South Africa’s demolition sector takes a pounding but shows cause for optimism

Published 22/11 at 10:42

Every five years PDi takes a look at the South African demolition industry, the leading sector in Africa. Our Africa editor, Kevin Mayhew, takes a look at recent developments.

The last five years has seen South Africa and indeed southern Africa as a whole, experience a period of economic and political turmoil. The country enjoyed positive growth from 1994 when its first free democratic elections took place, with a 14 year ‘golden summer’ of optimism ensuing. This however did not last, with the country experiencing economic and political disquiet which coinciding with the rule of the ousted former president, Jacob Zuma. This left the economy reeling and current president, Cyril Ramaphosa, is trying desperately to steady a ship which is still faced by a myriad of problems.

 

A diminished construction sector

In South Africa, political vagaries are essentially economic ones, as they have an impact on an economy that is driven by a few sectors, many of which impact heavily on the demolition industry. These include government departments, state owned enterprises and mining and construction with their attendant feeder industries. The government has a major impact and, in many cases, it is a key driver of all industry sectors, including infrastructure development in line with social programmes to meet the country’s burgeoning needs.

Systemic within the country was said to be a culture of ‘state capture’ which was unveiled primarily by the media and the ex-Public Protector of South Africa, Thuli Madonsela, who actually first coined the term. Now the subject of an investigation by a dedicated Commission of Inquiry, ‘state capture’ was allegedly perpetrated by a cabal of local politicians and businesses that are said to have enjoyed assistance from a variety of multinationals and service providers.  This and other factors saw a general drying up of investment in infrastructure, despite the government at national and provincial level making commitments to investment in capital projects for transport, housing, health and other primary social and economic necessities. The demolition sector suffered as, generally, few of these came to fruition.

To understand the full impact of how the country’s once powerful construction sector has diminished, and the corresponding effect on the demolition industry, the president of Consulting Engineers South Africa, Neresh Pather, says this is a clear indicator of the state of health of the country’s economy. “The government is spending R300B (€19B approx.) a year on infrastructure but it remains in a dire state. The survival of the construction sector is wholly dependent on this money being spent effectively, but this is not happening. Much of it is being wasted on bad planning and a flawed procurement system.”

Highlighting the above comments, in February this year one of the country’s major diversified construction groups, Group Five, filed for bankruptcy. Reuters attributed this to, “an industry squeezed by stagnant economic growth and a pullback in infrastructure spending by government and the private sector”. Only a year before the Group Five collapse another large construction group, Basil Read, went into business rescue, having failed to negotiate the economic headwinds. 

 

Strong state sector in decline

South Africa has over 30 State Owned Enterprises (SOEs), which are generally a carryover from the country’s colonial past and apartheid era government. They operated to facilitate key areas of the economy ranging from electricity, food supply, oil provision and transport to arms manufacture in order to sustain economic growth that boomed in the post war era. Many of these SOEs are now in varying states of financial woe. For instance electricity supplier, Eskom, has required financial bailouts from the government. Eskom and its construction of two new coal based power stations are at the heart of the ‘state capture’ inquiry along with the  logistics giant Transnet and its subsidiaries. The latter have been major influencers within the demolition sector but are now essentially inert.

The SOEs’ maintenance and expansion plans gave significant impetus to the demolition sector in the past. An analysis however of the latest results of SOEs by South Africa’s Moneyweb news service in May this year concluded that 13 of the SOEs performed so dismally that they dwarfed the positive results of the rest.

The mining industry, along with agriculture, has traditionally been one of the backbones of the country’s economy since the discovery of diamonds and gold in the mid-19th century. It has also suffered, and has not been able to fill the gap made by the declining state sector, despite being the beneficiary of increased global demand for commodities in the 1990s. However, this demand has reduced as the latter day development powerhouses, China and India, curtailed demand following the international financial meltdown of 2008, although this fortunately appears to be changing positively. 

