MDA Law
South Africa’s ability to compete effectively in cross border public sector jobs.
There has been a major change in the past twenty or so years in the attitude of South African construction workers to working across border and up into Africa. Where previously workers were reluctant to venture more than a days’ drive away from their home base there is now willingness to work on an ex pat basis through out Africa and the Middle East.
The decline in work availability commencing in the mid 1980’s necessitated that work should be found elsewhere. There was obviously a perception that South Africans would be in a good position and be competitive in environments that were perceived as being very similar to those found in South Africa, The major obstacle at this time to winning work in many African Countries was obviously the pariah status of South Africa during the last decade of the Apartheid government.
This all changed after 1994 and there was a major move to acquire work, particularly road work and mining related projects throughout Africa. The major lure being that many of the contracts were funded by international aid agencies and these were therefore “hard currency” contracts.
Prior to the strengthening of the Rand approximately ten years ago, super profits were available on contracts where the revenue was in Dollars or Euros and the costs were incurred in Rand’s or whatever was the local currency at the job site and both these currencies were gradually losing value relative to the currency of payment.
When the Rand strengthened this situation reversed and many of the South African construction companies (particularly those working on road contracts) lost some significant amounts of money. Just after this there was an upswing in work availability (mainly to do with the 2010 world cup) and many companies took policy decisions NOT to take on cross border work.
Notwithstanding recent statements concerning major infra structure improvement and development projects mooted by the South African government this has yet to translate into tenders and an improvement in contractors (and for that matter consultants) order books. The major players on the construction scene are therefore venturing back into Africa in order to keep resources busy and keep their order books ticking over.
The environment is a very different one to that experienced in the late 1990’s and early 200’s. Competition in the form of Chinese, Arab and European and in some instances American companies are now competing with South African contractors. Very often they are able to offer finance (and in some instances they are subsidized by their governments) for these projects and that puts South African at a disadvantage.
Notwithstanding this, our local contractors are making major commitments and efforts to secure this work, which in some instances represents the majority of the work load being undertaken by these contractors.
Given the benefits of relevant experience both with working conditions and cultures, the cost benefit of a weak Rand and logistic advantages South African contractors are well positioned to secure and carry out these cross border projects.
Author: Ian Massey – Director
