South Africa : Workers Lose Out as Construction Sector Expands

Productivity in the construction industry has more than doubled in 20 years, but wages are not keeping pace. Picture: LRS.
The construction sector has grown enormously in the last 20 years, but the old system of cheap labour still prevails, writes Eddie Cottle.

South Africans in construction took their traditional annual leave last month, closing down another year for a sector that is steadily failing both its workers and its transformation agenda.

Over the past 20 years the construction sector in this country has undergone marked expansion. In the apartheid era it was constrained by sanctions and racial policies.

However, the post-apartheid state actively encouraged a series of policy measures to foster the economic growth of South African construction firms. Key to the policy process was the establishment of a Construction Industry Development Board and a Register of Contractors, the scheduling of public sector spending through the Medium Term Expenditure Framework process, and support programmes to develop the emerging black sector. The post-apartheid state also became the construction sector’s biggest single client in the delivery of social and economic infrastructure.

The gross operating profit for the construction sector in 1993 was R6.9 billion and R35.1 billion in 2012 which amounts to a 412% increase in real terms over a 19 year period. Over the 20 year period from 1994-2013, the total productivity of construction workers increased by 123% with an average productivity increase of 6.1% per annum. By 2005 the mean hours worked in the construction sector had increased to 49 hours per week or 16 hours overtime per month.

Why then, have real earnings for the average worker remained almost unchanged since 1995 if we use the Labour Market Survey data (2012)? Using Statistics South Africa data, our calculations show that in fact construction workers’ average wages fell in real terms by -2% annually over twenty years. This implies that the construction sector has maintained the cheap labour system entrenched during apartheid.

Why is it that in 2004 it took the lowest paid worker within the construction sector 167 years to earn the average annual income of a CEO, but this had increased to 287 years in 2013?

Why is it also that the permanent workforce has shrunk, with construction companies preferring to downsize their workforces to fewer core site employees? This leaves workers vulnerable to labour brokers and short-term contracts with little or no protection.

Why is it that over a period of 20 years of sustained government intervention to transform racial ownership patterns, the majority of South Africans remain excluded from ownership, control and management of the productive assets within the construction sector?

The lack of transformation in ownership patterns can be attributed in part to the centralisation tendencies of capital that increased as a result of the pro-market policies of the new government. But it is also the result of internationalisation of South Africa’s large construction companies.

Under apartheid about 5% of construction companies accounted for 63% of turnover in the industry. By 2011, about 1.2% of construction companies accounted for 64% of turnover in the industry. This increased power of construction cartels allowed for the massive corruption through the collusive practice of bid rigging and excessive overpricing, construction companies extract or attained huge financials gains for themselves at the expense of workers and taxpayers.

In 1994 there were 23 industrial building and construction companies listed on the JSE, and by 2013 there were only 12 “heavy construction” companies listed on the JSE as a result of bankruptcies or mergers. The trend therefore since apartheid can be viewed as increasing concentration and centralisation of capital among the established apartheid-era construction companies, and the continued marginalisation of black-owned construction companies.

The five large JSE-listed heavy construction companies, the “Big Five”, are Murray & Roberts, Aveng (owner of Grinaker-LTA), Wilson Bayly Holmes-Ovcon (WBHO), Group Five and Basil Read.

Attempts by the ANC government to transform the class and race composition of the large construction companies through black economic empowerment by setting a target of 25% black ownership by 2013 have dismally failed. The latest figures show that only around 10% of large construction companies are black owned. In addition, in 2013, approximately 80% of public sector tenders were awarded to large contractors in grades 7 to 9, which implies that white capital within the construction sector are still the main beneficiaries, including of the new government’s tender system.

Organising labour has also become more difficult as workforces are downsized.

Subcontracting arrangements have become increasingly prevalent with up to 70% of building and 30% of civil engineering projects subcontracted out. The norm of the three month Limited Duration Contract (LDC) employment contract and extensive use of sub-contractors and labour brokers in the sector is a clear indicator that most workers find themselves in “partial” employ.

There is, of course, a reserve army of labour, a disposable workforce that can be called upon when capital expands - and disposed of immediately afterward. By the time the 2010 FIFA World Cup kicked off in South Africa, 110 000 construction jobs had been lost after the building of stadia and other structures was over.

Signing up and retaining union members under these circumstances is challenging.

Also, somewhat ironically, the Framework Agreement on labour intensive construction agreed to by construction trade unions and COSATU has contributed to the marginalisation of the trade unions.

Furthermore, there is government’s Expanded Public Works Programme (EPWP) which pays less than half what the civil engineering sector pays workers doing similar work.

Other factors that have contributed to the weakening of trade unions are the exodus of experienced trade unionists into government and business; and the increasing bureaucratisation of the trade union movement.

The close alliance between labour, the ANC and SACP has also ensured a certain containment of workers’ discontent, and a decrease in strike activity since 1994. That is, until the 2008 financial crisis where a resurgence of unprotected strikes emerged, indicating a new trend in workers’ militancy.

South Africa’s construction trade unions will have to review their approach to worker militancy and the class struggle. A decisive shift and commitment to social movement unionism is necessary, as are changes to the organisational form of the unions to adequately represent a fragmented and localised construction workforce. Otherwise the growing redistribution of income in favour of construction capital will continue unabatedly until the reserve army of labour takes matters into its own hands in spontaneous revolts.

Overall, a new strategic path needs to be developed where the construction trade unions place public sector alternatives on the agenda – this is where the workforce is more stable, where workplace power can be built, and the gains used methodically to strengthen workers in the private sector.

As in the past, the strategic strength of the construction trade unions lies in linking up with the militancy and spontaneous struggle of workers and harnessing the discontent of working class communities. In so doing, new alliances will be formed and new forms of solidarity will become possible to struggle against rampant and growing inequality in South Africa.

Eddie Cottle is project leader of Collective Bargaining Support at the Labour Research Service (LRS). He was editor of the book, “South Africa’s World Cup: A Legacy for Whom?” published in 2011. This is the first of a series of articles based on the LRS “Bargaining Indicators” report. The complete article can be found in the report, at