Since the recent changes in the South African government took place, the sense of hopefulness and positivity in the country has been palpable. According to Managing Director: PPC SA Cement Division, Njombo Lekula, the construction sector is poised to benefit from these changes in the long term.
According to PWC’s report: SA construction 3rd edition (2017), the industry is a significant contributor to employment and economic growth. Last year it contributed an average of 3.9% to national GDP.
“The construction industry is generally a good indicator of economic performance. Following completion of 2010 Soccer World Cup projects, the industry slumped as major government infrastructure projects either dried up or slowed down tremendously. In fact, in the past few years we have seen a shift in cement consumption patterns. Demand has been driven by small projects and individual household consumption as opposed to big infrastructure projects which mainly require bulk supply. As a consequence of the shift in demand, cement companies have had to adjust their business models to cater for this new reality,” wrote Njombo in a recent article.
The South African construction industry’s performance has been sluggish and has been experiencing recessionary pressures and negative growth. President Ramaphosa and the Minister of Finance have committed the government to uprooting corruption and creating a conducive economic environment. The newfound commitment by government leaders to boost the sector has boosted investor confidence, says Njombo.
“Investor confidence is the highest it has been since 2009. In economic terms, the current government leadership is committed to creating a positive economic environment that will attract higher levels of investment. Admittedly, the national budget will restrain government spending which may result in an initial contraction in the economy. Increased taxes and levies will, in the short term, affect people’s disposable income and ability to spend as they otherwise would, constraining demand for our products, mainly cement in our case. In my view, this period will not last long, especially if the leadership delivers on the pronounced commitments,” adds Njombo.
In his budget presentation, the Minister of Finance said that government recognises the need to shift spending away from consumption towards higher investment and Njombo is of the opinion that South African industry stands to benefit from this. Close to R50 billion is earmarked for infrastructure related spending including on schools, industrial and public infrastructure. Speedy implementation of these projects, and the removal of corrupt practices, will make a significant positive difference.
The construction industry is labour intensive and thus well placed to absorb large numbers of youth. One of the key messages in the State of the Nation Address was that the creating of jobs, especially for the youth, is at the centre of the national agenda in 2018.
“We must be an active partner and contributor to this national agenda. The industry must actively participate in the proposed Jobs Summit and help shape the conversation, especially given the industry’s labour absorption capacity. In addition, we need to support government’s drive to expand tertiary education beyond the university system by providing meaningful alternatives such as artisan training,” concludes Njombo.
For more information, contact PPC on +27 (12) 377 7300 or via www.ppc.co.za.
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