The evaluation of selected risks and opportunities associated with globalisation of South African construction companies into Southern Africa

Abstract

Globalisation is an inescapable fact. National economies are no longer immune to external influences and cannot be insulated from global effects. South African construction companies globalise as a result of expansion, diversification, deepening of trade and to eliminate the cyclical nature of the construction market within South Africa. A literature review revealed the following risks for South African construction companies when globalising into Southern Africa: competition from other international construction companies, the lack of political stability in the region, fraud and corruption, conflicting cultures of varying regions, the impact of foreign exchange, under-researched and documented industries and lack of quality assurance and the impact of HIV/AIDS amongst other risks. In contrast, funding and foreign aid, the superior management capability and information technology that South African construction companies possess, the opportunities to form associations and joint ventures with other construction companies to access markets and the possibility of advance payments are amongst the opportunities that can be exploited in the Southern African region. Sub-Saharan Africa is viewed as one of the world's poorest and under-developed regions. The region has alarming HIV/AIDS infection rates prevalent. However, it is a region rich in natural resources and tourism potential. The countries analysed in this treatise for the risks and potential opportunities for South African construction companies are: Angola, Botswana, Lesotho, Malawi, Mozambique, Namibia, Swaziland, Zambia and Zimbabwe. A common trend, such as, political instability, under-developed infrastructure, massive housing, educational and health facility needs, ample supply of unskilled and semi-skilled labour and a high dependency on foreign aid is dominant in most Southern African countries. Conversely, opportunities exist to upgrade infrastructure, address the massive housing, schools and hospitals need, exploitation of tourism potential and the ability to form joint ventures with local construction companies in an attempt to transfer skills, share risks and overcome cultural barriers. Interviews with representatives of leading construction companies emphasised risks such as late and non-payment, logistics, foreign exchange fluctuations, culture differences (including language disparity), bureaucracy, health of workforce and labour productivity. With very few exceptions, most respondents had similar views on risks perceived in particular countries. Interviewees highlighted opportunities such as higher returns, access to larger markets, earning foreign exchange, the region's need for housing, schools and hospitals, availability of donor and foreign aid, superior management capabilities of South African contractors, reconstruction and rehabilitation of dilapidated buildings and tourism demand. With very few exceptions, most respondents had similar views on opportunities perceived in particular countries. In terms of risks, opportunities and statistical data, the countries were ranked as follows, with first being most favourable and the last mentioned as least favourable: Botswana, Namibia, Mozambique, Swaziland, Angola, Lesotho, Zambia, Zimbabwe, Malawi. A way forward is presented by means of "words of advice" and rules of thumb from the representatives of the leading construction companies in South Africa who have already tested the waters.