2019 in the facilities management sector - a difficult year for most

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“We were looking at 1% economic growth, instead the economy only grew by 0.5%. This impacted a number of areas - unemployment figures increased in the wrong direction, and the relationship between government, business and unions did not improve – it worsened, with each stakeholder seeking to satisfy their perspectives,” says Nkomo.

The facilities management (FM) sector was no exception.

“As the FM sector is strongly linked to economic growth, changes in the economy heavily impacted the sector’s performance. While South Africa’s economy grew at 0.5%, this equally affected growth in the FM sector,” says Francois Oosthuizen, chief operating officer at Servest.

According to Oosthuizen, the FM sector experienced tougher pricing negotiations with clients and even tougher negotiations with procurement departments handling tender submissions, where greater emphasis than ever before was placed on costs - a clear indication of a strained economy.

Oosthuizen says, “In instances where contracts were obtained, they were obtained at very low margins as clients looked to reduce costs. In many instances, clients pushed to pay lower than inflation in annual increases with negotiations ranging from 0% to 4%, and in some instances, clients were pushing for decreases.

"In turn, we experienced higher than inflation-linked wage increases across all the soft and hard services sectors, putting a strain on cost effectiveness.”

He continues, “Of interest to note, we saw an increase in the number of SMMEs entering the market, which is a good indication from an employment creation perspective; however, a number of challenges remain around pricing, compliance, service delivery and undercutting costs to get the client.”

The biggest discussion in the year was around ways of bringing fully integrated FM solutions to clients. The days of clients contracting from multiple suppliers are fast approaching an end, as there is a demand for the provision of fully integrated facilities management solutions.

“Interestingly, 2019 saw most companies working on energy management, environmental issues and consolidations. Also, FM resources such as equipment, labour and consumables were optimally improved.

Recognising labour

"The introduction of the national minimum wage was a welcome change to help eliminate non-compliant entrants in the sector as they are forced to pay employees in line with the regulatory requirements. We are of the view that fly-by-night companies will eventually fall off the grid.

“The introduction of the Employment Tax Incentive (ETI) a few years ago has changed the industry as most of the employees in the FM sector fall into the ETI salary bracket. There has been a huge drive to recruit and train employees who are aged between 18 and 29 years to reap the significant benefits from doing so. These benefits have also been passed on to clients in some instances.”

Nkomo concurs that additional tax incentives will attract investors, who in turn will create much needed jobs.

According to Nkomo, it’s difficult to say at this point what needs to be done to weather the storm in 2020.

“Perhaps a starting point would be to look at improving locally generated drivers to low economic growth and once those have been resolved, the externally generated drivers can follow. We must deal decisively with corruption and create an environment that can attract investors, we need to show that we can provide an enabling environment for businesses to grow in South Africa,” says Nkomo.

Looking ahead into 2020

“Looking ahead, many processes across industries will be automated; from improved accuracy to speed of output. There is definitely going to be a lot of innovation in artificial intelligence (AI) and machine learning, and an increase in the use of smart surveillance systems, especially in the security space.

“We must minimise the number of people who lose jobs resulting from 4IR innovations,” cautions Oosthuizen.

“The challenge to business remains to ensure that we don’t lose a lot of people in the process but rather identify areas where people can be absorbed, retrained and upskilled to ensure that they keep up and remain relevant in other roles,” he says.