Lockdown forcing construction sector to think more strategically about tech adoption

According to the results of a survey conducted by Construction Computer Software $($CCS$)$ amongst its clients, stakeholders and industry partners, the lockdown has compelled the construction industry to think more strategically about the adoption of technology, especially as it relates to communication and collaboration. The survey was conducted to establish how the construction industry has been affected by the lockdown and what measures players are putting in place to manage the current situation, as the sector is expected to play a major role in South Africa$$s economic recovery post the Covid$-19$ pandemic.

Project disruptions and delays

Some $70\%$ of respondents said all their projects have been affected by disruptions or delays due to the Covid$-19$ pandemic and $52\%$ of respondents from companies with a revenue of more than R$1$bn indicated that $100\%$ of their projects have been delayed or disrupted. These disruptions and delays are as a result of the lockdown measures enforced by government, as well as shortages of materials, plants and equipment and PPE.

CCS CEO Andrew Skudder says while respondents expect all construction sectors to be affected by the pandemic in the short$-$term, the building sector is expected to be the most affected.

$$The building sector is primarily funded by private sector clients, who are expected to cut back on investments due to the anticipated economic decline as a result of the Covid$-19$ pandemic. Residential and retail investment is likely to be most affected due to significant job losses, growing consumer financial stress and a lack of confidence following the Covid$-19$ enforced lockdowns.$$

He adds that infrastructure spending, including civil and roads, is expected to be less affected as this tends to be government funded. $$Respondents suggest that government is likely to accelerate its infrastructure spend programme in a bid to accelerate economic recovery and absorb unemployed labour into the employment market as quickly as possible. Mining is expected to be least affected.$$

Private clients most affected

$79\%$ of respondents said private clients would be the most affected. Business and consumer confidence have been negatively affected by the Covid$-19$ pandemic and lockdowns, which is expected to result in a $6\mathrm{.}1\%$ decline in GDP in $2020.$ This supports the view that the building sector will be most affected as it is primarily funded by private clients.

State$-$owned enterprises, such as Eskom and Sanral, are expected to be least affected. Eskom, in particular, is an essential service provider and has significant build programmes under way which have not been affected by the lockdown. In addition, water authorities such as Rand Water, which is an extension of national government, are also expected to be less affected as they too provide essential services, with infrastructure requiring ongoing maintenance and upgrading.

Skudder says $77\%$ of respondents indicated that on more than $20\%$ of their projects, clients have invoked force majeure clauses on their projects. $$Smaller companies seem to have been less affected with $67\%$ of companies with less than R$100$m revenue having more than $20\%$ of their projects affected.$$This compares to $89\%$ of R$100$m to R$500$m$,79\%$ of R$500$m to R$1$bn and $80\%$ of R$1$bn$-$plus revenue companies. Companies with a revenue of between R$100$m and R$1$bn seem to have had the highest level of force majeure being invoked, with $57\%$ of R$100$m to R$500$m companies having $81\%$ to $100\%$ of their projects being affected, compared to just $20\%$ for companies with revenue of less than R$1$bn$.$

Managing the challenges presented by the pandemic

Skudder says a few major themes emerged in the survey. $$One was the increased need to keep the channels of communication open, especially with employees, but also with clients and other stakeholders on projects. It is undoubtedly healthier for businesses if people feel informed in times of great uncertainty. "Cost management is another obvious theme, with companies implementing measures to manage costs and ensure liquidity stretches for as long as possible. Interestingly, organisations have been terminating rental of plants and negotiating insurance premiums.$$

He says the construction industry is highly commercially driven, with stringent contracts in place that regulate the relationship between contractors and their clients. $$Various steps need to be taken by construction companies to ensure they position themselves for recovery and for the commercial entitlement they will need to establish as a result of the crisis,$$ he adds. He points to a new industry guide introduced by the UK government$$s Construction Leadership Council Covid$-19$ Task Force, which offers practical advice to help contractors avoid expensive and long$-$running disputes over the effects of the pandemic on projects.