Civil Engineering May 2021 | Vol 29 No 4

Civil Engineering May 2021 39 Delivery and Procurement Management (FIDPM), which is aligned with the SFU) Q Q Methods of evaluation Q Q Fraud and contract alignment. The traditional method of procurement is the most widely relied upon system in South Africa, but it has become increasingly inef- fective (Watermeyer, 2011). That is because the traditional method of procurement implies that the client can design the project, and that there is an adequate amount of time to work on the project design. Unfortunately, these assumptions are not in accordance with current realities in which clients are required to fast-track projects, causing the cost of projects to soar and the quality of work to decline (Watermeyer, 2011). In some quarters, it has been suggested that para- statals might benefit from using the NEC3 as a standard contract, but funding institutions increasingly prefer the FIDIC contract. Prior to the outbreak of the Covid-19 pandemic, the “South African construction sector faced significant challenges including lack of work, late and non-payment of con- tractors and professionals, as well as the un- controlled illegal construction site invasions by syndicated organised crime. Covid-19 has also brought about other challenges such as the immediate stoppage of work, lack of payment for certified work, work impossible to complete, loss of income and manpower, potential litigation issues and business uncertainty” (CC19RRTT, 2020). THE DECLINE OF THE CONTRACTORS With the construction industry serving as one of the most significant contributors to the country’s economy (Ofori and Toor, 2012), the decrease in construction-related expenditure has a knock-on effect on South Africa’s economy as well as the ability of construction companies to get work at good profit margins and develop sustainably. The decline of construction compa- nies in South Africa has been on the rise. Statistics show that the total number of company and close corporation liquida- tions in 2018 was 91. Ten of these were compulsory liquidations, and the other 81 voluntary liquidations (StatsSA, 2019b). A further 48 construction companies underwent liquidation between January and July 2019, eight of which were liqui- dated compulsorily, and the remainder voluntarily (StatsSA, 2019c). Furthermore, in the 10 years leading up to the pandemic, many small- and medium-sized construction companies such as Filcon Construction, Basil Read, Esor Construction, and the Liviero Group underwent business rescue. Many others, including Aveng, are still undergoing financial difficulties. Gadekar and Pimplikar (2014) ranked insufficient capital, lack of managerial experience, lack of business knowledge, and insufficient profit as the highest factors that cause small- and medium-sized construction companies to fail. The challenges also extend to large com- panies, such as Neil Muller Construction (NMC) and Group 5, which have undergone business rescue. Gadekar and Pimplikar (2014) have ranked cash flow management, overexpansion, high employee turnover, industry weakness, and lack of managerial experience as the highest factors that cause large-size construction companies to fail. NMC had a high employee turnover that was caused by overexpansion of the company. The overexpansion resulted in high expenditure on overheads, which the income of the company could not accom- modate. NMC also faced cash flow chal- lenges caused by late payment from clients. A state department owed the contractor six months’ payments which affected the cash flow and the turnover of the company, ultimately contributing to its failure. Group 5, a Grade 9 construction com- pany, applied for business rescue in March 2019 in the midst of ongoing projects in- cluding the Gauteng Freeway Improvement Project, projects for the University of Johannesburg, and international projects like the Ayanfuri Gold Project in Ghana (Groupfive, 2019). From the company’s pub- lished 2018 annual financial report, Group 5 had revenue of R7.3 billion and an operating loss of R1.4 billion in 2018 (Groupfive, 2019). The company initiated a plan to decrease its focus on engineer, procure and construc- tion (EPC) projects and increasingly focus on developments and investments as well as operations and maintenance projects (Groupfive, 2019). However, this was only established after assessing the mounting losses accrued by the company. The failure of main contractors such as the Liviero Group, Basil Read and NMC has also led to the failure of many of their appointed sub-contractors and caused those sub-contractors to apply for busi- ness rescue (Cokayne, 2018). Of great concern during the lockdown period, according to CC19RRTT (2020) is “the fact that the industry, which works on a ‘no work no pay’ basis, is unable to ensure money flow to some of the poorest sectors of society, i.e., labour. At the same time, critical infrastructure projects are being delayed, which will have a knock-on impact on society and the economy.” THE WAY FORWARD Africa missed the first three industrial revolutions, and Covid-19 has presented the continent with a reset button. Although Covid-19 may present a greater decrease in the work supply to the industry, it also offers several opportunities, including: Q Q The use of more online software packages in project procurement and analysis, including the use of Big Data and artificial intelligence, automation in project packaging, verification, and payment (blockchain). Q Q Online networking between construc- tion stakeholders through training, mentorship and nurturing of employees to ensure the continued growth, evolu- tion, and profitability of the company. Q Q The re-design of the construction business and project delivery business models to enable companies to offer full construction solutions and make use of PPPs, ultimately providing a dedicated one-stop service. Q Q Better health and safety (H&S) prac- tices and facilities on site as well as the opportunity to price provision for on-site H&S in the tender. Q Q Development of strong and resilient local supply chains to ensure no disrup- tion to production if there is another pandemic in the future. This must be done by carefully examining imported resources and fabricating them locally. Q Q Development of the local building materials industry. Q Q The use of robots and 3D printing in construction. Reducing the cost of labour (which constitutes 40% of the cost of construction) will lead to cheaper construction and the ability to provide more buildings and infra- structure. Opportunities also exist for increased off-site and modular construction practices. Q Q Research and development to help companies sustain their own develop- ment by examining problems faced by both public and private sector clients in the construction industry and providing integrated solutions.