Energy constraints deepen construction sector woes

Eskom’s recent announcement of project delays in the completion and critical maintenance of many power plants will make load shedding a reality for the next few years.

While many sectors will be negatively affected, it is the emerging contractors within the construction sector who will find the immediate future particularly challenging.

Although up by 2,9% for the same period in 2013, the latest Quarterly Labour Force Survey indicates total construction industry employment fell by 17,000 in the second quarter of 2014 compared to the first quarter.

With a fragile economy and the country’s major industries emerging from crippling wage strikes, the planned maintenance of all power stations will seriously hamper the sector’s recovery efforts.

Tendering conditions are particularly tough for public infrastructure projects where emerging contractors are competing against larger contractors. Limited access to supplier credit and project finance remains challenging for emerging contractors; creating serious risk for financial services and construction material suppliers.

As construction material manufacturers and the manufacturing industry in general rely on reliable power supplies, production stoppages affect output, manufacturing cost and the selling price of construction material.

Ongoing doubt regarding the sustainability of the South African construction industry will deter insurance and international reinsurance companies from bringing in invaluable foreign investment.

Thus renewable energy technology would be a viable option and the logical solution would be for the mining and manufacturing industries to jointly address energy security concerns. It would make sense to incentivise industries that produce their own power. Failure by industry stakeholders to find sustainable solutions will only result in deepening woes for the sector.
By Brian Africa

More information from Carlien Louw, Tel: +27(0)11 100 2250 / www.changetc.co.za