Housing in Southern Africa September 2016

Housing

Bribery, corruption and labour shortage Musa Shangase, Commercial Director of Corobrik cited a number of challenges that face

the construction industry in South Africa. The most notable challenges facing the building sector according to

Shangase is the struggling rand,

corruption, labour shortage, service delivery and Eskom.

Musa Shangase

A ddressing delegates at Inter- build Africa 2016, Shangase said that given the challenges it is not all gloom and doom, the future maybe brighter than it seems. Unpacking the challenges he says, “The country’s sloweconomic growth makes for a sluggish construction sector, in 2015 until early 2016 the rand took a serious knock in relation to the dollar. As the value of the rand decreased, project costs rose, as well as those of construction materials like steel and oil. Commodity mar- kets are affected, with subsequent decreases in revenue being felt by major construction firms. A poor per-

numerous activities which make up the construction process. The bal- ance between activities that legally facilitate this process and those that are tainted by concepts of bribery, or corruption is not always clear. Lately there were issues of corruption, with companies paying to have their ten- ders fast-tracked. Also these cartels limit healthy competition, under- mines the reputation of the industry and prevents healthy competitive pricing.” Citing the example of power problems facing Eskom, the power shortages may force construction companies to look at increased

Almost 56% stated disruption of sup- ply of utilities, 46%were impacted by government employee strikes 45% cited the rising cost of legislative compliance had negatively affected their businesses. However, Stats SA reported re- cently that the value of building plans passed increased by 7,6% or R3,1 billion between January to May 2016, compared to the previous year. The residential building sector increased by 6,7% or R1,38 billion and non-residential increasedby 18% or R1,9 billion over the same period last year. He says, “South Africa’s strength- ening rand has made a positive con- tribution and the fact that the recent elections were free and fair. National Treasury says that it will maintain government’s fiscal policy stated in the 2016 budget. This includes achieving economic growth of 2,7% in 2017 rising to 4% in 2019. ʻMadiba’, always said it seems impossible until it is done.” ■

forming currency means plummet- ing profitability for construction firms. When the economic growth stalls, so does the demand for con- struction work. If the demand for new construction wo r k r ema i n s poor in 2016, it will pose a serious challenge.”

mechanisation in the future. On labour shortages, Shangase points out that there are few skilled arti- sans coming into the industry and some contractors claim that staff salaries represent 29%of total oper- ating costs.

‘The residential building sector increased by 6,7% or R1,38 billion and non-residential increased by 18% or R1,9 billion over the same period last year.’

Research from Grant Thornton’s International Business Report for 2016, shows that 61%of SouthAfrican businesses have been negatively af- fected by government services deliv- ery issues or regulatory requirements in the past six months. Of these 61% stated that increased service costs such as electricity, water, e-tolls and rising rates and taxes had the great- est negative impact on businesses.

He adds that bribery and corrup- tion has pervaded the construction industry. “The topic is regarded by many as synonymous with con- struction and engineering projects. However, the procurement and completion of such projects demands interaction between the participants; it involves a certain level of coop- eration in order to coordinate the

September 2016