CAMERA OBSCURA

CAMERA OBSCURA

This time last year, as we once again gathered to examine and discuss the state of our industry, I wrote that we lived in interesting times – not an original pronouncement, but certainly accurate for the time. And it holds true to this day 12 months later.

However, we can’t say that there hasn’t been a slight lifting of the mood, a lightening of the step, notwithstanding more members of our industry continuing to fail or going into business rescue. There are even those who have put a shine on that, and perhaps they have a point.

John Matthews, President, Master Builders South Africa

Times are still hard, but at least something seems to be getting done about the situation. Not least was the news that feisty former Mayor of Cape Town, Patricia de Lille, now Minister of Public Works and Infrastructure, is taking aim at nowhere less than Parliament, with a full-scale investigation into its non-payment of service providers within a prescribed period.

It was time to put the people first, she said, and return to the Batho Pele principles which require public servants to be polite, open and transparent and to deliver good service to the public. And to pay them on time for services rendered, we hope.

Significantly, a media release on July 31, from the Department of Public Works and Infrastructure, announced that almost 70% of service providers had been paid, following her investigation. Seems there’s a chance that she’ll get it right.

As for the continued failure of companies in the building industry, architect Patrick McInerny, writing about the gloom of the recent SAPOA Convention, wondered why, if things were that bad, do we have a record number of building cranes operating in places such as Sandton, Rosebank and Cape Town.

He believes the reason for the cranes is the ‘enormous property boom in the central nodes’. Many new A-grade buildings are coming on stream and being filled by tenants previously in B-grade buildings, he says. So there’s now an oversupply of B-grade property and, because of all the new projects, an oversupply of A-grade as well. But he says, it is part of the natural cycle of the industry and not the harbinger of its imminent doom. ‘Those empty B-grade spaces represent a massive opportunity for the future’. Pipe dreams, or just plain fact – we have yet to see.

Another little pinpoint of light piercing the gloom (it may just be spin but has a glimmer of hope), is a particular belief among some members of our industry that the failures of the ‘big guys’ opens doors for SMME contractors.

The argument seems to be that SMMEs represent the future of the industry, and as sector interests converge, interesting new SMME development models are emerging.

Individuals whose lives are turned upside-down by loss of work are filling the gaps left by the fallen giants. And clients might well like the idea of dealing with smaller, highly skilled groups, hungry to make their mark and probably more inclined to make a deal on the contracts they pitch for.

Given that these workers are short on business skills, there might even be an emerging market for professional management groups to offer their services. Opportunity knocks in sundry places.

Good wishes to everyone and let’s make the Congress memorable.

John

BATTEN DOWN – THIS IS NOT THE TIME FOR HEROICS

BATTEN DOWN – THIS IS NOT THE TIME FOR HEROICS

Just how volatile that thing we call ‘sentiment’ can be, is illustrated by the business sector’s massive surge in confidence in the first quarter of this year. Jumping from 34 in the last quarter of last year, the RMB/BER Business Confidence Index made a blockbuster jump to 45 in the first three months of 2018.

John Matthews, President – Master Builders South Africa

And just as swiftly, it dropped back to 39 in this year’s second quarter.

The jump and its subsequent retreat were driven, as it turns out, by what a lot of people believe was just one factor – vain hope that a change in the country’s leadership was going to give the economy a quick boost.

Seriously, it’s not hard to be optimistic when it looks like that helicopter is coming to save you from the roof of your flooded house as the water rises, but when the darn thing crashes and burns, nobody’s going to blame you for being a bit downhearted. Specially if you feel that the pilot made an unforced error, scored an own goal, or missed the posts by a mile.

In a masterful understatement, BER analysts say the result of their research indicates that right now, close to three fifths of respondents regard prevailing business conditions as ‘unsatisfactory – a disappointing outcome, yet probably an accurate reflection of reality’.

But while despair is not advised (don’t forget, this has all happened before) it’s also not the time for extreme acts of heroism, like diving off the roof into the flood-waters and swimming against the current.

