Alleged extortion of SA’s cash-strapped construction companies by organised groupings claiming to represent local communities at project sites could keep the struggling industry in the doldrums.
The spread of disruptions at construction sites eats into already thin profit margins because of the decline in new building projects over the past decade.
Since the beginning of 2010 the JSE construction and materials index has fallen by 69.54%, while the all share index has risen by 110.43%.
The SA Forum of Civil Engineering Contractors (Safcec) says “the construction mafia” hijacks construction sites, leading to project delays that can cost contractors upwards of R40m in penalties.
The business rescue proceedings at some of the country’s formerly large construction companies attests to the industry’s woes.
The total value of disrupted projects as at March last year was R25.5bn, says Safcec.
Disrupted projects include listed construction company WBHO’s oil-storage project in Saldanha in the Western Cape. In March 2019 armed gangs, demanding to be part of the investment, arrived on site and halted work.
Another example is the Mtentu bridge project on the Wild Coast in the Eastern Cape. Citing intimidation on site, infrastructure and resources group Aveng and its joint venture partner European-based Strabag International pulled out of the project in 2019.
David Metelerkamp, a senior economist at construction market intelligence firm Industry Insight, says civil unrest is among the top three risks facing the construction sector in 2020.
Unemployment is at a high and is expected to get worse, Metelerkamp says. “People are going to get desperate.”
Prospects of civil construction tenders, especially in road construction, will create much-needed jobs, he says. But that could mean more projects being disrupted, he adds.
“There is also a perception that not much has been done about the violence even though industry bodies such as Safcec and the MBSA (Master Builders SA) have called on the police to get more involved,” Metelerkamp says.
Sanral, the state-owned entity responsible for the management, maintenance and development of SA’s road network, has a project pipeline of more than R40bn until 2021.
Master Builders Association North executive director Mohau Mphomela says the disruptions of projects include site invasions and stoppages by people — sometimes armed and violent — who claim to represent communities “but the veracity of the communities they claim to represent has always been in question”.
“It seems like an opportunity by groups to make a quick buck. This has caused serious delays and cancellation for some of the projects.”
This has serious implications for contractors who have stipulated deadlines, with stipulated penalties for delays.
Mphomela says that as a result of the intimidation and disruptions which result in loss of margins on projects some contractors decline projects in certain areas.
He says Business Unity SA (Busa) and construction-related bodies including the MBSA, the Black Business Council in the Built Environment (BBCBE) and Safcec have raised the matter with police minister Bheki Cele and President Cyril Ramaphosa, but to no avail.
“The intimidation continues,” he says.
“It is sad that business forums are not (well) structured. We do not know if they are who they say they are and represent communities. Today one forum comes in and tomorrow another one comes in to discredit the previous one.”
In light of the heightened intimidation at construction sites, Mphomela says MBA North has instructed members to refrain from dealing directly with the groups without its involvement.
“MBA North has been playing an intervention role on behalf of our members and meeting some of these groups to protect our members,” he says.
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Article Source: https://www.businesslive.co.zaand Business Day