By Jim Connolly, Head of Construction and Engineering at Infiniti Insurance
Innovative technologies and climate change will shape the future of infrastructure
Globally, there is an increase in the adoption of automation, modular construction techniques, as well as other innovative technologies that continue to shape the future of the construction industry. In South Africa, we have seen the demand for green building practices, being driven largely by environmentally conscious international investors.
Despite the current economic depression in the country, there is a high demand for more and upgraded roads, housing, energy, and water infrastructure. Construction companies that adopt sustainable practices may benefit from a competitive advantage in the industry when the government forges ahead with its commitment to a public sector infrastructure development plan.
The private construction projects funded by private and foreign investors will gain momentum this year as the world continues to recover from the impact of Covid-19 pandemic. However, global and national economic pressures will continue to affect the industry and the output is unlikely to return to pre-pandemic levels before 2025. The impact of the pandemic and the lockdown will linger for the next two years.
The economic risks in the construction sector
The construction industry in South Africa is facing substantial risks such as a shortage of equipment due to logistic restrictions caused by the pandemic. Contractors are now feeling the pressure as the cost of goods and services continues to rise due to the high inflation and interest rates globally. Shipment costs across the world have increased dramatically in the past two years, directly affecting the costs of imported goods, especially in the construction and engineering sector.
The construction industry’s top risks include scarcity of materials, liquidity risk and shortages of skills. Some of the contractors cannot necessarily afford to train or upskill their workers due to the depressed economic climate. But gradual national and global economic recovery from the aftermath of Covid-19 pandemic will bring new investment and this will boost the industry to create more jobs. However, procurement delays remain a major challenge. Construction companies should be cognisant of these supply chain risks and need to put measures in place to mitigate the risks.
Article first published in Cover Web Magazine