Today: February 22, 2024

COVID-19 has ravaged South Africa’s construction industry, but it can recover

A year that dawned with promise for many around the world has descended into chaos with a pandemic whose effects have not experienced since the Spanish flu. The term “lockdown” has become synonymous with this pandemic. Globally countries shut their borders, implemented social distancing, put everyone on high alert and economies at risk in order to save lives. As countries came to grip with the pandemic, for some lockdown brought construction sites to a standstill, creating ghost towns and a crisis for the Construction Industry.

Countries like the UK, Germany, Canada and Brazil, though hit by COVID-19, did not shut down their construction industries. These countries shared one important commonality: they declared construction an essential service and allowed work to continue albeit with stricter health and safety measures in place.

Before all blame for the state of the South African construction Industry is laid at COVID-19’s feet, it should be noted that the industry was already in trouble. As Industry Insight reports, the sector was in trouble pre-COVID with the first quarter of 2020 showing a contraction of 4.7%, the 7th consecutive quarter decline since 2018, with further declines forecast for the year. Challenges faced by the industry included late or non-payment of various stakeholders, reduction in available work, project delays, cost overruns and corruption to mention a few. COVID-19 came with its own additional problems that made a dire situation worse.

To understand the impact of a standstill construction industry in South Africa, one has to visualise the number of sites and workers affected. The impact spreads beyond just contractors, clients and professional consultants who are the internal stakeholders. Thousands of households and projects were put at risk economically because of the freeze, housing projects slated to ensure families were in homes by winter were left incomplete and many smaller construction companies went bankrupt as they could not endure such a long period of inactivity. While, government had to quickly adjust budgets and available funds to ensure industries and households could survive this period, it was not going to be enough.

The CIDB Construction Monitor put formal employment in the sector at about 856 000 and informal employment at 483 000 for the 3rd quarter of 2019. This means hundreds of thousands of families are immediately affected when breadwinners are suddenly cut off from jobs. Established, stable organisations were expected to stay afloat for only three months of lockdown before they would be unable to pay workers and maintain their businesses. In an economy already struggling with high unemployment rates, the pandemic came with alarming effects. This was an unexpected crisis, one no one could have planned or adequately mitigated for. While Stats SA gives a cautionary figure of 14 000 jobs lost in the industry, less conservative figures put the estimate at 100,000 affected jobs.

Consider, thousands of projects were on ice for weeks or even months. Is it possible to compute the staggering amounts of monies lost through the lockdown measures? Can an accurate count be done of those households in dire straits because jobs have been lost?  Honestly, the true cost of the pandemic can hardly be computed now, we can at best estimate.

Just to give an idea of the possible numbers involved, these are the figures quoted by David Maynier, the Western Cape Provincial Minister of Finance and Economic Opportunities in arguments for reopening the private construction sector during level 4 restrictions: the construction industry was valued at about US$9.9 billion (R172 billion) in 2019, the Western Cape (a single province out of 9) was estimating loss of income figures at just under US$866 million (R15 billion) and nationally it was expected that about 40% of the workforce and businesses would be affected by the lockdown. These numbers show the extreme effects of a closed construction industry and invite an investigation into what exactly has been happening to cause such a grim outlook.

During level five lockdown, only essential services were functioning. Sites literally had to shut down regardless of what stage they were on a project. Think about it, all these sites at different level of completion left to the elements. Besides these risks, no work means no milestones implying complications when payments need to be made. All construction companies, regardless of size or clout were affected.

The move to level three opened some breathing room with especially contracting teams allowed back on site. The current move to level 2 will hopefully include fast tracked progress to provide the needed boost to the industry.