The construction industry endured a difficult year in 2022, with an extended downtick following on from the Covid pandemic, which saw many businesses meet their demise. Those that survived have been struggling to keep their doors open, with some publicly listed firms reporting as much as a 36% decline in share prices over five years.
Despite this challenging environment, GVK-Siya Zama, one of the largest privately owned construction companies in the country, enjoyed an increase in orders and recorded four consecutive years of growth.
CEO, Eben Meyburgh, attributes these successes to effective planning and project management, entrepreneurial agility and an ongoing mission to be the employer of choice in the industry.
“We delivered on some notable projects and secured several landmark contracts. In addition, our robust cash management philosophy is underpinned by our commitment to looking after our people holistically and prioritising their physical and mental wellbeing, while offering competitive packages,” explains Meyburgh.
GVK’s project pipeline
The redevelopment of Cape Town Station into a mixed-used space for students, and construction of a mega Eastern Cape hospital are two of the notable projects awarded to GVK in 2022. The company covers a diverse portfolio of work that includes projects in the private and public sectors ranging in complexity, from luxury housing to industrial and urban regeneration.
“Securing sufficient work and the correct mix of work at the right margins is critical to ensure that we can provide employment to a core team of construction professionals, as well as generate profits to ensure the sustainability of the business. We have projects that will take us into 2024 and that’s a good sign. One of our healthcare projects extends to 2027,” continues Meyburgh.
Employer of choice
“The construction industry – like any other business that operates at a high level – needs smart, skilled people. Thus far, our ability to retain top talent has been a critical cornerstone of our business, and one which we’ve devoted considerable effort to,” says Group HR Executive Marlize Fourie.
“The brain drain and emigration of skilled individuals is a growing threat facing local businesses, including ours. Conditions such as sustained rolling blackouts and socio-political unrest have contributed to South African professionals considering job prospects abroad,” Fourie continues.
“As many as 53% of university graduates and 43% of those who earned more than R20,000 a month indicated their intention to leave the country in the Social Research Foundation’s survey (SRF). In addition, Rand Merchant Bank has estimated that an average of 1.7% of civil engineers are leaving South Africa each year. These are disturbing statistics for the construction sector,” she adds.
Forecast
The country’s economic outlook is on shaky ground, even for the most optimistic of investors. A growing number of rating agencies now classify South Africa as a high-risk market. The changing sentiment means the industry is now paying a premium for contract guarantees from international investors.
“While many of these macro-factors affecting the country are beyond our control, as a business our mitigation strategy will continue to emphasise prudent and sound financial management. This, and delivering projects on time, go a long way towards allaying investor and guarantor apprehension,” says the group’s CFO John de Sousa.
De Sousa adds that strategically pivoting away from low-margin projects will also enhance the business and the industry’s sustainability, stressing that general discipline and good business controls are fundamentals of success.
“We have to continually scrutinise projects for opportunities, engage in intelligent procurement and continuous value engineering with our professional teams,” he explains.
Construction mafia
Meyburgh says limiting on-site disruptions will be a key determining factor for the industry in 2023. This entails highlighting the negative effects that the so-called ‘construction mafia’ and unlawful disruption is having on the industry. Owing to deficiencies in law enforcement and government administration, along with well-established patronage networks, the construction mafia, a shadowy cabal that uses violence and the threat of property destruction as a means for extortion, continues to undermine legitimate business in the construction industry.
Khaya Sithole, accountant and public commentator, encapsulated the issue well in a recent opinion article on the construction mafia model, writing, “The model is relatively straightforward, in exchange for 30% of the economic value of the contract, companies are offered a sense of protection where they can undertake their work without interruptions. Alternatively – if one doesn’t comply – the destruction of infrastructure and disruption of operations is the guaranteed outcome.”
Dismantling these vigilante ‘business forums’, as the mafia often presents itself, will take concerted action from the entire industry, including professional bodies, law enforcement, civil society, business and the government.
Meyburgh concludes by saying, “Our industry has just returned to work from its annual recess. I hope that our people were able to unplug, refresh and regroup and that they’ve returned to work energised to face the opportunities of the new year. The year will require resilience, efficiency and optimism.”
“My wish list for the year is an even playing field, greater political stability, reduced inflation, lower interest rates and a light at the end of Eskom’s dark tunnel.”
