The liquidation of Sinbad Construction highlights new workforce woes hurting the industry – and Stats NZ says building labour costs are driving up inflation
Sinipata Kaufononga shared a love of big utes with his old schoolfriend, the late Jonah Lomu. The rugby hero liked to pimp his up with big sound systems and light displays; the soft-spoken Kaufononga used his for work.
Now, the labour firm owner is about to lose his big turbocharged LDV T60 to help pay nearly half a million dollars in debts. But first, it had a task: he drove it round five Auckland building sites to break the bad news to his 20 workers. He was putting Sinbad Construction into liquidation.
His workers had ranged in age from 21 to 55; some were young apprentices offered their first chance in the workforce; others had been given a second chance after jail terms or unemployment. Most had families to feed, the 47-year-old says.
Sinbad’s liquidation is just the latest in a flood that is expected to worsen in coming months. First the problem was the Gib and timber supply crisis; now it’s getting workers and paying for their wage rises.
CBS Co-op buys building supplies in bulk for its 1000 members, from Northland to the Bluff. Chair Carl Taylor talks worriedly of a looming Great Liquidation in the building industry.
This week, Statistics NZ published the latest consumers price index figures. The main driver for the 7.2 percent annual inflation was housing, because of rising prices for construction, rentals for housing, and local authority rates.
“The cost to construct a new house has continued to rise with supply-chain issues, labour costs, and higher demand, all of which combine to push up prices.”
– Nicola Growden, Statistics NZ
The cost of building a new house has risen 17 percent in the past year and that’s increasingly because of rising labour costs. The official statisticians know this, because their quarterly construction survey asks a range of questions including price changes, price of supplies, sub-contractor charges and labour costs. This includes staff recruitment and changes to existing salaries and wages.
“The cost to construct a new house has continued to rise with supply-chain issues, labour costs, and higher demand, all of which combine to push up prices,” prices senior manager Nicola Growden says.
Certainly, the impact of labour costs is reflected in the demise of Sinbad Construction. The first liquidator’s report cites five reasons for the company’s plunge into insolvency.
Some are familiar to those who have been following the building industry’s problems: low margins on jobs, Covid lockdowns affecting workflow and cash flow, and a month’s work contracting to another building company, Direct Project Ltd, that went bust owing $1.1 million to Sinbad and other creditors.
But workforce woes also now feature: Liquidator Grant Reynolds says the company lost employees to competitors poaching them.
It raised wages by about $3 an hour for those who remained, but to do so, Kaufononga admits it dipped into the money needed to pay its tax.
“The company was not able to increase rates with its main contractors to take into account cost of living increases and higher wages paid to employees,” Reynolds reports.
Cost of constructing a new house soars
Kaufononga has been a builder for 25 years. But nearly 10 years ago, he cut off three of his fingers with a power saw. It was after that accident that he began thinking about running a building labour firm that could help others who needed a chance.
“I noticed when I was off work that there were a lot of people around there were working. And so the idea came to mind to just start teaching people the trade, if I can’t do it with my own hands,” he says.
“So then I started taking a little jobs, home jobs, just fixing up little things. That was the beginning of what I believe is giving back to my trade.”
He took on a dad who’d been at home looking after his kids, “to pick up a little bit of machoness again”, he laughs, “and to provide for his family as well.”
“And I had a homeless guy who was staying with me, so I gave him a job and taught him the trade. We’ve even had guys who were incarcerated, who couldn’t find work when they got out, and I would give them a shot as well.
“There were kids coming out of school who didn’t know what they were doing, and what to do. And some of their parents would look me up and asked if I could teach them the trade. I started putting them through apprenticeships to get them something under their belt. And we’ve we’ve had some qualify already. Some of the guys are yet to qualify, and obviously not getting that instruction anymore.”
Lance Pirini was one of his supervisors; now he owns his own joinery company. He was friends with Kaufononga at their Seventh Day Adventist church, before going to work for him.
He says the liquidation is very bad news for the workers. “You know, he was really good guy, the best boss I’ve ever worked for, and I’ve been working in construction for 25 years. He always said, you’ve got to give these young fellas a chance.
“When you get a chance like that, you don’t want to ruin it. And a lot of them, when they eventually moved on, they got a good reference and found it easy to get work after that.”