By Matthew Kibby, vice-president, Enterprise, Africa and Middle East at Sage

Public infrastructure spending has been stagnant since the investment bonanza leading up to the 2010 World Cup, the home market has slumped, private sector investment is sluggish and many of the listed construction groups are struggling.

Although the government is planning to pump hundreds of billions into infrastructure as part of its economic stimulus plan, which spells opportunity for small and emerging construction companies, the industry still faces several challenges.

Here are four concerns for smaller construction contractors and tips on how to better manage them:

Cash flow
Prolonged tendering and payment cycles affect the sustainability of large construction groups and smaller contractors. Government procurement moves slowly, which means construction groups often can’t pay their smaller sub-contractors on time, and this affects the sub-contractor’s ability to take on other projects and its ability to pay suppliers.

At the same time, rising materials expenses – thanks to rand volatility – and higher labour costs mean construction companies need to carefully manage cash flow and margins to ensure sustainability into the future.

Tip 1: Industry engagement with the government will hopefully lead to faster payment cycles. In the meantime, smaller construction firms can use enterprise management solutions to track cash flow and project risks, so they can better predict and mitigate payment delays and other issues.

Construction companies have to comply with rigorous tax and labour laws, the black economic empowerment (BEE) code for the sector, tough health, safety and environment laws and regulations such as the Compensation for Occupational Injuries and Diseases Act. The red-tape, paperwork and certifications place a heavy burden on smaller contractors struggling to survive in a tight economy.

Tip 2: Where possible, automate back-office administration and capture electronic records. This will make it easier to compile documents such as payroll or income returns, and to access accurate data about the company’s performance in meeting demands such as quality standards or BEE targets.

Skills shortages
Competent and experienced civil engineers, architects, artisans and supervisors are in short supply and even if the government manages to mobilise funds for large-scale infrastructure investment, the construction industry will still struggle to access the skills needed to service the demand. This leads to fierce competition for skills in the marketplace and could drive the wage and salary bill up for a sector already struggling to contain operating costs.

Tip 3: Putting a modern human resource management (HRM) solution in place can help a construction company to get a firmer handle on workforce performance and planning. It can use rich reporting information to get insight into skills requirements, labour costs, employee turnover and worker performance. It can also use tools such as employee self-service to deliver a better workplace experience for employees scattered across multiple construction sites.

Matthew Kibby

Preparing for emerging technologies
As new technologies such as artificial intelligence (AI) and the Internet of Things mature, the building and construction sector will face the challenge of reskilling their workforce for a digital age.

Some examples of the disruptive technologies include:
• Wearables such as smart helmets and glasses using augmented reality, or safety vests with built-in GPS trackers and sensors.
• 3D printing.
• Building materials such as self-healing concrete and new-age solar technology.
• Driverless heavy vehicles.
• Drones used for video and picture taking, tracking job progress and inspecting hard-to-reach places.
• Building information modelling (BIM).

Local construction groups may be slower to adopt some of these technologies than companies in Europe or North America because local labour costs are relatively low, but the picture will change as they come under pressure to drive higher productivity.

Tip 4: A business management solution that empowers end-users and puts information and services at their fingertips is the catalyst for digital transformation. A robust enterprise management solution will enable a construction company to better manage and analyse the wealth of data streaming into its business from the many new sensors and devices it will deploy to automate operations in the future. This will drive innovation, boost productivity and enable the company to make better strategic and operational decisions.

Acknowledgement is given to SAGE for the insights provided.

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