McKinsey urges construction industry in South Africa to strengthen

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Construction industry in South Africa should strengthen and emerge as a major player in Sub-Saharan Africa, an expert from research firm McKinsey Global Institute has said.

Christine Wu a partner in McKinsey’s Johannesburg office observes that construction industry in South Africa only accounts for 7% of market share in Sub Saharan Africa.

Speaking to the media in South Africa, Wu said that  unless South Africa boosts its construction industry, stiff competition from Brazil and China will take over. She said that Brazil and China have established local construction industry and with global slow down in construction activities, they will eye the African market.

Wu urged the construction industry in South Africa to improve its value proposition and strengthen the local industry to cushion it from impending cutthroat competition. She noted that, with ambitious infrastructure plans in South Africa, local construction firms can only compete with foreign companies if they have a well established industry locally.

Sources say that South Africa has 50% of the market share and with a sheer improvement in its value proposition; it will be possible to hit a double of its market share by 2030.

According to Christine Wu the growth of South Africa is linked to the growth of the rest of the continent with a growth estimate of 6.6% per annum when it comes to construction exports and construction related services to the rest of Africa.

Financial experts therefore advise on the need for South Africa to strengthen its local domestic industry by improving competitiveness and maintaining a robust local industry through partnerships with banks in key priority markets to aid in project financing.

With its key bulk markets across the continent being Mozambique ,Ghana ,Angola and Nigeria, It should also invest in proper public and private sector partnerships so they can deliver on a sound and robust domestic program and use it as a ladder to steer growth in the country.

The construction firms in South Africa have reported declining profits in recent years, mainly as a result of the global financial crisis. The firms such as  Murray & Roberts and WHBO announced that they were diversifying in a bid to cushion themselves from the harsh economic times.

During a Macquarie Group CEO construction conference in the capital Johannesburg, the firms singled out poor market in global mining commodities rout and worrying fall in demand for steel products as a major setback to the industry in South Africa.