HVAC+R sector under COVID-19
There has been a general confusion on what part of the construction industry falls under essential services. Under the current regulations, the HVAC+R sector, although under the construction industry, in essence, is deemed an essential service. It is important to note that each level of lockdown requires adherence to specific operational criteria outlined by the Department of Labour.
“HVAC+R companies registered as SARACCA members can contact the association virtually for further information on criteria and compliance guidelines.” – Barney Richardson, Director of SARACCA.
As we come down in levels and the country reopens it is important to note that the construction industry will remain under pressure for time to come. According to Industry Insight, the industry is set to shed 120 000 to 140 000 formal jobs. This, of course, will include the HVAC+R sector. So how do our member prepare? Up and above the support offered to members directly, here are 2 potential scenarios predicted by industry specialists.
Return to growth in 2021
It will take two to three years for the industry to return to positive growth. This is attributed to the lockdown and the subsequent downgrades by the rating agencies. Government is the leader in infrastructure development, but as finance comes under pressure, infrastructure projects will be put on hold or iced altogether.
Quoted from MoneyWeb these are 3 growth outlooks for the construction industry:
- The construction sector activity levels are forecast to decline by 22.5% in 2020, with a recovery to 4.8% growth in 2021.
- In the more optimistic scenario, there is a 30% probability construction activity levels will decline by 14.5% in 2020 but grow by 3.4% in 2021.
- The more pessimistic scenario, there is a 55% probability construction activity levels declining by 27.7% in 2020 then growing by 5% in 2021.
Slower demand in new developments
Maintenance and repairs will be the name of the game in the short-term, with new developments postponed until healthy consumer demand returns. Under level 4 road construction and maintenance returned to work, but the balance of the construction industry only returns between level 3 and 2. This still Leaves the HVAC+R industry as one of the hardest hit.
Aside from the impact of COVID-19, over the past 3 years, the HVAC+R sector has evolved from a base of predominately larger companies to a scattering of smaller entities. COVID-19 could see the scales tipping in the favour of smaller entities with lower overheads and agile finances. But on the other hand the small contractors may not have the reserves to weather the turmoil past the pandemic. All this is speculation at best, as market conditions change daily. The unpredictability of the virus, in all senses, is the true killer.
In summary, HVAC+R companies operating during lockdown face the frustrations experienced with heavy administration regulations and uncertainty on industry growth. SARACCA offers continuous support and updates on the guidelines published by relevant buildings associations and the government. To contact SARACCA virtually for clarity and support, visit www.saracca.co.za