Construction industry set to benefit from localisation initiatives

Construction industry knowledge hub Databuild has welcomed recent announcements by National Treasury and the South African Bureau of Standards (SABS) regarding locally produced products and materials.  

“National Treasury’s decision to prohibit the use of imported cement on government-funded projects from 4 November will give the beleaguered South African construction industry a much-needed boost and hopefully stimulate the creation of new jobs while ensuring that existing ones are sustained,” says CEO Morag Evans.

Local cement manufacturers have been particularly hard hit over the past few years by cheap imports from countries such as Vietnam and Pakistan.

Research done by data company Industry Insight revealed that imports to South Africa increased by 51 per cent between January and September this year and by three per cent compared to the same period in 2019, before the outbreak of the pandemic.

“Not only do these imports negatively impact the competitiveness of our local manufacturers, but independent studies showed the quality of these international products to be inferior and in contravention of cement quality regulations,” says Evans.

“The new regulations will hopefully level the playing field for our local cement producers, enabling them to focus their efforts on expanding their business rather than struggling to survive.”

“The pandemic has taught us that local supply chains are integral to the sustainability of the South African construction industry,” she continues. “Consequently, support for local manufacturers must be prioritised to ensure they are able to produce the volumes required to operate profitably.”

Evans adds that the recent launch of a local content verification scheme by the South African Bureau of Standards (SABS) will further catalyse the demand for domestic materials.

“Enabling local producers and manufacturers to certify the local content of their products will bolster their sales opportunities to both government and private sector customers.”

Evans notes that smaller companies should be the main beneficiary of the new localisation initiatives to prevent the creation of monopolies.

“Smaller players have been particularly hard hit by the pandemic and need the industry’s support now more than ever before. Awarding contracts – specifically for government-funded projects – to large companies only serves to reduce competition in a market where margins are already extremely tight.”

South Africa’s manufacturing capacity has been on a steady downward trend since 1994, and currently only represents 11.8 per cent of the economy, Evans concludes.

“Our country now has a golden opportunity to boost local manufacturing capacity, strengthen local supply chains and thus assist our ailing construction industry on the road to recovery.”