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News & Press: 2020 News Items

Counting the real costs of lockdown on the development and construction sector

Wednesday, 09 September 2020  
Posted by: Bert vd Heever
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While construction sites were able to reopen as far back as early May for civil projects, ongoing delays in terms of both the public sector being slow to change gears, as well as the requirements of clients for additional regulations around health and safety, have exacerbated challenges for both property development and construction companies.

According to Stefan Bothma, CEO of The Power Group’s development arm, Power Developments, while his company was able to adapt its own business model overnight to enable staff to work remotely, its physical operations and in turn many of its clients’ projects have been severely hamstrung by government departments failing to put similar systems in place.

Adds Steven Levey, the company’s Senior Development Manager: “Government services seemingly went backwards instead of forwards as their own operations came back on stream, from building plan and NHBRC approvals to town planning applications and the Western Cape Deeds Office in terms of transfers. These are the factors having the biggest impact on our industry and not necessarily Covid-19 itself.”

The 37-year-old Power Group, founded by chairman Graham Power, supplies civil, roads, building, turnkey housing and property development services through its two companies, Power Construction and Power Developments. With regard to the latter, the company has for several years specialised in the affordable housing market, particularly in the price range of between R500 000 and R850 000.

Notes Bothma: “With the average household income of South Africans who can afford this price range being around R18 500 per month, new homeowners in the Western Cape who have been waiting to take possession of their properties are being very hard hit by the on-going closure of the Deeds Office.”

This adds huge economic stress onto a segment of the South African workforce where there has already been substantial job losses due to Covid-19. “Families in this income bracket are now either being expected to look for other rental accommodation while they await transfer on their new properties, or are expected to pay occupational interest way beyond what they budgeted for or would be paying on their bonds,” notes Bothma. “And all of this with the added uncertainty as to when the situation will be rectified, despite higher echelons of government trying to intervene.”

Transferring attorneys with whom he has been in discussion have informed Bothma that registration of properties at the Western Cape Deeds Office now takes 37 working days, whereas previously it took between eight to 10 days: “This essentially has stretched the waiting period by an additional two months – an untenable situation for most new property owners, let alone those in the affordable market.”

The group’s construction arm has also been hit with challenges no one could have foreseen with Covid-19.

“As an example,” notes Bothma, “the construction of five large wind farms as part of the Renewable Energy Independent Power Producers Procurement Programme (REIPPPP) were not seen as public works projects, so it took a number of weeks for the authorities to give the final go-ahead.”

To complicate matters even further the wind farm projects are in three provinces (Western, Eastern and Northern Cape) and the movement of people and other resources across provincial borders delayed the recommencement of theses projects by approximately 3 weeks.

With the projects situated in remote areas, transporting the work teams immediately doubled in cost with South African regulations stipulating vehicles could only carry 50% passenger capacity. The same challenges applied to guest houses and other venues accommodating the teams.

“One has to understand that the base camps from which these teams work are in remote areas and people have to be transported up to 60km”, says Bothma. “Adding to the challenges just in terms of getting supplies and teams on site were the implementation of additional PPE and daily measures such as temperature monitoring and stricter access control, and thus costs have really climbed.”

An additional unforeseen challenge has been the client’s own extended Covid-19 regulations added on top of those of the South African government.

Bothma explains: “Just in terms of transportation, even though South Africa has relaxed passenger capacity, the client is still insisting we run vehicles at only 70% of full capacity. In many ways, this is understandable when one acknowledges the high Covid-19 death rate encountered in Europe.

The overall frustration with government red tape and ineffiencies has resulted in the group being actively involved in lobbying for change in the property development and construction industry for a number of years now, and it was among the first members of the Western Cape Property Development Forum (WCPDF) in 2008.

It was the group’s introduction of the WCPDF then years later to the then Western Cape Minister of Economic Opportunites, Alan Winde, that lead to the WCPDF’s chairperson Deon van Zyl proposing the establishment of an Economic War Room; an initiative adopted by Winde’s Cabinet in 2019.

Power Developments will also be a Gold sponsor of the WCPDF’s next “In Conversation” webinar on 17 September, at which National Minister of Public Works and Infrastructure will discuss government’s investment in growth post Covid-19 through infrastructure projects. De Lille will be in discussion with panellists Webster Mfebe (South African Forum of Civil Engineering Contractors), Vuyiswa Mutshekwane (South African Institute of Black Property Professionals) and Deon van Zyl (WCPDF), with the webinar facilitated by Bafikile Simelane (South African Council for the Project and Construction Management Professions).

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