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The state of the WC property development and construction industry

TWO reports launched last year were the bellwether indicators of the state in which the property development and construction sectors now find themselves, and demonstrated just how far down the economic scale this industry had fallen – already prior to Covid-19.

According to Deon van Zyl, chairperson of the Western Cape Property Development Forum, the first of these  was the 2022 Infrastructure Report Card (IRC), published by the South African Institute of Civil Engineers (SAICE), which rated the overall condition of South Africa’s infrastructure as a “D – at risk of failure” – the lowest since the IRC first launched in 2006. 

The second was the Statistics SA June report on the Construction Industry, which showed that employment in this sector had contracted by 25% already pre-Covid-19, with 118 000 jobs lost between June 2017 and June 2020.

Joe de Beer (Deputy Director General, Economic Statistics, StatsSA) attributed the decline largely to the lack of government procurement, and Van Zyl concurs: “It has taken a State of Emergency just to beg the national energy provider to do its job – to maintain let alone renew, its energy infrastructure.

“Without a solid plan and platform for all public-driven, crucial infrastructure, our industry has no stage on which to play out the vast contribution we make to the economy, particularly in terms of job creation.”

Adds Bafikile Bonke Simelane, Managing Director at Cape Town-based project management company AL&A: “These reports all prove that our industry’s current woes predate the advent of Covid-19, but which in turn then saw associated lockdowns exacerbating an already deteriorating situation. 

“Therefore, it’s a misnomer to speak of a ‘post Covid-19 recovery’, especially when the much-vaunted but persistently stubborn ‘infrastructure-led’ recovery of our country remains elusive with specific reference to Built Environment-related public-sector projects.”

There are, however, lights on the horizon, one of these being the recent launch of City of Cape Town Mayor Geordin Hill-Lewis’s Infrastructure Report. 

Forming the foundation for economic growth over the next 10 years, Van Zyl notes that the report is also “refreshingly honest” about the City’s past infrastructure shortcomings and shows a change of attitude from within the City’s executive management team.

Other sectors within the industry are also cautiously optimistic, including commercial developments.

Riaan Munnik, Western Cape-based Regional Development Manager for Growthpoint Properties, 2022 had seen a bottoming out during which the confidence in the property sector had dipped drastically and the result seen in many of the listed share prices.  All of this had been exacerbated by a general negative sentiment towards the South African economic and political environment. There is light now, at the end of the commercial tunnel, notes Munnik: “Office is making a huge comeback. We are excited.”

For many private residential developers such as the Rabie Property Group, the growing challenge will be increases in interest rates which always immediately contract the residential. 

The bottom line is that it can no longer be business as usual. Simelane agrees: “The name of the game is agility, resilience and collaboration because there are still opportunities out there, even though they may now take much longer to materialise due to long gestation periods brought about by budget cuts, capital expenditure deferrals and a very competitive environment.”

Van Zyl concludes: “Indeed, one of the biggest messages of hope emerging from the industry is the feeling that – while 2023 will still be a tough year – there was strong light on the horizon and even an anticipated boom across the marketplace from 2025 onwards.”

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