Multi-year budget system mooted for construction sector

Sep 11 2017 12:54
Carin Smith

Cape Town – The Department of Economic Development is consulting with National Treasury on the possibility of a multi-year budget system to mirror the build cycle of mega constructions and thus provide budget system certainty for the construction industry, Minister of Economic Development Ebrahim Patel said on Monday.

He was an opening speaker at the annual congress of Master Builders SA.

Patel reckons such a multi-year budget system would provide huge comfort to the market.

“The Master Builders SA congress comes at a time of enormous challenges globally and domestically,” Patel said.

South Africa has, for instance been impacted by a change in China’s growth model and by African growth levels tapering down. At the same time the Fourth Industrial Revolution will shape the future of the construction industry due to the disruption by artificial intelligence and digitisation.

In Patel’s view, the state must do a better job in dealing with corruption and improving management of state-owned enterprises (SOEs). He would also like to see greater partnerships forged between labour and the private and public sectors.

For Patel, it is a concern that the latest statistics show negative growth in the SA construction industry. The industry provides jobs for 1.4 million people – about 9 out of 100 jobs in the country.

“Construction adds wealth to the SA economy, which also creates demand in the finance and supply sectors as well as for engineers and artisans,” said Patel.

“The construction industry is the foundation of SA’s infrastructure sector. Construction generates the output which is vital for the economy and for the living standards of South Africans.”

Patel acknowledged that the construction industry faces a number of challenges. These include reduced spending by SOEs – especially Transnet - due to reduced demand.

Collusion is another challenge, but Patel is positive about the impact of a huge fine imposed on a number of large construction companies for colluding on building, among others, stadiums for the 2010 Soccer World Cup.

Some of these companies have subsequently signed a code of ethics, and Patel would like to see more companies following this. He is also happy with a training fund started by some of these companies.

As for the challenge of corruption, Patel urged more South Africans to join the fight against it as corruption ultimately impacts the economy.

“Even a conservative estimate of a 10% ‘overpayment’ because of corruption in awarding construction contracts could mean an annual loss of about R27bn to GDP,” said Patel.

Further challenges include project delays, which bring cost overruns; cable and metal theft; and site disruptions by extortionists or community protestors.

Patel said he would also like the construction industry to address transformation, without lowering the high standards the SA industry is known for.

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