In a letter to shareholders published in the group’s latest annual report, chair Louwtjie Nel said that due to the decline in public fixed investment and low business confidence, the industry has shrunk nearly 40% over the past six years.
“There is an urgent need for SA to prioritise upholding the rule of law. The adverse effects of not doing so are becoming increasingly obvious,” said Nel, adding that “crime and corruption function as significant deterrents to business and investor confidence, demanding swift and decisive action.
“We strongly urge the government to combat the growing tide of criminal extortion and corruption that is affecting SA society, particularly within the construction sector.”
Since 2015, there has been a proliferation of “local business forums”, organised under the banner of “radical economic transformation” that have invaded construction sites across the country, demanding money or a stake in development projects.
Much of their success is due to the capacity and readiness of these mafia groups to use violence and vandalism to ensure their demands are met.
In his latest address to the nation, President Cyril Ramaphosa said the SA Police Service has established 20 economic infrastructure task teams to protect critical infrastructure and tackle the construction mafia. “I have also extended the employment of 880 members of the SANDF [SA National Defence Force] to support the police in combating criminal activity that targets critical economic infrastructure,” he said.
Law enforcement agencies are cracking down on criminal syndicates, according to Ramaphosa, as police have arrested several people for extortion at construction sites and have made more than 3,000 arrests for illegal mining.
But there is a need to urgently tackle “business forums”, which disrupt projects with increasing frequency.
Nel said that while the SA business community is willing to collaborate with the government through organisations such as Business for SA to develop strategies to combat crime and corruption, and to address energy and logistical constraints, the thrust of the fight has to be state-led.
The construction firm is one of the few that survived an industrywide slump in SA, where big construction projects have been few and far between in the past decade.
WBHO is divided into three main operating divisions: building construction, civil engineering, and road and earthworks.
The company entered Australia in 2000 as a springboard to diversify its revenue base, but after two decades it said the construction environment there had become increasingly competitive, while the potential risk of megaprojects outweighed the margins on offer.
This was mainly brought on by its unprofitable Australian subsidiary, Probuild, and pandemic restrictions, which had a ripple effect on the construction industry. In 2022 the group decided to officially exit the market Down Under, but it still took a big hit from its discontinued operations there and reported its first annual loss in 52 years totalling R1.96bn.
Looking to its future without the Australian operations, WBHO managed to grow its order book 47% to R33bn and has swung back into profitability in the year to end-June, thanks to an uptick in construction, roadworks and civil engineering activity in SA and the rest of Africa.
Nel said the group can now direct its focus towards efficiently delivering the sizeable work in hand.
With more than two-thirds of the order book work attributed to SA, the group bagged high levels of business in the country over the second half of 2022 and the first half of the 2023 financial year, in which revenue from SA rose 42% to R16bn.
While mirroring the global trend of heightened inflation and rising interest rates, the local economy is also grappling with a deep-seated energy crisis, rapidly deteriorating infrastructure and limitations in logistics, particularly rail and ports.
Nel said that despite the challenges faced by Eskom, there has been a notable level of investment in power stations in recent years, and private sector spending in the renewable energy sector has increased significantly. WBHO is seeing steadily climbing private investment in the renewable energy, data centre and logistics markets, while the group also has a strong baseload of mining infrastructure projects.
Noting that the government’s undertaking to fast-track the rollout of critical infrastructure appears to be keeping momentum — with projects worth R134.2bn in the procurement phase — he urged it to keep this development momentum going and further strengthen the partnership between the public and private sectors.
However, Nel warned that high levels of public debt, and governance and corruption weaknesses are potential constraints to continued sustainable infrastructure development.
“For the first time in a while, the construction industry in SA has some healthy prospects for the medium term,” said Nel.
“But this will largely depend on the government’s ability to create a conducive environment for the industry, including curbing the disruptions caused by the construction mafia.”
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