FROM THE DESK OF THE EXECUTIVE DIRECTOR
Our industry must brace itself for yet another rough ride in 2016
2015 has been a very challenging year for many sectors of our economy. Despite the slow economic growth, the building and construction sector continued to play its role in supporting our economic development. Like in any other sector, some construction companies did very well while others struggled.
I think we all understand that even in countries where economic growth meets expectations, it remains critical for construction companies to look at new ways of doing things and remaining in business.
It is also very important for these companies to carefully consider how they are going to deal with some unusual challenges that may adversely affects their business performance and growth. I am not talking about the simple risk management processes, but rather a careful consideration of transversal challenges that affect all businesses. I would like to share with Master Builders a few challenges that they will need to contend with in 2016:
A weak economy and high costs
As we have seen during 2015 and more especially towards the end of the year when the rand reached its record low of R16 to the USD, the costs of projects are definitely going to increase thereby decreasing the appetite for construction projects. The market’s loss of confidence in our economy is likely to continue in 2016 and this may continue to be a challenge to the construction and building industry. As South Africa is so very close to junk status rating, it is important for our industry to brace itself for yet another rough ride in 2016 should the country fail to avoid slipping down to junk status. Economists predict interest rate increase by the Reserve Bank as early as in January 2016 as well as during the year and that will definitely see a slow rate of construction work mainly in the residential housing sector.
Uncertain political atmosphere
You may wonder how this is relevant to the construction and building industry… Yes it is in many ways. Government infrastructure development projects play a huge role in the development and sustainment of the building and construction sector. With the recently seen movements of Ministers in serious government portfolios, we may see more reshuffling of political leadership in some Departments which are critical to our construction sector. This challenge may seem a bit far fetched for a large well established construction company, but it’s an immediate reality for many SMMEs that largely survive on government work.
As we have seen in recent years, labour disputes are declared annually in both the public and private sectors. The construction and building industry has not been badly affected recently but that stability is not permanent. During strikes, project completion dates are delayed and become more costly, properties are vandalized, investors take their money elsewhere and the industry suffers.
Construction health and safety
In 2015, we have seen many incidents that have unfortunately resulted in loss of life. More than ever, construction health and safety has become one of the most important considerations for anyone in the building and construction industry. The industry itself has to increase and maintain effective systems for management of construction health and safety beyond what Government and regulators prescribe. Industry expectations are definitely going to be high in 2016 as one injury does not only affect the employer but the industry as a whole.