13 March 2019

South Africa: Group Five - Another SA Construction Giant Buckles Under the Pressure

Photo: Masixole Feni/GroundUp
(file photo)

Group Five, one of SA's biggest names in construction and the company that built the Moses Mabhida stadium and King Shaka airport in Durban, filed for business rescue on Tuesday 12 March, becoming the latest in a long line of construction companies that have gone under in the past few years. The question now is not so much whether the company sector can be saved, but whether the sector can ever be revived, and if so, how.

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.

After the project collapsed, the company claimed on a $62.7-million guarantee for the failure to complete the project which decimated Group Five's cash flow, always a tricky problem for construction companies to manage.

But it's not as though Group Five would definitely have survived were it not for this one disastrous project; the whole listed construction sector has been under huge pressure for the...

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