Maybe it's Time | GAST | Construction industry in South Africa is collapsing

Maybe it’s Time

The Future vs. The Old Ways
04/05/2019
We are Family…
19/07/2019

Welcome to another addition of the CEO’s Corner, I hope you had an opportunity to read my first post https://www.gast.co.za/the-future-vs-the-old-ways/ which was written earlier this month. As you know these pieces are written in the early hours of the morning with a cup of Joe and not enough caffeine stimuli, therefore please be gentle when reading them.

Over the last few months we’ve seen some of the largest, oldest and well-known construction companies in South Africa go through turmoil and peril with entities like Basil Read @BasilReadLtd Group 5 @G5_ingenuity & Liviero @LivieroCivils taking the largest brunt.

There downfall is widely publicized from the when to the how, but have we really delved deeper into the systemic reasons within the construction industry in South Africa? Have we really asked ourselves why have these entities survived the previous 50 years including all the historical tribulations, yet they could not or are struggling to survive now? Something obviously does not make sense. Our country has been in far worse scenarios, the construction industry has been in far worse scenarios, so why now?

The construction industry is a fickle thing, with a plethora of different agendas being pelted, rife with collusion and the majority of the time, self-enrichment as the primary objective. These, let’s call them construction “fraternities” exist, have always existed and will probably exist for many years to come. These “fraternities” are closely guarded secrets, manned by some of the most powerful people within the construction industry and exist to dictate how the industry should be run. Those “yellow envelopes” are handed out, deals are signed and a select few add a few Benjamin’s to their back pockets. It’s been run like this for many years, hence very few Small Medium Enterprises no matter how good they are never seem to break into the upper echelons to convert to a large construction company or become one of the “Big 5”

The old guard is also currently being outplayed by the new kids on the block, these so called militant mafia group or better known as “Business Community Forums” see below article:
https://mg.co.za/article/2019-04-12-00-rise-of-the-new-construction-mafia

Their approach is completely different, however in essence it is actually the same thing, now I can never state publicly or insinuate that larger construction companies operate like the mafioso but it’s honestly an unspoken fact, without naming any of them and being as generalizing and vague as I humanly can…. don’t think South Africa has a witness protection program 🙂 So I shall watch myself here…. 🙂

So why are these larger entities collapsing? Here is a quick summary I believe in no particular order:

  1. Government and the “role players” within government have changed Agenda from friend to foe against some of these larger entities, unless these entities agree to the new terms, whatever those terms are.
  2. The “fraternity” is collapsing due to a survival of the fittest, thus creating a divide and conquer mentality between the supporters of the new players & the old boys club.
  3. Economical challenges including reduction in Infra spent by Government, see also point 1. above which falls within this ambit.
  4. New kids on the block, these “Business Community Forums” wreaking havoc however they are strategic and politically driven, a well organized drive. I wonder who actually controls them?
  5. Self enrichment was higher up on the Agenda than future survival to a certain select few within these larger construction entities.
  6. Fewer projects with hundreds of contractors and everyone fighting for the scraps so lower margins including ridiculous commercial terms.
  7. Corruption is still rife, it only bears different clothing, a different name and some highly effective spin-doctors, like magicians…. focus on this item here “as its very bad” while we steal somewhere else, while you are focused on the item over here.
  8. A carrot-stick model with a highly ineffective reward system, it is still the standard modus operandi within our industry. It’s obsolete for the current market.
  9. Adaptability – it takes a large train & carts forever to change direction at a whim. If you don’t have the flexibility of an SME yet the capabilities and power of a “Big 5” you will struggle.
  10. Last but not least and my favorite – “Care” Genuinely caring about your staff, your client, your labor force, your projects, your suppliers, your creditors and your country. Money is important yes, we all need food and shoes for the kids but we all have to be human and we all have to actually care about one another. We need to uplift each other, we need to support one another. “Care” has been forgotten and being a decent human being has been forgotten in our industry, we need to find it again and quickly.

Don’t panic! It’s not all doom & gloom! There is light amongst this darkness, unfortunately / fortunately it’s not Eskom (That is another story for another time)

Change is slowly happening in the shadows, maybe for the good or bad, but it is changing which is probably a positive depending on how you look at it.

There is currently a significant drive to support SME entities, I know guys like Marnus Broodryk @marnusbroodryk and his initiative @smedotafrica are assisting various companies. There is also a significant effort by Government to remove business red tape in assisting SME’s. Why am I speaking about SME’s, well I honestly believe the more SME’s are empowered and supported the healthier the construction industry will become. You cannot have a permanent “Big 5” you need a ever changing “Big 10”. We need that healthy competition, it not only benefits the industry but most importantly the clients, they get more competitive rates, they get better quality products & services.

Above and beyond the SME drive, there are dials being moved in the right direction with removing these “fraternities” “Business Community Forums” and leveling the playing field for the rest, again it might just be new overloads but it is a change and change is as good as a holiday right?

Maybe you have picked up on something by now, I tend to operate outside the onion ring and probably why I’ve only been invited to 1 or 2 of those “fraternity” meetings in the past…..if I could be honest for a second, the food wasn’t that bad at these meetings. To be even more honest there are some seriously great people in this industry who really care and are trying to make a difference not only for the people who work for them but for South Africa. We need to support them as much as we can, we need to stand by them and when the going gets tough we need to protect them.

I also suspect I might be burnt at the stake for this post or even have one of those fancy spin-doctors create some magic, why have a voice and not use it, why push for change when you change nothing. My fellow construction compatriots, comrades, brothers, broers and colleagues, let us change this industry for the better, not only for today but for tomorrow, before evil reigns over good.

To those “other” people, you know the ones who stopped caring and pillaging the village (South Africa), I just want to say: “Your days are number so start counting……”

I’m not very active on Social Media, but I do have a twitter! I bid you adieu until the next CEO’s Corner piece. Hopefully this post was insightful and awakens your internal voice to change this industry for the better. Thank you for your time and all the messages I’ve been receiving over the last couple of months, they are really fantastic and I’m excited to see so many caring people that want to change this industry for the better.

KEVIN GAST
CEO – GAST GROUP
@kgastza

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