As those in the Cape have learned, when the notorious winter storms hit our shores, it’s best to batten down the hatches and weather the squall. Somehow.

Some of us suffer more than others, and the vulnerable are the most frequent victims.

But in the building industry, disaster doesn’t only strike the smaller players, and two recent national examples have graphically illustrated exactly that – as in the case of Basil Read and NMC.

It’s not really surprising that South African business is a bit bleak at this point, and the situation only bolsters evidence that perhaps positive sentiment based on an improved political climate is not the only factor to rely on for a better economic outlook.

So if there’s any answer, it could lie in not too easily responding with blind optimism, nor relying on the unknown. And particularly, not placing one’s confidence in the untested.

In an industry that’s as old as the Pyramids, we must have come to some useful conclusions over the aeons, that undoubtedly include the value of taking stock of a situation, considering the downside and planning for the recovery.

Perhaps it’s best to look to the past, and if you’ve been in business successfully for a good number of years, be advised by what brought you through the inevitable tough times before. Maybe you will find that size, or rather, right-sizing, does matter, and make the necessary adjustments.

You know what we’re talking about.

John

Our construction industry is healthier than many people believe

 
Our construction industry is healthier than many people believeMASTER BUILDERS NEW LOGO

 

It is therefore unfortunate and not unexpected that our attendance as well as media coverage of the Construction Summit held last week in Midrand has been drowned out and overtaken by other bigger national events beyond our control as alluded to above.

Bafikile Bonke Simelane, President, Master Builders South Africa

Bafikile Bonke Simelane, President, Master Builders South Africa

Our previous theme of “Courage and resilience in the face of adversity” could not be more relevant under these circumstances. It is therefore important that we do not lose sight of the positive intent and beneficial impact of the Voluntary Rebuilding Programme (VRP); and associated Declaration of Integrity (DoI) that was the predominant subject of the Construction Summit as a potentially strategic tool for the advancement of transformation in our industry/sector.
Master Builders South Africa affirmed its commitment to this new covenant as a blueprint and strategic road map for real, meaningful and sustainable transformation in our sector. While we acknowledge that it is not a perfect document, its foundational and ground-breaking aspects cannot be ignored. It is therefore up to all role players as well as all interested and affected parties to play their part in the realisation of its vision, objectives and “desired end-state” for the benefit of the industry as a whole.
We remain steadfast in our belief that the VRP together with the new Preferential Procurement Regulations and the imminent Construction Sector Charter Codes will deepen and accelerate transformation in the construction industry bearing in mind that transformation is a long-term project.
It was also heartening to read that the FNB/BER Building Confidence Index improved for the third consecutive quarter, rising by 3 points to 43 in 1Q2017, marking the highest confidence in more than a year. However, even though confidence improved, the current level of the index indicates that the majority (close to sixty per cent) of respondents are dissatisfied with prevailing business conditions. The investment downgrade will most certainly exacerbate this sentiment unfortunately.
This will no doubt undermine confidence in the public infrastructure build programme operating under the slogan “Turn South Africa into a Construction Site” considering that public expenditure accounts for about 55% of total construction expenditure. This is also against a 14% decline in total capital expenditure in 2016 by State-Owned Entities.
It was therefore somewhat reassuring to also read the findings of the inaugural Afrimat Construction Index which suggests that construction activity in South Africa is not as depressed as suggested by the media, large construction firms or industry analysts.
This study supports Afrimat’s argument over the last five years that construction is healthier than many people believed. This bodes well for the future despite recent political and economic setbacks by which we must not be overly panicked but remain resolute and focused; difficult as that may be under the currently over-charged political, social and economic environment of volatility, uncertainty, unpredictability, complexity and instability compounded by low growth.
I am reminded at this time of one of my favourite poems, “If” by Rudyard Kipling. “…If you can fill the unforgiving minute with sixty seconds’ worth of distance run…” Have a blessed and safe Easter. Let’s unite around Freedom Day to reclaim the promise heralded by the dawning of our new nation in 1994.

Bafikile Bonke Simelane