A drift towards potential land expropriation without compensation has also had a negative effect on foreign investment in new or existing capital projects. This issue is a major factor in South Africa dropping off the radar for investors overseas. International surveys show that SA dropped from the 28th country in the World Economic Forum to 61st in 2017. The IMD Global Ranking saw the country go from 37th to 53rd out of 63 countries; all essentially during the tenure of ex-president Jacob Zuma. 

 

South African demolition sector looks north for pickings

Despite all these factors and events, the South African demolition industry is undoubtedly the continent’s dominant player, but is under enormous pressure. The sector’s main players are still able to compete with the best in the world and, indeed, do win tenders both on the continent and even further afield against foreign counterparts. In fact it is beyond South Africa’s borders that the sector has been forced to look, particularly in other parts of the continent where its expertise and low cost of operations have made it a real competitor in difficult conditions. The managing director of Jet Demolition, Joe Brinkmann, stated: “Africa is a growth area and we will undertake the bigger jobs, whether it be mechanical or by explosives. Our focus is not on the developed countries, but African and other less developed nations which do not have a local industry that can support the challenges posed by large, complicated projects.” 

Concurring with this is explosives specialist for Olifantsfontein based Wreckers Dismantling, Kyle Perkin.  “We are well geared to operate in Africa as a whole, as it is essentially our back yard.  We understand its dynamics and difficulties and South Africa’s skills base and capacity put us at an advantage.  It is not an easy environment, but demolition by its nature, presents unique challenges in every project you undertake, so we merely adjust to the local environment and do the job.”

 

‘Heritage creep’ 

Well intentioned South African architectural and historical heritage preservation legislation is impacting on property development and thus on the demolition sector, with its impact set to become more intense each year. The National Heritage Resources Act 25 of 1999 requires the approval of heritage authorities before properties 60 years or older may be destroyed, damaged, defaced, excavated, altered, removed from their original position, subdivided or their planning status changed. 

Two examples of the legislation’s impact have been highlighted by PDi in the past five years. Late last year a South African sporting body decided to remove four concrete towers for the floodlights at a cricket stadium. The towers were of no practical use having been replaced with steel alternatives some time before, but posed a danger of collapse due to structural decay in a mining intense area with attendant potential earth tremors. The five second demolition was undertaken on the towers only once a clearance had been given for their removal by relevant heritage authorities, in keeping with the law regarding structures older than 60 years.

Two years earlier, the sport of rugby presented a different challenge at the famous Loftus Versfeld Stadium in the country’s capital Pretoria (also known as Tshwane). Change to the area surrounding the stadium was approved but one building, which served as a restaurant and bar on match days, had to be preserved. It was dismantled tile by tile, brick by brick, truss by truss and stored in a safe place to be reassembled for the rugby faithful and future users of the newly developed stadium surroundings called Loftus Park. 

An unintended consequence of the legislation is that each year more and more properties that have no real architectural significance, must be cleared for demolition by local, provincial or national heritage overseers. This presents the real possibility of authorities finding themselves overwhelmed by the sheer volume and forced to put a brake on much needed housing or commercial property development.

 

Healthier inner city opportunities 

Urban areas are faced by the problem of decaying, abandoned buildings, generally occupied by people seeking work. Each city initiates efforts to make them fit for habitation, which in most cases requires demolition. Privately, demolition industry players claim that some of the buildings are almost too dangerous to venture into and are in imminent danger of collapse. A shortage of finance has made it impossible for the city authorities to employ the services of companies with the skills and experience to effect necessary demolition.

However, the mayor of the country’s principal financial city, Herman Mashaba, talked recently of seeing cranes across inner Johannesburg within six to eight months when construction worth about €1.2B is set to begin. Initially 24 developments consisting of 81 properties will be undertaken in joint private and public sector partnerships. “This is indeed the biggest number of properties awarded simultaneously in the city’s history. This is also the largest number of mixed use private sector developments focusing on residential and student accommodation being facilitated by the city at once,” Mashaba said.

