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COMMENTARY: Underspending on repairs and maintenance impacting Joburg infrastructure

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In January 2014, the National Treasury published Municipal Finance Management Act Circular no. 71, which mandated that municipalities allocate at least 8% of the carrying value of their property, plant, equipment, and investment property to repairs and maintenance activities. This directive aimed to ensure that municipalities prioritize the upkeep and preservation of their assets. A civil society group called Organization Undoing Tax Abuse (Outa) has, through its initiative JoburgCAN, highlighted that the city of Johannesburg consistently under-budgets for essential repairs and maintenance tasks. The city's financial reporting also lacks accuracy and consistency, with significant variations in numbers from year to year without any explanation. JoburgCAN analyzed the city's reported spending on repairs and maintenance from 2014/15 to 2023/24, along with the projected spending for 2024/25. This analysis covered a period of ten years since the Treasury set a standard of 8% for ma
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NEWS: Major role for construction in SA recovery

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The South African construction industry is expected to play an important role in the economic recovery plan post Covid 19.



According to a survey conducted by construction software company Construction Computer Software (CCS) among its clients, stakeholders and industry partners to establish how they have been affected by the lockdown and what measures they are putting in place to manage the situation.

Some 70 percent of respondents said all their projects have been affected by disruptions or delays due to the Covid-19 pandemic and 52 percent of respondents from companies with a revenue of more than R1 billion indicated that 100 percent of their projects have been delayed or disrupted.

These disruptions and delays are as a result of the lockdown measures enforced by the government, as well as shortages of materials, plant and equipment and personal protective equipment.

Although respondents expect all construction sectors to be affected by the pandemic in the short term, the building sector is expected to be the most affected.

The building sector is primarily funded by private sector clients, who are expected to cut back on investments due to the anticipated economic decline as a result of the Covid-19 pandemic. Residential and retail investment is likely to be most affected due to significant job losses, growing consumer financial stress and a lack of confidence following the lockdowns.Infrastructure spending, including civil and roads, is expected to be less affected, as this tends to be government-funded.

Respondents suggest that the government is likely to accelerate its infrastructure spend programme in a bid to accelerate economic recovery and absorb unemployed labour into the employment market as quickly as possible. Mining is expected to be least affected.

Seventy-nine percent of respondents said private clients would be the most affected. Business and consumer confidence have been negatively affected by the Covid-19 pandemic and lockdowns, which is expected to result in a 6.1 percent decline in gross domestic product in 2020. This supports the view that the building sector will be most affected, as it is primarily funded by private clients.

State-owned enterprises, such as Eskom and Sanral, are expected to be least affected. Eskom, in particular, is an essential service provider and has significant build programmes under way, which have not been affected by the lockdown.

In addition, water authorities such as Rand Water, which is an extension of the national government, are also expected to be less affected as they too provide essential services, with infrastructure requiring ongoing maintenance and upgrading.

About 77 percent of respondents indicated that on more than 20 percent of their projects, clients have invoked force majeure clauses on their projects.

Smaller companies seem to have been less affected, with 67 percent of companies with less than R100 million revenue having more than 20 percent of their projects affected. This compares to 89 percent of R100m to R500m, 79 percent of R500m to R1bn and 80 percent of R1bn-plus revenue companies.

Embracing technology

One of the major insights to emerge from the survey is that there are no boundaries with technology. While the construction industry has been notoriously slow to adopt technology, the pandemic has compelled it to embrace digitisation to facilitate remote operations.

This is aligned with a report by McKinsey & Company, which notes that – globally – the industry is shifting to remote ways of working. It cites the example of designers and engineers relying even more heavily on digital collaboration tools such as building-information modelling (BIM) and engineers and contractors are using 4D and 5D simulation to re-plan projects and optimise schedules.

Respondents in the survey indicated that the pandemic has made them more aware of the role technology has to play – during the crisis, but also into the future. The construction industry will be critical to the country’s post-pandemic recovery.

This article was written by Andrew Skudder is the chief executive of CCS.

Source: iol

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