OPINION: Delisting of SA construction giants time to deal with elephant in the room?

The demise of South African construction giants is seen in some quarters as an opportunity for new or emerging players but Ebrahim Adam cautions against that as a sole focus.

Ebrahim believes the construction industry should not only focus on opportunities but it should also seriously look at the underlying reasons that led to the delisting because this has a serious impact on the economy of the country.

Is this the opportunity for the Construction industry to deal with the elephant in the room?

The South African Construction industry has many privately owned construction companies who are able to pass the threshold of turning over R1bn per annum. It is true that these companies can successfully deliver major projects, and fill the gap created by the demise of listed companies 

However, with these giants disappearing from our stock exchange, has other major implications to just to highlight a few:

1. How do we fund large infrastructure projects?

Right now, in terms of funding and investment on mega projects, we need international investment but how do we then attract that international funding if investors see the decline and delisting of companies that have been trading for decades?

2.Why are private companies not listing?

If we only rely of these 1Bn turnover private companies as a way forward, why are they not listing themselves or selling off a portion, even if its a 10% stake in their business? 

Are these private enterprises willing to fund projects and wait months prior to being paid? If so then it could be a positive outcome for the future of the Construction Industry in South Africa. If not, then it would be the current scenario we are in, and a bit worst than now.

3. Can we sustain the jobs that are to be lost due to the delisting of these giants?

If we rely on the 20%, or whatever the employment rate may currently be at, employed South Africans to build South Africa then it would be a long and hard route, it can be done but it will take a long time. 

Will the private Companies be able to absorb all the 10 000 + jobs that are estimated will be lost due to the delisting of these companies?? 

The impact the delisting of these major giants is not to be underestimated we must consider the entire supply chain networks, ie sub-contractors, material suppliers, professional services, manufacturers, etc. Can we sustain these jobs?

Projects on hold

Right now South Africa is struggling to find investment to complete many projects in South Africa, and as a result projects are placed on Hold.

The reason why we find ourselves in this situation solely boils down to the fact, that , Government does not have the funds to carry out these projects, hence, the reason they prolong the "award of contract" process and wait for the next annual budget to be released and then decide whether it will be financially suitable to pursue that project.

I know of some projects that haven't been awarded for 3+ years, in certain scenarios 5 years. I assume that, they are probably awaiting funding or sponsorship for these projects.

Hope in the pandemic

Indeed there is much hope in South Africa, just look at this current Pandemic, how were we able to pull out so much of funds just to support our economy in a matter of a few months. This shows potential and personally I know South Africa can overcome any challenge.

Its just that they are too many underlying issues, such as corruption, nepotism(hiring of contractors as well as staff) and other factors that needs to be adjusted prior to us moving in the right direction.

We are a beautiful nation, diverse and full of potential, yet we do not fully harness and reap its absolute benefits.

There were solutions and perhaps plans to save these fallen entities, however, I personally feel that people in the right places allowed them to fall, for personal benefit and gains.

This article was written for The Hardhat Professional by Ebrahim Adam a Commercial & Compliance Director at PROCONSA KSA