PORT ELIZABETH, SOUTH AFRICA, Sept 23 — South Africa’s Deputy Minister of Labour, Phathekile Holomisa, has voiced concern over what he refers to as high levels of collusion in the construction industry.
Speaking at the annual Master Builders South Africa Congress in Port Elizabeth Monday, he said big construction and engineering groups were part of numerous cartels operating in major projects.
The practice of collusion in the construction industry ensured that competitive bidding was eliminated. A recent investigation by the Competition Commission identified 300 cases of collusion in the construction and engineering industry, between 2006 and 2009.
“Instead of companies competing fairly, they tend to collude among themselves — in such a way that even the bidders end up receiving something because of the cartel-like kind of operation that they have,” said Holomisa.
“So that does therefore tend to delay transformation that is necessary — because it is the big companies that are in the forefront now, the ones that are still not transformed — that are able to take advantage of the opportunities that are there.”
The seasonally adjusted gross domestic product (GDP) data for the first quarter of 2014 showed that the most notable performance was the construction industry, with a 4.9 per cent increase.
The congress provides an opportunity for national and African representatives to discuss the latest trends, opportunities and challenges faced by the construction industry.
The focus is the Eastern Cape, a province that is viewed as having the fastest growth in infrastructure, power generation and industrial development.
According to Master Builder South Africa Executive Director, Thuli Dlamini, the building industry is crucial for job creation as it is not overly reliant on a highly-skilled workforce.
She said any increase in activity levels within the sector could quickly translate into higher employment since a lack of skills does not impose constraints.
“For infrastructure to be there, it needs the construction industry. The trillions of rand that have been set aside in the past years are intended to ensure that our infrastructure is up to standard. Building of dams and roads are the necessary ingredients for any economy to grow,” says Holomisa.
The strategic importance of the construction and engineering industry for economic growth in South Africa is backed up by leading economists.
The Chief Economist at Econometrix, Azar Jammine, said the construction industry was used as a tool by governments around the world for economic recovery.
The South African government adopted such a stance following the 2008-2009 global financial crisis.
Jammine said the country still lagged well below the necessary infrastructure investment when compared with other developing economies.
“What I find rather depressing was to see a graph in which compared the ratio of construction investment to GDP of different countries and South Africa was at the bottom of the pile and clearly if we want to be able to supply the goods and services that the country needs in the longer term we need to invest far more in civil engineering and building activity in the country.”
Industry specialists say empowerment in the construction sector must be measured against its sustainability.