects.
The establishment of an Infrastructure Finance & Implementation Support Agency, coupled with mechanisms for concessional borrowing and approaches such as build-operate-transfer structures, signal a new approach to fostering private-public collaborations. If effectively implemented these interventions have the potential to unlock a range of infrastructure projects crucial for SA’s economic growth.
Yes, SA’s script may be challenging, but now is the time to improve our growth story — to convince ourselves that we can grow our economy and succeed as a nation. Despite numerous challenges, SA has consistently demonstrated the ability to bounce back, adapt and forge ahead.
Even in the midst of record load-shedding (SA experienced more power cuts in the nine months to September than in the whole of 2022), the economy managed to achieve growth in the first half of the year.
While an economic growth rate of 0.9% is wholly insufficient to tackle the country’s economic challenges, it is a sign of the country’s economic resilience and a signal that if we increase public and private sector co-operation and improve policy frameworks, we have the potential to improve our performance on the world stage.
• Swanepoel is CEO of the Inclusive Society Institute. This article draws on the content of the institute’s ‘Building The Future: Construction Industry Summit’ report on the recent summit, hosted in collaboration with Asla.
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