Seminar Lays Foundations for a More Stable Construction Industry
 On the 2nd of February 2011, the Master Builders Association of the Western Cape (MBAWC) - a registered trade association for employers in the building industry, hosted a seminar to discuss 'Developing a More Stable Construction Industry in the Western Cape Province'. According to MBAWC President, Allen Bodill, "We called together this forum to pin down some of the reasons for the current depressed state of the industry ...The specific intention of this seminar was to explore the ways in which the various stakeholders of the built environment could collaborate in creating a more stable environment in the building industry in our region". Speakers from a variety of sectors shared their perspectives on the crisis to the gathering of contractors, architects, quantity surveyors, civil and structural engineers, industry suppliers, skills training providers, developers, academics, media, trade union members and local government representatives.
In his presentation Dr Johan Snyman, Director of Medium Term Forecasting Associates, explained that the South African construction industry as a whole is cyclical in nature. He said, "The bad news is that we are in the downswing of the current recession but the good news is that these cycles do exist and will recur and that we will experience a good period in the future". In his presentation he explained that these cycles, particularly as they apply to the construction of private housing, correlate with the decline or increase in the level of investment, population migration and interest rates.
Based on the most recent figures from the South African Reserve Bank concerning the level of investment in residential buildings, Dr Snyman has forecasted that the housing industry will start to see an improvement sometime during this year. With regard to construction in the non-residential market which includes factories, warehouses, shops, offices etc, he anticipates that the level of investment will continue to decline but that it won't be a particularly bad period. He stated that there was approximately a two year lag between the residential and non-residential sectors and as a result the latter would only start to see an upturn in 2012, with two more years of downturn in the interim. In terms of total construction works such as civil works, roads, bridges, gas pipelines and the like, the level of investment has dropped year on year and he expects that this will continue as projects which have boosted investment, such as those ahead of the World Cup, have now been completed. He indicated that this sector will continue to experience a downturn potentially up until 2015, however the level of investment at that time will be vastly superior to what it was in 2000.
Dr Snyman warned that with investment being modest in the residential sector, declining in the non-residential sector and dropping massively in the total construction works sector, combined with lower tender prices will see tough times ahead for Western Cape contractors.
Following on from this, Elsie Snyman of Industry Insight narrowed the focus of her discussion to industry trends in the Western Cape. She said that the Western Cape construction industry has to adapt and change to where the focus of investment lies and that the building industry, in particular, is very sensitive and vulnerable to the needs that are driving private sector investment as well as to factors that influence the confidence levels and decision-making behind these investments. She also pointed out that according to recent construction projects awarded; local government is a critical client of the industry.
In terms of looking at solutions to make the industry less cyclical and more stable, Ms Snyman said that the public sector now can play a much bigger role than what it could in the past. "The private sector is always determined by interest rates, confidence, economic perceptions of growth and actual growth - those kinds of things will always be cyclical in nature. The government, and local authorities on the other hand, are far less sensitive to changes in interest rates in the short term and they have budgets that they plan towards. They also have integrated development plans for the next five years. Therefore, government and local authorities have the power to become counter cyclical in this market and are playing a bigger role as a client so they can influence the market. Thus, it is important that we engage with the public sector on some of these issues".
She also acknowledged that local government is responsible for many of the bottlenecks and inefficient spending but said that there is a change in how government is approaching accountability and the consequences of not performing. Recently, this has been evidenced by the National Treasury making a municipal capital budget available which will allow the public access to the budget for the next three years. Also, because the budget has been allocated to different sectors and is highly detailed, the industry can quote directly from it when experiencing non-performance. She urged industry members to use this information and to be vocal when non-performance creeps in - a sentiment which was echoed by speakers from other industry sectors. The treasury has stated that it will be taking a no nonsense approach where if money that has been allocated is not spent, it will simply be taken away. "If we work our way up from municipal level we can make significant progress in improving government spending", Ms Snyman explained.
In a similar vein, Michael Bagraim of the Cape Chamber of Commerce challenged the industry to stand together and form a lobbyist group to put pressure on the government instead of sitting back and waiting for them to dole out money. He further said that there must be a solution between the need for housing and that of the building industry's need for work. Bagraim continued that it should fall to this industry to help the government to spend that money which, at present, it is struggling to use.
The theme of Bagraim's speech was echoed by Leon Cohen, MD of the Rabie Property Development, Group, who said, "We as can't go down with statistics and negativity... [Rather] we have to be positive, we have to be creative, we have to be different and we have to be innovative. We can't just complain, we've got go to work and make things happen. While it won't be the same turnover, there is always scope for those that are better than others". He also expressed the need for government to boost confidence in order to drive the industry.
Speaking from the perspective of local government, on behalf of the Provincial Minister of Public Works, Robin Carlisle (who was invited to the event but could not attend), Hector Ellliot said that the Department of Transport and Public Works is fully committed to the construction industry. "Our support takes two forms...First; we invest in infrastructure, including building, maintaining, repairing and enhancing roads, hospitals, schools and other public buildings. Secondly, we invest in people, building and retaining the skills we need in the Province to drive the industry and the economy as a whole".
On the issue of investment in infrastructure , he elaborated by saying that despite budgetary cuts by the National Government, the Department would not decrease its level of investment in infrastructure-related projects in the near future and that it would, in fact be increasing its expenditure by six to seven per cent over the next three financial years. He also spoke of stimulating development through his soon to be launched Regeneration programme which aims to transform both Cape Town and the Province. As a result it could potentially attract major business investments which will have a positive impact on the construction industry.
In terms of its commitment to developing the industry's people, Elliot quoted Carlisle as saying that through the Department's Masakh'Isizwe bursary programme it has spent millions of Rand on skills development in construction, architecture, civil engineering and built environment. He further stated that the programme is a partnership between the government, the industry and the three principal institutes of higher learning in the Province. He also said that the Department will be extending its Apprenticeship Programme to the construction and built environment fields.
The Minister expressed that he and his Department are committed to the industry both through providing and nurturing construction as well as through developing and nurturing people. He also added that Government cannot do it alone.
Guy Lundy, CEO of Accelerate Cape Town -a private sector-led body, painted a positive picture of the future by sharing his company's vision of seeing the City of Cape Town as Africa's global city and as a city of inspiration and innovation by the year 2030. He explained that by developing a knowledge economy there will be a number of sectors that will have growth potential going forward and which will create opportunities for the construction industry. He also encouraged industry members to develop a more positive attitude and to give their input in order to assist the Chamber of Commerce together with the Provincial Government and the City in their efforts to unravel the red tape that ties up projects. "We can in fact move forward to becoming Africa's global city - a city of inspiration and innovation and my call to [the construction industry] is to get involved... in creating that vision".
The MBAWC president concluded the seminar by saying, "From the various presentations made it becomes clear that we have all seen these cycles but that these difficult times don't last. What we need to get through these difficult times is close collaboration between employers, employees, the private sector and local government as well as positivity, innovation and adaptation".
Issued by:
Master Builders & Allied Trades Association W.Cape
Tel: 021 6852625 Fax: 021 6852622
www.mbawc.org.za
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