save costs

There’s no denying that the South African construction industry is facing tough times. In this context, it’s more important than ever to save costs in the construction business.

2019 woes for the industry

In March 2019, the construction industry was rocked by news of Group Five’s bankruptcy, after 45 years of trading on the JSE.

This event drew attention to serious decline in the industry, which is at a 22-year low.

The Daily Maverick noted that, “The big five construction companies were worth about R60-billion in total; they are now worth about R15-billion.”

Construction giant, Murray & Roberts, sold its local infrastructure units back in 2016.

High costs and heavy competition have seen other local construction companies filing for bankruptcy protection in the last year.

Tips for cutting costs in construction

Plans by government to create a multi-billion rand infrastructure fund may help boost the South African construction industry in future.

Until then, construction companies may need to consider how they can cut costs to ride out the storm.

Lease equipment instead of buying

Consider leasing the equipment you need for a job, especially if you’re not sure you’ll use it frequently afterwards.

This can also be a good way to test the waters with new machinery to see if it’s worth the investment. Even heavy machinery can be leased.

Negotiate with suppliers

Suppliers depend on the survival of the companies they supply, so they have an interest in giving struggling businesses a reasonable deal. Even suppliers you’ve used for many years may be open to offering discounts, or longer payment periods, if you ask.

Mitigate risks

Financial pressures leave businesses with less “wiggle room”. This makes it doubly important to manage risks well.

For example, mitigate the risk of a project taking longer than expected (and so adding to expenses). This might involve taking steps to reduce the risks of:

  • ordered materials arriving late or failing to meet needs and standards
  • being short-handed, with crew absent or sick
  • old or untrustworthy equipment failing.

Also mitigate the risk of significant clients failing to make payment. For instance, secure deposits and payments for materials, stagger invoicing and so on.

Investigate new technology options and practices

It may seem counter-intuitive to spend more money, but newer technologies sometimes save on energy and labour costs.

Don’t give in to “industry 4.0” hype, however. Do your own research on new equipment and systems. Then make conservative, informed decisions on the basis of legitimate business needs.

Incentivise money saving

Implementing money saving practices only works if your entire team is on board.

Offer incentives for employees to adhere consistently to money-saving measures. You could also reward employees who come up with practical ideas for cutting costs.

Hire versatile employees

Try to find staff that could potentially fill more than one role.

Specialists may seem like the best way to get quality workmanship. However, employees who can handle multiple different tasks while still maintaining high standards will save on staff costs.

Minimise heavy machinery and vehicle fleet costs

Weigh up the cost of using heavy machinery and trucks with the time saved by using them. There may be instances when you’re using equipment or your fleet unnecessarily.

Buy reconditioned equipment

Reconditioned equipment is cheaper than new machinery. At the same time, it typically offers much better reliability, performance and durability than used machines straight from the second-hand market.

Reconditioned machines are usually refurbished to OEM standards and come with warranties.

At KH Plant, we specialise in restoring Caterpillar motor graders and components to as-new condition. This means you can enjoy the benefits of a new motor grader at a fraction of the cost of a new machine. If you’re looking for ways to save costs in the construction business and need a high-quality but affordable motor grader, contact us for more information.

Contact us for more information