8 September 2010 – The emergence of an independent power producing industry would fuel significant construction growth in the local economy, Alexander Forbes Risk Services said on Wednesday.

It pointed out that such an industry would have to be large enough to supply power to a resurgent mining and growing mineral beneficiation sector, thereby creating jobs and building a globally competitive industrial economy.

Alexander Forbes argued that government’s current and approved power generation projects were inadequate to meet future demand.

Mike Lamb, business unit manager of construction projects, at Alexander Forbes Risk Services said that removing the legislative and bureaucratic constraints currently limiting the participation of independent power producers in the national energy mix would "provide the kind of large scale construction projects able to counter global recession, increase national power output, absorb significant amounts of labour – and ultimately lay the infrastructural base for the broadening and deepening of a globally competitive industrial economy."

The South African Federation of Civil Engineering Contractors, however, indicated that the civil construction industry could shrink by almost 40 percent following the World Cup – making the 64 000 construction jobs lost in the first quarter of this year merely the tip of the iceberg, Alexander Forbes Risk Services said.

"The single biggest factor driving the construction slowdown is South Africa’s current lack of power and insecurity and uncertainty about future power supply," said Lamb.

The group argued that the World Cup infrastructure development programme protected South Africa from the initial impact of the global economic financial crisis.

So, while the construction industry in South Africa was aware that it would face difficult times following the 2010 bonanza, there is no doubt that the extent of the slowdown is exacerbated by the country’s current power shortage – along with insecurities surrounding the future of power supply in South Africa, said Lamb.

He said that despite a general consensus that power supply is critical to reviving the construction sector and driving employment, government’s current and approved power generation projects are inadequate given projected demand.

At the same time "government seems to be dragging its feet on finalising the uptake agreements that will allow private power producers to supply the grid," Lamb added.

He said that public-private partnerships for construction projects have generally taken too long to negotiate let alone close.

Since tender processes and the selection of providers are either fraught with irregularity or driven by political imperatives "projects either fail to get off the ground or are mothballed for years while political rather than practical solutions are sought," Lamb said.

Alexander Forbes said that while South African construction majors were looking beyond local borders to the largely Chinese-driven construction boom on the continent, competition is tough.