Construction World October 2018

COMMENT Do you think that the Greek austerity of the last few years is far removed from the South African situation? It is actually not and the similarities are quite uncanny and alarming.

An abandoned construction site. The South African construction industry has been on a downward trajectory for 55 months. The local civils industry is in especially tough terrain.

On 23 April 2010, the prime minister of Greece, George Papandre- ou announced that the country would require billions of euros for it not to collapse completely, a result of many years of failing to effectively govern the Greek state. Eight years later, on 20 August 2018, Greece graduated from its third bailout. In these eight years, ordinary Greeks faced austerity and paid for the economic ‘crimes’ of their leaders. It can be said, as Richard Poplak from the Daily Maverick put it, that the country had been “colonised by an actuary’s spreadsheet”. In spite of the fact that the Eurozone is our biggest trading partner, South Africa, which is geographically far removed from Greece, did not really take notice. Instead, rather than heeding the alarm bells the Greek economic crisis set off, our previous president chose to wholly mess up Transnet, Eskom and most state-owned enterprises by enriching a limited few. When his term came to an end, the damage had already been done. Sadly, his successor is not faring much better. For a while the country was caught up in the euphoria of the election of Cyril Ramaphosa as president and for a quarter, there was positive growth. But we swiftly swung out of Ramaphoria on the back of a first quarter contraction of 2,2% and then a 0,7% retraction which put the country in a technical recession. We realise now that it is going to take more than sentiment to get us out of this mess. First to go was the rand. Up till recently it had been the darling currency of the developing world, but has, at the time of writing, lost almost 4% of its value on the back of the implosion of the Turkish lira. Recep Erdoğan, the Turkish president, fuelled Turkish growth by borrowing in American dollars. As the interest rates rose in the USA and the lira dropped in value, investors became increasingly worried that the country would not be able to repay them and lost interest in emerging currencies. Sure, the previous president cannot be blamed for this, but his actions

over his terms left the country devoid of any buffer. These include a year-on-year retracting economy and a youth unemployment rate of 52,5% (not to mention the current unem- ployment rate of 27,2% (Q2 2018)). The ruling party is not helping the situation. We have the land expropriation without compensation policy that is scaring off many potential investors, the inability to realise the uncertainty created by not finalising the Mining Charter and the inability to effectively root out corruption. The latter has effectively stopped the private sector, which is sitting on massive cash deposits, from injecting the economy with a much needed impetus. Instead of steadying the fundamentals, Cyril Ramaphosa is going around the world collecting promises of investment from the likes of China and Britain while being mum on the actual terms. This is where the similarity with the Greek situation comes in: we may end up in a situation where money is so expensive to repay, that we end up ‘surrendering’ our sovereignty. The inability to govern effectively, cannot be corrected by plugging holes – these always come with hefty price tags. The construction industry What does this mean for the construction industry? Yes, it has experienced a downward trend for the past 55 months, but this is still no excuse for government not to invest in infrastructure. It is a case of simple economics: the construction sector has the potential to be the country’s biggest employer. Instead, tenders are cancelled, payments are made to contractors late, and there is rampant corruption under the guise of transforma- tion. The result? A civils industry that is battling for survival.

Wilhelm du Plessis Editor

@ConstWorldSA

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EDITOR & DEPUTY PUBLISHER Wilhelm du Plessis constr@crown.co.za ADVERTISING MANAGER Erna Oosthuizen ernao@crown.co.za LAYOUT & DESIGN Adèl JvR Bothma CIRCULATION Karen Smith

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CONSTRUCTION WORLD OCTOBER 2018