Building a hopeful future

SA’s construction industry set to flourish in 2021

BY FIONA WAKELIN

After being the country’s poorest performing sector in 2020, which saw construction GDP slump by 20.3%, the good news is that South Africa’s construction industry is showing signs of green shoots this year.

In his SONA address, President Ramaphosa was clear about the government’s commitment to growth in this sector:

ECONOMIC RECONSTRUCTION AND RECOVERY PLAN

Since the commencement of theEconomic Reconstruction andRecovery Plan (ERRP), the SouthAfrican government has been zooming in on four priority interventions:

- A massive roll-out of infrastructure throughout the country

- A massive increase in local production

- An employment stimulus to create jobs and support livelihoods

- The rapid expansion of energy generation capacity

“We announced that we would beembarking on a massive roll-out ofinfrastructure throughout the country.

We knew that to achieve this objective we would need to steadily rebuild technical skills within government to prepare and manage large infrastructure projects”, President Cyril Ramaphosa commented.

INFRASTRUCTURE INVESTMENT PROJECT

Government has developed an infrastructure investment project pipeline worth R340-billion in network industries such as energy, water, transport and telecommunications. Construction has started and progress is being made on a number of projects.

Since the announcement of the ERRP, government has launched two major human settlements projects that will provide homes to almost 68 000 households in Gauteng. Similar human settlements projects are planned in other provinces.

Also, a newly instated R100-billion Infrastructure Fund is now in full operation. This fund will blend resources from the fiscus with financing from the private sector and development institutions. Its approved project pipeline for 2021 is varied and includes the Student Housing Infrastructure Programme, which aims to provide 300 000 student beds.

THE BLACK INDUSTRIALIST FUND

“We have worked closely with the auto sector to help it weather the pandemic. By the end of the year[2020], the sector had recovered around 70% of its normal annual production, in difficult circumstances”, Ramaphosa explained.

During 2021, government will be focusing on lifting the auto industry back to full production status, by implementing the Black IndustrialistFund, and creating a new platform for expanded auto trade with the rest of the continent. This fund will become part of government’s efforts to support the manufacturing sector.

WHAT’S IN THE BAG FOR INFRASTRUCTURE AND CONSTRUCTION IN 2021

Government has set asideR791.2-billion for infrastructure investment drive. In his 2021Budget Speech, Finance MinisterTito Mboweni said government was partnering with the private sector and other players to rollout infrastructure through initiatives such as the blended finance InfrastructureFund. Echoing the SONA, the Budget explicitly supported economic transformation and job creation, with special mention being made of the R6.2-trillion spending envelope over the Medium Term ExpenditureFramework focussing on the EconomicReconstruction and Recovery Plan.

“This is not an austerity Budget. Our fastest-growing area of spending is our investment in the future-capital payments,” – Minister Mboweni.

Minister Mboweni also stated that in order to improve access to African markets, the country’s six busiest border posts would be upgraded and expanded. He stated that, “These will be significant infrastructure interventions using the PPP model. Starting with Beit Bridge, which was built in 1929 and last upgraded in 1995, these One-Stop-Border-Posts will harmonise the crossing of border by people and goods” –Minister Mboweni.

REVITALISATION OF THE PORT OF DURBAN

In line with this focus on infrastructure development is the construction work being done to make the Port of Durban more efficient and competitive. The government is making the improvement of ports a priority of Operation Vulindlela.

“Altogether, the expansion of infrastructure at the port will requireR100-billion in new investment over the next decade and more. This will completely transform the port, expanding its capacity for container handling from 2.9 million units to more than 11 million units.

These ambitious plans will require greater private sector participation and investment. Transnet, including theDurban Port, is an important national asset belonging to the people of SouthAfrica.”- President Ramaphosa

The government has emphasised that partnerships with the private sector are crucial “to bring new investment, technology and expertise to port operations and to modernise equipment and infrastructure.”

Through this reform process, which is part of the Reconstruction andRecovery Plan, the efficiency of SouthAfrican ports and railways will pave the way for substantial investment in infrastructure, which will, in turn lower costs and improve the competitiveness of exports, and result in huge numbers of job creation opportunities.

GLOBAL CONSTRUCTION OUTLOOK

A new report by Global Data Global Construction Outlook to 2025 says that the construction industry is set to grow by 5.2% this year – after a sizeable contraction due to the impact of Covid-19.

“In markets where the construction industry has managed to return to relatively normal levels of operation since the crisis engulfed the world in 2020, activity has rebounded positively, with signs that in some markets there has been a marked effort to get projects back on track quickly.

“With activity levels trending upwards in the absence of restrictions on site works, there are likely to be record high rates of year-on-year growth in major markets in the coming quarters, given the comparison to periods last year when construction sites were closed or when activity was severely disrupted.There are also positive signs for the coming quarters when assessing leading indicators, such as building permit approvals,” Danny Richards, GlobalData.