Juan-Pierre Holmes, National Head: Specialist Property Line of Business, Bryte Insurance
Plagued by factors such as subdued economic growth, reduced infrastructure spending, skills shortages and rising input costs, South Africa’s construction industry has been on a path of steady decline over the past four years.
Major construction players, such as Group Five and Basil Read have succumbed to the pressures while others took to diversifying their focus to keep afloat.
Sadly, this burden has intensified since the pandemic with construction truly being at the coalface in terms of industries worst affected. During the most stringent phase of the lockdown in 2020, the industry’s growth reduced by 30.7%. Add to this prevalence of supply chain interruptions, constraints faced due to reduced workforces (which is impacting both productivity and profitability) and the added workplace safety compliance costs, and it’s understandable how the industry’s contribution to GDP dropped by 20%, from R104 billion in 2019 to R83 billion in 2020.
It thus stands to reason that in this climate of uncertainty and disruption, the quagmire of challenges faced translates to the road ahead not just being long and winding, but also riddled with potholes and missing a few bridges. Nonetheless, with infrastructure being a critical catalyst for economic growth, and the construction industry accounting for almost 13% of the global GDP, there is light at the end of this tunnel. However, to optimise the potential of the construction industry – and our economy, it is imperative for all parties in the value chain to actively participate in meaningful ways.
Embedding enabling technologies
From a construction business perspective, there is just no alternative but to survive (and perhaps even thrive). This necessitates creative thinking, broader-scale innovation and perseverance. Teams are under increasing pressure to complete projects on time, on budget, with reduced workforces and in the safest possible way. In this environment, the use of drones, robotics, 3D modeling, visualisation, etc. can help alleviate some of the pressures across businesses of all sizes. Equally important is ensuring that the technology is in place to enable effective remote working, where this is an option.
The Venture Capital ace up the construction sleeve
Disruptive innovation is truly playing a major role in the survival of SMMEs and big businesses in construction. Companies are integrating supply chain optimisation tools which allow them to better extract the benefits of a global supply chain network and assists in more informed purchasing decision-making. While technology investments can come with a hefty price tag, businesses certainly have access to more investment opportunities when one considers that from 2016 to 2018, venture capital investment into construction technology grew by a staggering 1700% to $6 billion.
Adding to the hope on the horizon is the government’s decision to fast track more than 50 major infrastructure projects to bolster job creation and economic recovery. Worth R340 billion, this will see the development of affordable housing, roads and dams – among others.
No to silos
What’s more, once notorious for working in silo’s, construction has been turning a corner – and how. Key players are forming tactical partnerships which are vital for integrating processes and enhancing their competitive advantage. This collaboration is allowing wider access to products, solutions, skills and technology that is helping to secure as well as deliver more complex and large projects. It is also promoting future-forward ways of thinking and the development of progressive business models which are heralding a shift in processes and the redesign of projects that bring to the fore concepts such as modular buildings. Additionally, this allows for wider training and skills development opportunities and the incorporation of more agile approaches to pandemic-proof construction businesses.
In a manner of speaking, this opens more doors for SMMEs (the bedrock of our economy). These businesses often bring with them a strong appetite for work and flexible approach to pricing, making them much more attractive to work with. The added value is the expanded opportunities for a larger business to facilitate the strategic transfer of skills to SMMEs.
Brokers and Insurers as risk torch-bearers
From an insurance industry perspective, understanding the depth and diversity of risks – which are continually evolving, takes advisors and insurers with deep insight as well as foresight. Efficient exposure management is multi-faceted and brokers have an integral role to play in this process by understanding their client’s business, their industry and the layers of exposures faced. Brokers are well-placed to collaborate with insurers to identify risks, predict trends, create awareness of – and an appreciation for – exposure management measures that help prevent or moderate risk.
In equal measure, it is also about providing an accessible and effective safety net so businesses can aim towards new heights, with confidence. This is where brokers can support to ensure the necessary risk mitigation measures and insurance covers are in place (and at the appropriate value), so businesses are not left out-of-pocket when disaster does indeed strike. Also important is ensuring that traditional products are redesigned to optimise risk responsiveness. From cover for machinery and equipment to project delays and cyber threats – effective risk partners look at risk holistically and pragmatically, presenting bespoke solutions that help drive resilience in challenging times.
Ultimately, collaboration is essential to ensure the construction industry is well-prepared to weather each storm, emerging more resilient than ever before.