The impact on the South African construction industry

The construction industry started feeling the effects of the coronavirus outbreak in China well before the Lockdown in South Africa. The export shutdown from China and then Italy impacted on the supply of; materials, mechanical & electrical equipment, fittings, finishes and a vast range of other products. Developers and contractors’ deadlines and their bottom line were affected directly. They had to source alternative materials and products, which delayed delivery and therefore progress on site. The alternatives came at an increased cost, resulting in a double blow.

This unforeseen delay and cost came at a time when the industry has been struggling in a very weak economy. 

The Lockdown in South Africa has now brought the construction industry to a complete halt. The experts anticipate a possible two month delay, but the effect will be felt for much longer. Apart from the direct delays and costs; the viability, health impact, job losses, supply of materials and products will all impact on current and future construction projects.

The viability of public sector projects will be affected by government’s onerous systems and processes. Projects that exceed the projected time-frames will be subjected to time consuming reviews and budget re-allocations which could result in current projects being shelved, or re-tendered.

The private sector construction projects are driven by their viability and the financial returns to investors. Developers of projects at an advanced stage would need to source additional finance to complete the projects. Those projects in the planning stage could be shelved.

The short to medium term impact once the construction industry restarts will be:

  • Delayed resumption – It will take time to restart construction projects. Damage and losses will have to be assessed. The contractual extensions of time and costs will need to be negotiated. Then it will take time to re-establish staff and resources, before commencing construction.
  • Availability of materials – The manufacturing industries worldwide will be at various levels of production. Exporting and importing will be sporadic and slow to start. Building contractors will be competing with their local and international colleagues for materials, which will slowly become available. 
  • Health impact – Labour will not be the only staff affected by the virus. All tiers of the industry, Clients, Consultants, Suppliers, Contractors and Sub-contractors will be affected to some degree. This will have a bearing on their productivity. Further, health and safety procedures will have to be implemented, slowing things down further.
  • Specialist resources and sub-contractors – Initially specialists may not be available, particularly those from abroad. Travel will remain restricted and the demand worldwide will stretch the limited expertise.
  • Contractual – Building contractors will have to ensure that they comply timeously with the necessary contractual requirements to ensure that contract periods are extended. They may have to negotiate this with their clients, as well as the additional costs they believe are unforeseen and due.

In conclusion, industry experts note their concern that the construction industry has received very little attention during these difficult times and the loss of further contracting capacity will have a devastating impact on the delivery of both public and private sector projects.