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New empowerment model crucial for South Africa’s construction sector: Standard Bank

Aadil Cajee is the head of infrastructure for Standard Bank Group. (Image source: Standard Bank)

South Africa is planning to rebuild the country’s construction sector in an inclusive way, enabling it to shift the dial on growth driven by a strong, diverse and globally competitive construction sector

Following South Africa’s 2019 elections, one of the major elements of the country’s new dawn is, “government’s intention to prioritise capital expenditure on the infrastructure required to drive greater regional integration, trade and global export,” said Aadil Cajee, head of the infrastructure for Standard Bank Group.

“A number of the historically large construction firms have divested from or are in the process of divesting from the construction as a core focus, leaving one or two larger firms amongst a limited group of smaller enterprises,” said Cajee.

In other words, South Africa has an extremely limited list of contractors with globally competitive skills and world-class mega-project management ability. Those who remain are currently concentrating efforts on global expansion given South Africa’s limited domestic project pipeline. There are also a number of smaller emerging construction players with great potential. However, these firms have, “limited balance sheet or insufficient operational capability to successfully take on and manage the mega-projects required for infrastructure development to shift the dial on either transformation or growth in South Africa,” commented Cajee.

The last decade has seen a significant ‘brain drain’ in South Africa’s construction sector. Once globally competitive South African construction majors have seen skills migrate abroad as large corporations right-sized their businesses or divested of them completely. At the same time, new skills are not being developed fast enough in South Africa, “as the lack of focussed and structured infrastructure spend and policy has created little market or appetite to acquire, develop or retain these skills,” added Cajee.

Government policies are important

“In order to drive transformation in the construction sector, the government has broken up what would historically be large construction projects into mini-construction projects, handing out the smaller parcels of work to the country’s emerging construction players,” explained Cajee.

“The sector has been through various empowerment initiatives like sales of major stakes in larger players or mentoring smaller contractors, however, those with BEE credentials don’t all necessarily have the required operational capacity,” he added.

As Standard Bank has observed across Africa, “smaller local construction companies partnering with a global construction major presents a very powerful development and skills transfer proposition for emerging domestic construction firms in the continent,” he said.

As such, South African policymakers are in a uniquely powerful position to re-ignite the growth of the South African construction and infrastructure development sector. By allowing existing world-class domestic majors as well as global construction leaders to better partner with emerging black-owned contractors, “South Africa can rebuild skills and capacity in the domestic construction sector while driving transformation through the empowerment of emerging black-owned construction companies,” Cajee concluded.