The struggles of emerging construction companies pre and during Covid-19 pandemic

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A residential building construction site is seen, amid the outbreak of the coronavirus disease (Covid-19). Photo by: REUTERS/Rebecca Cook

The construction sector is pleading to be allowed to return to work as from the 1st of May under strict measures to mitigate the spread of the virus. The Construction Covid-19 Rapid Response Task Team (CC19RRTT) is the champion behind this initiative which consists of associations in the construction sector and its entire value chain that ranges from suppliers, manufacturers, built environment professionals, developers and contractors.
 
The CC19RRTT argues amongst other points that the sector currently employs between 900 000 and 1,4 million people, from a wide range of highly educated technical, expects to wage-earning labours. With the current status quo of the lockdown, the sector is projecting an estimate of 68 000 to 108 000 job losses and huge decline of the construction output growth forecast to 3.6% from the previous forecast of 6% for sub-Saharan Africa. 

While these are well-received arguments from the perspective of well-established construction companies that have active projects and pipeline project at the procurement stage. This prompted Development Action Group to think about how this lockdown has affected the average emerging contractors who have been struggling to secure public sector work opportunities for various reasons before the pandemic and are heavily reliant on small or remedial piece job in their respective geographic areas for survival. DAG as an organisation, has been working closely with emerging construction companies to better understand the sector regarding compliance but also capacitating the emerging construction companies so that their businesses can grow from the so-called “bakkie builders” to be fully-fledged companies contributing towards employment creation.

In the process of navigating the complex construction sector, emerging construction companies have not been getting coordinated support from either public or private sector, hence their companies continue to operate informally and not making much progress (regarding real company growth) nor remaining economically viable. Some of the challenges they face range from lack of meaningful capacity development programmes linked to work opportunities driven by the public sector. In return, most small emerging contractors face experience exploitation by the so-called “big five” construction companies that are significantly benefitting from a public sector infrastructure project. Those that are fortunate enough to secure public sector projects, repeatedly face deep levels of red tape and bureaucracy with payment delays. This is suffocating their companies’ sustainability, cash flow and ultimately, their ability to complete secured projects timeously.

Amongst other challenges they face are the stringent procurement procedures and processes that require newly registered companies to have the relevant company work experience to qualify for public sector projects. While the Covid-19 lockdown is having a negative impact to the whole construction sector, the emerging construction companies will be the hardest hit and post lockdown some of these companies will take years to operate again and others will be closed totally.

As DAG we support the call by the Construction Covid-19 Rapid Response Task Team (CC19RRTT) for the re-activation of the construction sector and we further call upon effective measures and support for these emerging construction companies from both public and private sector. We also believe that the capacitation of emerging construction companies should not be a classroom exercise whereby they are only exposed to the compliance component of the sector but rather a coordinated approach whereby the support is linked to work opportunities on the ground. We are making this call knowing that lots of funding for infrastructure projects are coming from the public sector.

Zama Mgwatyu is a Programme Manager and Chuma Giyose is a Project Co-ordinator at the Development Action Group (DAG).