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

Developing markets on the other hand have limited potential for increasing infrastructure spend as they struggle to re-establish pre-COVID investments. Some governments like those of Kenya and the Philippines have already pulled back from major infrastructure spends.

South Africa’s recovery approach borrows from both categories. The Construction COVID-19 Rapid Response Task Team (“CC19RRTT”) is one of the task teams established as a means of assisting government with interventions to prevent a complete collapse of the Construction Industry. Two key interventions they suggested were keeping to previously proposed infrastructure spend and also fast tracking independent public projects which have proven effective in other countries.

Government has had to be circumspect in the manner they approach the current economic crisis as the Construction Industry is not the only affected party. For example, money has been redirected from the education infrastructure grant to schools needing water, sanitation and PPE. The revised budget also shows some R16bn from conditional grants redirected to provide Covid relief. Investment in residential and non-residential buildings has also shown a decrease of just over 10 percent.

It should be noted though that government is also prioritising infrastructure development. It plans to expedite 50 infrastructure projects worth US$20,2 billion (R340bln) as part of its focus on the reconstruction and recovery of the South African economy. The Development Bank of South Africa is funding construction to the tune of US$259 million (R4.5bn) in the Johannesburg and Tshwane metros, the Cooperative Governance and Traditional Affairs Minister, Nkosazana Dlamini-Zuma confirms that US$32 million (R554 million) has also been set aside for creating jobs through municipal infrastructure projects. During the Sustainable Infrastructure Development Symposium South Africa (SIDSSA) in June, 276 projects worth a combined value of $150 billion (R2.6 trillion) were identified as being under evaluation by government; implementing even a fraction of these is expected to assist with boosting the industry and the economy.

According to Fitch, South Africa has a strong domestic presence in construction and financing. This private financing is expected to help cushion the construction industry preventing it from collapsing. This outlook provides hope that not all is lost for the industry, and government’s commitment to the sector as an economic recovery vehicle is already a huge step towards its revival.