In the principal port city of Durban there are similar projects planned, with two major private sector property regeneration players, Propertuity and Urban Lime, at the forefront. Urban Lime’s Nadeem Shahid, explains: “Our role is regeneration. We take existing buildings and restore them to make them fit for occupation, either residential or as commercial space. There is a demolition element in making them fit for purpose, but we are not in the space to tear down buildings that might appear derelict or to make way for new construction.”

 

‘Green demolition’ takes root 

Another development affecting South Africa’s demolition industry is the increasing need for ‘green demolition’. The chief executive officer of local consultants and service providers, Eco Match, Craig Allen, explains some of the challenges and opportunities being faced. “We’ve (South Africa) been very fortunate as we haven’t had to re-use, recycle or reduce demolition waste as we’ve always had the luxury of space in the half century or so since demolition became an established industry. It was demolish, make a big stockpile, salvage a bit of steel, load the rest onto trucks, dump it at the landfill and forget about it.

“In the past five years or so cost, and the reduction of disposal space as landfills close, are starting to force people to adopt alternative methods. The green industry as a whole is very much an emerging industry in South Africa. Contractors, consulting engineers, consultants and the like are all becoming aware of it, but there remains a big gap between awareness and implementation on the ground.”

Craig also explains the present options on offer for those involved in demolition. “We (Eco Match) offer a two pronged approach.  The first is to come onto your site where we process the entire stockpile from the demolition activity. The client will take out the rebar and anything else that’s of value.  We crush and screen the balance of the concrete waste which is then used as product in the new green building. Whether it’s for roads, or fill material, they get green credits for scoring a rating for using this method.

“The other approach is to operate a landfill site. In the past, landfills would accept all waste which went to the face of the landfill, got turned, capped and forgotten about. For the past two years, any construction and demolition waste that has come into that landfill has been diverted to a laydown area.  We crush and screen it to produce a level G5 or G6 aggregate material which we supply back into the construction sector as a recycled product. There is an appetite to buy recycled product because one can claim points as well for using recycled material, instead of natural aggregate that’s been mined from a quarry.  That two pronged approach is what we have offered in the past couple of years.  The challenge is to figure out how to get the industry to adopt these approaches.

“The South African (points) system is based on the Australian one of credit rating which is administered by the Green Building Council of South Africa (GBCSA), the body which facilitates and develops policy.  It applies point allocations and is essentially the authority on any green building. It works on a points system, where you get a hundred points per build.  For example, ten of the hundred points would be dedicated to building materials.  So if you use 100% recycled material to develop your concrete, in your structural pillars, on your floors, on your walls etc. you get ten points. Do nothing and you get naught points. Consultants help them to maximise points, in many cases working with international associates.”

A problem with the system is that there is little imperative for any developer to use it. “Unfortunately it is not legislated. You will find that it’s really only flagship projects where developers adopt a totally green building, recycled approach to waste because they want the kudos, the marketing and all of that. There are a handful, probably about 50 or so fully concentrated large scale developments that focus entirely on that approach in South Africa.”

Another difficulty Craig has experienced is that contractors and developers who lack the experience and know how to implement ‘green demolition’ have proved averse to seeking advice and assistance. “You are not paying to be compliant; you are paying for your consultants to assess you.  Their time costs as they charge by the hour. However, you are paying more for alternatives in terms of sourcing material, buying bulbs, or sourcing different contractors to handle your waste with recycling in mind. It can actually be cheaper because you can reuse material. You are saving on disposal costs, on transport, but you are also saving on having to source, new natural aggregate into your development. If we get our price right, we can save you money.

“The big players understand the root cause of the problem that we are dealing with and are listening and learning. There is also a lot of resistance from the old, established (cement) engineers. They query the quality of recycled product because for decades they have been ordering concrete klip from the quarry down the road, so why change now? Slowly there is a shift in the industry.” Finally Craig explains, and shares his optimistic view of the future for the demolition industry in South Africa. “An ambitious goal is zero demolition waste to landfill; not only concrete, but everything.  It is achievable, initially at a premium cost. As the industry becomes more competitive, pricing will adjust. I believe that the goal is certainly achievable. It’s the responsible way to do things.”

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