Jim Connolly: Infiniti Insurance Construction & Engineering Division
Tasked with answering a couple of pertinent questions focusing on Construction and Engineering Insurance in South Africa, I pondered how to tackle such a mission and considered the prospect of ‘poetic licence’ but the reality is that the facts demand we should gather the forces and advocate for robust and immediate investment into meaningful projects that will move the economy.
My research found significant reasons for a positive outlook based on our rich and often volatile history and as such I commit the following to you.
The first question should be relatively short to answer and asks;
Minister of Finance Mr Enoch Godongwana and President Ramaphosa committed to a strong focus and budget allocation to infrastructure and spending, will that be enough to get an ailing Construction and Engineering sector going?
In the 2022 Budget review the Minister certainly did commit to an aggressive public Infrastructure spend with the National Treasury confirmed their expenditure is expected to grow at an average rate of 7.9% from 2022, through to the 2024/ 25 period. On the same topic, the Construction Industry Forecast is of a 9.1% increase for the 2022/23 period bottoming out at 4.3% annually thereafter until 2025.
Some exciting projects which have been approved or are in the process of approval are as follows which place our Industry on a positive footing:
- SANRAL to receive an additional R9.9 billion for the maintenance of non–toll road works
- Approval for several water projects including the Clan William Dam to service the Western Cape and Umgeni Water Board – Lower Umkhomazi Bulk Water Supply schemes in Kwa Zulu – Natal. I have seen one of these cross my desk therefore I have full confidence that the finance minister will push the balance through.
- Project to modernise 6 border posts
- Expansion of the existing Gautrain Lines and Infrastructure
- Growth in expenditure for Municipalities which we hope will see it,s way to more infrastructure projects.
Construction, one of the biggest industries in the world, represents 13% of the global GDP. In South Africa, its contribution to GDP is currently below 7%, a position I choose to see as a massive opportunity.
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The ability of a revitalised Construction & Engineering industry to stimulate the economy calls for decisive action. Accelerated economic growth is not optional for South Africa, it is at the heart of our economic survival and it is extremely urgent. This is a moment when a strong and dynamic collaboration between Government and the Private sector, to reinvigorate the construction industry, needs to lead the charge.
A galvanised Construction industry is critical to combating unemployment and the growing socio-economic crisis. It will ignite demand down the entire value chain, creating employment, across skilled and semi-skilled groups in the process, making this a most significant sector in the recovery strategy for our Nation.
We also see some local and worldwide circumstances that I believe should have a positive effect on our ‘ailing Construction and Engineering sector‘.
- Power supply has not kept up with post-apartheid South African requirements and Eskom is working seriously on upgrading the supply
- The war in Ukraine has set in motion a need for European Countries and the EU to seek resources elsewhere and Africa has been targeted for the replacement of Russian Gas supplies. Although this will initially only benefit leading gas suppliers in Algeria, Egypt and Nigeria, it is believed that there will be a requirement for resources therefore we are well positioned to benefit from this in South Africa
- In the same vein as the above our mining sector is poised to capitalise as it becomes more evident that green energy in Europe cannot hope to replace fossil fuels as a mechanism for energy and heat at this stage
- Reconstruction and rehabilitation contracts coming through following the KwaZulu Natal flooding and the SASRIA claims
I am confident the aforementioned infrastructure spend, as well as prevailing circumstances will be enough to kick start the sector, and believe that this will in turn benefit our Construction and Engineering Insurance sector as we plan for the future.
The second question asks:
What is the Industry doing to withstand the pressure on premiums and increased competition?
The boom in the lead-up to the World Cup saw new roads, infrastructure, Gautrain, new hotels, and stadia going up across the country, despite insurance rates and terms that had become severely compromised relative to earlier years. Our market flourished during this period mainly due to this increased infrastructure spending.
The last decade and, post the 2010 World Cup, has seen turbulent times in South Africa and has led to less spending in infrastructure which has resulted in power shortages and disruption of services, water supply and other critical failures in the provision of basic services.
Economically we have struggled with the effect of Covid and the devasting impact of the shutdowns on the economy in general. Our Engineering and Construction sector has suffered setbacks on progress with important infrastructure development plans and investments.
I am genuinely excited for the future of our industry following recent events and believe this is the real beginning of those ‘ green shoots ‘ that have been spoken about for years now. There is still a high degree of skills and expertise in the Construction and Engineering field and I hope that this expertise are shared with our younger generation to equip them in leading the industry forward having learned from our experience.