Johannesburg - Unleashing independent power producers (IPPs) could create jobs and build a globally competitive industrial economy, Alexander Forbes Risk Services said on Wednesday.
"Removing the legislative and bureaucratic constraints currently limiting the participation of IPPs in the national energy mix would provide the kind of large scale construction projects able to counter global recession, increase national power output and absorb significant amounts of labour," said the company's construction projects business unit manager Mike Lamb.
Such actions would ultimately lay the infrastructural base for the broadening and deepening of a globally competitive industrial economy, Lamb said in a statement.
"For the moment, however, the SA Federation of Civil Engineering Contractors has indicated that the civil construction industry could shrink by almost 40% following the World Cup, making the 64 000 construction jobs lost in the first quarter of this year merely the tip of the iceberg."
Lamb said the single biggest factor driving the construction slowdown was South Africa's lack of power and insecurity and uncertainty about future power supply.
The World Cup infrastructure development programme had protected South Africa from the initial impact of the global economic and financial crisis.
"So, while the construction industry in South Africa was aware that it would face difficult times following the 2010 bonanza, there is no doubt that the extent of the slowdown is exacerbated by the country's current power shortage, along with insecurities surrounding the future of power supply in SA."
Despite a general consensus that power supply was critical to reviving the construction sector and driving employment, the government's current and approved power generation projects were "inadequate" given projected demand.
"At the same time, government seems to be dragging its feet on finalising the uptake agreements that will allow private power producers to supply the grid."
Dependent on powerThe mining sector, for example, was a significant employer, but also one hugely dependent on power.
This was especially true of the various mineral beneficiation processes which, ultimately, the country's army of unemployed needed to see developed if they were ever to find work, Lamb said.
"Without power, we won't be building the smelters and other heavy duty industrial infrastructure that will really drive construction and employment growth in this country."
Unfortunately, the public-private partnerships had generally taken too long to negotiate let alone close, Lamb said.
"Since tender processes and the selection of providers are either fraught with irregularity or driven by political imperatives projects either fail to get off the ground or are mothballed for years while political rather than practical solutions are sought."
Lamb said that while South African construction majors were looking beyond the country's borders to the largely Chinese-driven construction boom on the continent, competition was tough.
"From a purely insurance perspective, there is little opportunity for our products in much of Africa as state-backed and funded Chinese construction companies have little need for cover."
That said, over the next few years South African construction companies were likely to pursue projects in Africa and the Middle East to maintain turnover though this would do little for local employment prospects, Lamb said.