MAVERICK BUSINESS: Group Five: Another SA construction giant buckles under the pressure

The decision by Group Five to file for bankruptcy protection puts about 8,000 jobs at risk and the broadest reason for its implosion is a stagnant economy and lower government infrastructure spending. But the proximate cause is, in fact, nothing to do with SA; it was a Ghanaian power project, Cenpower Generation, which became a disaster for the group.

The decline of Group Five has been just gobsmacking. Its share was suspended on the JSE at 89c, which gives it a market value of about R100-million. A decade ago it was worth R5-billion. The second obvious problem is that the companies which have focused most on civil engineering, which requires government expenditure, have suffered most. Successive presidents have talked a big game about infrastructure development, but the numbers have only partially supported their enthusiasm, and more recently government expenditure on infrastructure has just plummeted. In 2018 there was a 15% decline in the estimated value of construction tenders awarded compared with 2017.

It was exactly this problem that tripped up Group Five, because the company had to take the fall for all the problems whether they arose from sub-contractors, or project creep, or changes in government policy which might affect excise duties which might affect the importation of construction material.

Money that is in the budget, but not spent, has increased to about 24% of the total allocation, way above the 10% average.

It is tough out there.

When companies like group 5 are crumbling, what chance do we have as smaller construction companies? It's tough

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