Following many shutdowns in the industry, GVK-Siya Zama CFO John de Sousa unpacks the outlook for the construction industry and reveals what both the government and private sector can do to help turn this around.
Confidence in the construction industry has dwindled over the last four years. According to Statistics South Africa, in 2022 alone, the sector’s liquidations went up by 32 percent. Master Builders Association North (MBA North) revealed that 88 construction companies liquidated that year, resulting in more than 7,000 job losses. The companies that remain continue to face immense challenges.
“Nationally, our business is beset by a dire skills shortage due to emigration. On an operational level, our sites face daily disruption caused by the frustration and unmet needs of local communities, as well as vigilante and unlawful action by various parties – like the so-called ‘construction mafia’,” says John de Sousa, CFO of one of the largest construction companies in South Africa, GVK-Siya Zama. He adds that economic growth, population growth, increasing unemployment and shrinking public sector spend place even the most reputable contractors in a precarious position.
John explains that the availability of projects remains an issue, as work is not freely accessible across the country and projects are fiercely contested on price. “This is not always optimal and does not yield the best outcome for all stakeholders.
"The industry needs a major boost to regain the prosperity of a decade ago.”
In fact, looking back 30 years, when GVK-Siya Zama was established and South Africa became a democratic country, the industry held much promise. “In those early days, there was a major drive by the government to invest in infrastructure, hospitals, education facilities and the type of projects that would cement the leadership’s foothold in the country. It presented an opportunity to address and redress inequality in terms of infrastructure and services,” John explains.
However, he adds that this focus was at the cost of unseen infrastructure such as pipelines and reticulation, roads, bridges, water and electricity – challenges that the country is now having to deal with.
“Much needs to be done to improve investor confidence and boost the industry. Here, the government has a major role to play,” John says. “On a macro level, investor confidence requires a stable and well-managed economy. In the South African context, the upcoming election already draws much attention and the results will be pivotal for investor confidence.”
Along with inflation being brought under control and reduced interest rates, he explains that stable energy supply and water security remain critical to overall confidence and the ability to operate.
“The finance minister’s announcements at the recent budget speech bode well for the industry – if they play out according to plan,” he adds. He says that the government’s recent commitment to making regulatory changes and investing in infrastructure provides some light at the end of the tunnel.
Addressing the challenges
In the country’s recent budget speech, the government announced that it plans to invest more than R943 billion in the refurbishment and maintenance of existing assets and the building of new public infrastructure. “This is a promising move and we’ll watch the space with keen interest,” John says.
“GVK-Siya Zama applauds the government’s plans to transform municipalities into engines of growth through the tightening of budget processes, ramping up of oversight, increasing skills and capacity of municipal employees, and driving investment in maintaining and building infrastructure,” he adds.
John notes it’s no secret that municipalities have not been great at managing finances and delivering projects in recent years. “Any focus on municipal governance and the eradication of corruption and ineptitude will go a long way towards addressing these challenges.”
He explains that any vehicle or relaxation of rigid structures and requirements – such as government’s intention to amend the public-private partnership (PPP) regulatory framework – will help to reduce procedural complexity of undertaking PPPs and contribute to more streamlined delivery of projects.
“The state needs private sector participation to accelerate these projects. The private sector has access to capital and management expertise to deliver essential projects. While governments are designed to set policy and unlock opportunities, it requires agility, creative solutions, and complex collaboration to develop the kind of infrastructure so sorely needed in the country with accelerated timeframes,” he adds.
Taking a hands-on approach
At GVK-Siya Zama, John explains, they strive for a sustainable company that provides employment, trains and develops employees, contributes meaningfully to the built environment, and turns a profit. “We will continue to carry the construction flame high and work with all stakeholders to ensure the industry’s longevity in the country.”
He adds that the company’s procurement approach has changed and that it is now employing different types of construction professionals who are skilled at facilitating deals from inception. “These individuals put design and supply teams together to deliver turnkey solutions, as opposed to the more traditional approach of competing on the tender market. As a result, projects are fast-tracked and come out of the ground in a much shorter space of time – as the design and implementation phases are rolled into one dynamic process. This requires high levels of agility, decision-making and project management.”
John says that the company’s agility is critical to daily survival. “As a non-listed, privately-owned entity, we are more nimble. Our decision-making processes are quick and we have to be hands-on.”
He explains that every executive in the company is involved in day-to-day operations.
“We have to change the way business is done, and be nimble enough to adapt our organisational approach to unlock opportunities and avenues of business.”
He adds that high levels of collaboration and the ability to function in multi-disciplinary teams afford the company entry into non-linear approaches of doing business. “The modern-day construction company is seen as part of unlocking a final solution in which allied industries support each other to advance and deliver large scale, complex projects geared for the future and a new built environment.”
