By George Parrott, engineering division partner at King Price Insurance
In his keynote address at the 2024 Sustainable Infrastructure Development Symposium, President Cyril Ramaphosa underscored a pivotal commitment to bolstering South Africa’s construction sector. With over R230 billion-worth of projects currently under construction and an additional R170 billion in procurement, the nation’s infrastructure agenda appears promising. Moreover, the government’s 2023 allocation of R903 billion to infrastructure until 2026 signals a clear intention to drive economic growth and address critical needs in, especially, transportation, energy, and water and sanitation.
However, despite these commendable efforts, challenges persist, raising questions about the construction industry’s resilience and the integrity of projects amid economic pressures.
A resurgence in construction activity in 2023, as reported by the Construction Industry Development Board (cidb) and the FNB/BER Civil Confidence Index, offered a glimmer of hope for an industry grappling with prolonged stagnation. However, confidence levels, which last year reached a six-year high, have dropped significantly this year. According to the latest FNB/BER Building Confidence Index, confidence plummeted to 27 in the first quarter of 2024, down from 43 in the previous quarter. This sharp decline, reaching its lowest level since mid-2020, signifies a stark dissatisfaction with current conditions among industry stakeholders. Concerns linger regarding the potential compromise of standards and increased risk exposure due to economic strain.
As an example, let’s look at the cheap cement imports that have recently become available to the South African construction industry. Their importance cannot be overstated: They alleviate cost pressures, bolster the number of infrastructure and building projects underway, facilitate greater affordability and accessibility, drive momentum in the construction sector, and stimulate economic activity. With increased availability of cement at competitive prices, projects that were previously delayed or deemed financially unfeasible can now proceed, contributing to job creation and infrastructure development across the nation.
However, amidst these benefits, it’s essential to acknowledge the negative impact caused by substituting local cement production with imports. A report commissioned by cement manufacturer PPC and conducted independently by the Centre for African Management and Markets (CAMM) notes that more than 2,200 jobs are potentially at risk, primarily in marginalised communities where the cement industry serves as a vital source of employment. Furthermore, there’s a potential loss of R2.6 billion per year in economic value, and PPC’s significant contribution to GDP of around R8.8 billion across its value chain is at risk. The report’s findings highlight the intricate interplay between domestic production and imported products, revealing the complex balance between cost savings and socio-economic consequences.
We are Clear About Service
- Mobile Service: My Glass comes to you, offering convenient on-site solutions
- Versatility: Not just vehicle glass. My Glass also specializes in building glass repairs and replacements
- Custom claims management: Experience seamless incident reporting with My Glass Bordereau, our bespoke online claims management system
- Extensive stock: My Glass boasts the widest range of available stock, ensuring prompt service.
In essence, while cheaper cement imports offer immediate benefits in terms of cost reduction and project feasibility, the displacement of domestic production carries substantial long-term implications. As policymakers and industry stakeholders navigate this delicate balance, it’s imperative to prioritise strategies that promote both economic efficiency and social welfare. Finding sustainable solutions that mitigate the negative impacts while capitalising on the opportunities presented by global markets will be crucial in fostering a resilient and inclusive construction industry.
While increased cement imports may alleviate some cost pressures, the volatility in prices underscores the need for prudent risk management strategies. Herein lies the critical role of insurance in mitigating the impact of market uncertainties and safeguarding construction projects against unforeseen disruptions.
The importance of industry best practices in maintaining quality standards amidst evolving market dynamics must be emphasised. Structural engineers, in particular, play a pivotal role in ensuring the integrity and safety of construction projects. From design and planning to material selection and analysis, their expertise underpins the successful execution of infrastructure projects while adhering to regulatory requirements and industry standards.
Furthermore, as the construction industry gears up to take on the long-term large-scale infrastructure projects that government is commissioning, the insurance industry King Price is recalibrating its offerings to meet the immediate risk mitigation needs of smaller contractors and project owners. Recognising the challenges posed by rising interest rates and macro-economic factors that are challenging on all fronts, as well as heightened competition, King Price advocates for a ‘back to basics’ approach, empowering businesses to tailor insurance policies that address their unique risk profiles. By streamlining our engineering products and providing comprehensive coverage options for risks at all stages of construction projects, King Price aims to bolster confidence and resilience across the construction ecosystem.
While South Africa’s construction industry embarks on a path to revival, the journey remains fraught with challenges and opportunities. As stakeholders rally behind infrastructure projects, both large and small, ensuring adherence to quality standards and effective risk management practices will be paramount. Through a steadfast commitment to excellence, the construction sector can realise its full potential as a catalyst for economic growth and social development, while the insurance industry works in the background to support and protect both the people and the projects, to build a better South Africa for all.