By Samkele Mchunu
The building sector in South Africa is a crucial one for our economy, accounting for almost 3% of GDP overall and being primarily driven by small and medium-sized businesses.
Although experts predict several significant challenges, the sector appears set to grow significantly in 2024. To overcome these obstacles head-on in 2023 and steer clear of the traps that resulted in the closure of about 90 businesses in 2022 alone, business owners will need to have solid plans and strategies in place.
According to Tom Stuart, chief marketing officer of B2B funding partner Lula, “success in the construction business hinges on planning, stakeholder communications, and robust leadership in managing people, projects, and finances.”
One of the biggest challenges the industry faced this year, and likely next year too, is loadshedding and lack of electrification. Power outages disrupt construction sites on many levels. Although some companies have already invested in contingencies like solar systems or diesel generators, loadshedding still leads to supply-side disruptions, and delays in equipment and supply deliveries.
What’s more, the rising costs of materials, driven by both inflation and supply chain disruptions, add another dimension to these challenges.
“Over the years, we’ve seen a marked shift away from rail freight and toward road-based transport. This puts enormous pressure on our transport infrastructure. Undoubtedly, this is an issue for the government to prioritise, and can’t be solved by the construction industry alone. If SA gets this right, it’ll facilitate easier and faster movement of teams and building supplies, and on-time project completions,” Stuart suggests.
“To further mitigate these risks, construction firms often stockpile resources and supplies whenever possible. Collaborations and group purchasing, as well as diversifying your supply sources, are also good strategies to consider.”
Funding issues can affect project management and cut into profit margins. Banks are cutting back on lending, while alternative funders have emerged to fill the gap, and offer cash flow solutions to the financial stumbling blocks weighing construction companies down.
“In the face of these challenges, B2B business capital offers the flexibility and support you need to handle these risks. Access to capital when needed helps manage cash flow effectively, especially in today’s unpredictable business environment,” Stuart says.
He suggests that “long term, we need to invest in our local suppliers so that they can in turn bolster the resilience of our local supply chains, and reduce the dependency on international ones, which will likely become even more volatile as the global import-export exchange economy ramps up.”
Addressing the skill gap in our local construction workforce is another pressing issue. A 2021 research paper from the Creative Construction Conference concluded that bridging the South African construction workers’ skills gap is one of the best ways to achieve our growth goals.
The impact of shifting weather patterns and the climate catastrophe on your construction project should not be understated. He issues a warning, stating that Southern Africa will be especially severely affected, leading to unpredictable weather and increased risks of natural disasters like flooding and drought.
To stay competitive, construction companies are also adopting technology. Drones and 3D printing are two examples of innovations that are improving cost effectiveness and helping with project management and planning. One of the most important technological innovations influencing the construction industry is building information modeling.
In order to overcome the obstacles and prepare South Africa’s construction companies for another busy year in 2024, strong strategic planning, the adoption of new technologies, and access to small business financing solutions will prove indispensable.
