Hesitancy in the construction industry owing to lack of funds

Engineering professional services consulting firm WSP | Parsons Brinckerhoff highlights that there is a fair amount of uncertainty in the construction and infrastructure industry, given the negative influences affecting it as a whole.

WSP divisional director Michael Bouwmeester points out that the industry is negatively impacted on by a variety of factors, including the lack of funds to support the National Development Plan (NDP) and mega construction projects, inaccessibility of available funds, the lack of skills in the industry and the issue of how professional services are procured.

He explains that mega projects in the infrastructure industry are subdued at the moment, owing to the lack of funds available to support material acquisition and the workers required to complete these projects.

Bouwmeester adds that, with the prevailing economic climate, investors are hesitant to put money into companies or projects that remain stagnant under such constraints.

As a result, larger corporations from the construction and associated consulting sphere have dedicated their time and funds to smaller projects in order to spread work loads to maintain industry jobs and stick to prescribed budgets. In addition to this, larger projects have been broken up and divided into smaller segments so that a mega project cannot belong to one single contractor.

Although there is potential for growth in larger infrastructure projects, such as the 2022 Commonwealth Games in Durban, Bouwmeester adds that gaining access to funding for these projects is a problem and that the majority of funding decisions are based on gross domestic product growth and investor confidence in the country.

Potential Transport Nightmare

He adds that there are other types of revenue generators in the country, such as State-owned enterprises, including Eskom and the South African National Roads Agency Limited (Sanral), but these enterprises are also behind on their construction projects, owing to the country’s political instability and severe lack of funds.

“For example, Sanral recounts that highways which were upgraded under the Gauteng Freeway Improvement Project (GFIP) will reach their capacity within the next three to five years, owing to the growing number of vehicles. Sanral, speaking at the Transport Forum’s Month of Transport Celebrations held in October, stated that there was little that could be done about this, given the insufficient funding available to Sanral,” Bouwmeester points out.

This means that phases 2 and 3 of the GFIP are unlikely to be implemented. Based on the initial roll-out plan, the PWV 14 (Germiston to Boksburg), linking the R21 at OR Tambo International Airport with the N3/M2 at the Geldenhuys interchange should have been completed.

As a result, all the major metropolitan areas have faced high levels of congestion and motorists often spend hours travelling to and from work.

In keeping with the user-pays principle, the GFIP is a three-phase project that plans to use a sustainable revenue stream from e-toll payments by users to fund the much-needed freeway upgrades and future phases of the project in the country’s far and away most industrialised province.

“We need to be able to have a growth rate of 6% to start making a dent in unemployment and to start achieving the requirements of the NDP. With potential growth rates being 0.5% for the year and next year possibly 1.3%, it is nowhere near where we need to be,” asserts Bouwmeester.

Growing Population

Owing to the growing population in South Africa, WSP points out that it is a requirement to have increased infrastructure as a whole as well as an increased demand for services such as water, sewerage systems, roads and public transport.

Bouwmeester highlights that, in addition to this, the growing population also affects the maintenance of the infrastructure South Africa currently has.

He maintains that there is already a maintenance backlog and that this issue needs to be addressed to ensure that the country is able to keep the services it has in place, as the longer infrastructure is left without maintenance and the less maintenance is done, the more costly it becomes in the long run.

Procuring Services

WSP adds that, as a consulting firm, it is focused on providing solutions for its clients to make the most of the money that they have in order to optimise their spending, allowing the client to spend money on good value and good services.

The firm notes that, on the consulting side of the construction industry, the concern lies in how professional services are being procured.

Bouwmeester notes that professional services, despite significant pockets of shortages of relevant professionals in the public sector, are being cut down on and that companies who are winning tenders cannot provide the valued services that the client is looking for.

He asserts that the poorer the economy gets, the more the pressure on the industry increases. He adds that industry players need to compare civil engineering with other specialised service professions, such as doctors and attorneys, and ask if the cheapest option is necessarily the better option in the long run.

“The construction and infrastructure industry as a whole has been negatively affected and very low growth for the future is predicted,” concludes Bouwmeester.