Annual Forum Papers

Understanding the South African Construction Services Industry: Towards a GATS Negotiating Strategy

  • Year: 2002
  • Author(s): Ethel Teljeur; Matthew Stern
  • Countries and Regions: South Africa

The South African architectural, construction and engineering services industries have notable competitive advantages, particularly in providing basic infrastructure and particularly on the African continent. However, the sector has been in decline for over two decades, threatening the survival of those advantages. Exporters face many hurdles, ranging from corruption in Africa and the Middle East to protracted licensing and visa procedures in the industrialized nations. Based on interviews with industry associations and South African companies in this sector, specific export hurdles are highlighted. Not all export hurdles are relevant to the GATS negotiations, or even the WTO, as some export barriers are linked to domestic policy issues or regulation, demonstrating the extent to which the trade strategy of a sector and its domestic policy are inextricably linked.

South Africa's trade liberalization of the architectural, construction and engineering service industries is highly advanced and therefore only modest scope exists for further offers of market access. Despite this openness, there has been little foreign entry into the domestic market, mainly due to the weakness of the Rand and the lack of familiarity of foreign competitors with local conditions and labour practices. This situation is likely to change when the imminent revival of demand in these industries is confronted with the contraction of local capacity that has resulted from two decades of falling output.

To assist the South African policy makers and GATS negotiators, the GATS commitments made by actual and potential target markets for South African construction and engineering exports are scrutinized, leading to suggestions for requests for further market access. Obstacles to the presence of natural persons prove to be most commonly employed limitation on market access. The lack of international standards for accreditation of academic achievements and professional qualifications appears to be the greatest formal stumbling block in the export of engineering services. Construction services also suffer from a lack of transparency in building regulations in target markets and the proliferation of country-specific standards. As it is unclear to what extent the current obstacles are dampening or even preventing exports, it is not possible to quantify the impact that lifting formal barriers will have on South Africa's exports. Lastly, some areas for further research are highlighted.