The Economic Benefit of The South African Construction Industry in 2014 (Part 1 of 3)

Over the last 34 years Mitchell du Plessis Projects (MDA) has experienced various highs and lows in the overall economy of the country. There have been dramatic improvements in the political stability of the country. This has led to a multiracial economic elite and sustainable black middle class has developed.

At the forefront of economic activity

However, the base out of which this living standard has evolved has not been matched by improvements in the core values required to sustain development. For example, construction labour training from unskilled to artisan has all but ceased. Consequently, when economic conditions improve, the construction industry will be unable to take advantage of the upswing and deliver. This is significant given that construction counts for approximately 8% of GDP.

Economic outlook remains sensitive

According to Databuild, the economic outlook for the South African economy remains sensitive to various factors. This sentiment follows a further downward revision in the 2013 GDP forecast by both the South African Reserve Bank and the International Monetary Fund (IMF). The South African economy is expected to have grown by between 2% and 2,4% in 2013, insufficient to make a meaningful contribution to the overall economy. The risk of a further downgrade in the country’s sovereign debt rating has also increased. As a result, lower than expected economic growth will have a negative impact on the current account deficit. On a positive note, a general improvement in world economic activities and improved retail sales performances in the latter part of 2013 should stimulate development. This, in turn, will give rise to construction activity.

Investor and business confidence

Moreover, protests related to poor service delivery impact negatively on investor and business confidence, locally and internationally. Also, the upcoming general election in April could further restrain development opportunities, at least until there is greater ongoing political certainty in terms of economic direction.

The impact of increased Government expenditure

The proposed increase in Government expenditure as a result of the National Development Plan (NDP) will, once the rollout system has been put in place, provide a meaningful improvement in the flow of work through the professions and construction related concerns. However, there are a number of issues that will need to be addressed first, such as securing funds through external borrowings or increased taxes, neither of which is palatable. And what of the up skilling of labour to undertake the work, the provision of sufficient resources at reasonable rates, to name a few?

Accountability at national level

From the issues above, there are a number of key elements that must be addressed at a national level before grandiose plans will benefit the industry workforce. This also applies to the general population as a whole. Government has an extremely poor record in terms of ‘getting things done’. This is where the professions can provide the assistance needed to reinvigorate the economy.

Part 2 of 3
Part 3 of 3