“Bringing in Turks and Chinese” for construction is the “worst way” to solve problems in the sector

The construction sector has suffered from a “stigma” over the last 15 years that has led to disinvestment in the sector, which is contributing to the crisis currently being experienced in Portugal, argues António Carlos Rodrigues. For the CEO of Casais, who is also chairman of the board of founders of the Construction Foundation, the situation in the sector has been further aggravated by a lack of labour, a problem that he rejects can be solved by resorting to Chinese and Turkish companies. “Instead of giving [Portuguese] companies the opportunity to grow, we are going to pass this wealth on to other countries. It’s the worst way to manage this need and this process”, he says.

António Carlos Rodrigues admits that Portuguese construction companies need to resort to foreign workers, but warns that the need will not always be the same, pointing to industrial construction as a solution both to reduce the need for labour and to respond to the housing crisis, comparing this construction — mostly done in factories — to a smartphone. “The construction we do today will be of lower quality”, he says, pointing out that in industrialised construction “there is greater rigour”.

With nearly 20% of building construction industrialised, the entrepreneur admits that industrial construction could reach 35%/40% next year. Even so, he guarantees that he will “never” abandon traditional construction.

Portugal is facing a housing crisis. Do you see industrial construction as a solution to this problem?

Over the last 15 years, since 2008, we have ended up taking a big step backwards in what the sector was doing, with the crisis that began at that time. There was some stigma against construction companies and there was disinvestment in the industry. We are also experiencing the results of this disinvestment.

On the other hand, a number of other roles and other types of jobs have emerged, more in the service sector. Tourism has been growing, not only in Portugal. The service sector, particularly digital technologies, has also been growing, which creates an alternative for those in construction, who have to work in the cold, in the rain and are constantly on the move.

Over the last 15 years, there has been an exodus to other sectors, which means that the [construction] sector has increasingly less access to skilled labour. If we don’t have labour, it’s because people have alternatives — not in terms of salary, because construction pays better on average than a supermarket checkout or a hotel receptionist, but in terms of workplace stability, there is no unpredictability of having to change location every day or almost every month.

Even though they earn more, are people no longer willing to accept this instability?

There are a number of factors that have made it more difficult to attract and retain workers in the construction industry. I would make a comparison with agriculture. If you look at the amount of food produced per unit of time by one person, in the case of agriculture, if it is not mechanised or industrialised, the amount of product per hour is very low. It would not be enough to feed the world. If this process of industrialisation of agriculture had not taken place, the world would have run out of food a long time ago. Construction is the same. Industrialisation and mechanisation mean that an hour of a worker’s time is transformed, not into laying a tile, but eventually into putting up an entire wall, because they are operating a machine that is doing the hard work and doing it repeatedly and more quickly.

Is industrialisation enough to solve this labour problem?

The solution to the reduced need for labour is achieved through industrialisation and, in addition, we are able to increase the value of a person. I can pay a better salary to someone who produces 100 walls than to someone who only produces one because they are doing it manually. The other positive effect is to reduce the need to bring in so much labour. We will still need them, but we will reduce the quantity.

If I draw a parallel between what our workforce needed for the Beja residence, instead of 300 people, we only needed 90. We reduced it to a third. If we apply this to all the work that will be necessary in the coming years, we reduce the tension and the need to bring in labour.

Is the expectation to reduce the need for workers by a third with industrial construction?

Yes, I think that’s reasonable. We’re talking about construction work, it’s a third, but there was labour in the factory. But it’s labour that’s also in a controlled, air-conditioned, more stable environment. It’s not exposed to those factors of instability [in construction]. It produces more, it is easier to train, it is easier to educate. In addition, we are investing in fixed, tangible assets, which are factories. Instead of turning money into construction, more wealth is created because we are also building factories, which can export and capture value in the construction sector in other markets if they are exporting.

Regarding labour, there is a misconception that we need to bring in Turks and Chinese. I have seen this in a clear way. A delegation of Turkish companies has now come to Portugal at the invitation of the Government, and the same has been done with Chinese companies. This is the worst way to manage this need and this process, because in the countries where these companies set up, they literally bring everything from their own country.

Isn’t it just the workers?

It’s not just the workers. They’re going to bring everything from there. It’s our government’s money, that is, our taxpayers’ money, which instead of leaving the wealth here, will be transferring the wealth abroad. Instead of giving companies the opportunity to grow, we are going to pass that wealth on to others. The Chinese or Turks will be the ones receiving the wages, because they are literally bringing in labour from there. The only thing that stays here is Social Security, which will charge the workers who are here working, but as many of them are workers from China or Turkey, they will be declared on the minimum wage. They won’t even pay income tax because they are in the minimum bracket. There is some Social Security and little else. Everything else goes to these other countries.

But we still need foreign labour, don’t we?

We are continuing, but the path that should be followed is to take advantage of all the capacity that Portuguese companies have, many of which operate in Brazil, Angola, Mozambique and so many other countries. A few days ago, I was talking to a company that has 200 electricians in Mozambique. It has much more capacity to bring 50 of them here to respond to a peak demand, or to hire and train them there and bring them here. Then, when the peak workload here is over, they return to their country of origin, better trained, and become a great help to a Portuguese company in the workers’ own country of origin.

The channel for bringing people [to meet this additional demand] should be [through] our companies, point number one. Point number two, through binational vocational training schools, that is, schools owned by Portugal and Angola, Portugal and Cape Verde, Portugal and Mozambique. They need these schools and we need them too. We can respond to these peaks in demand in this way, and I think it would be a much more sustainable approach.

People would come here through companies, with qualifications, and provide the peak response, which now lasts five, six, seven years. When [that peak] recedes, these people continue to be part of a business group.

How many employees does Casais have today?

About seven thousand.

In ten years’ time, do you see Casais with seven thousand or a third of those workers?

The way to grow is by gaining competence and capacity to do more and elevate these people to do more skilled work. When a person starts as an apprentice, the expectation is not to remain an apprentice for life. They want to move from apprentice to team manager, to foreman, to site manager, whatever. There is a whole ladder you can climb. Anyone working in our group, in the following year, two years later, will want to be in a higher position.

That’s why we also need to grow. For us, growth is a way of giving people the opportunity to do more skilled work. What I imagine is that these 7,000 people, in a more industrialised environment, will enable the company to earn three times as much.

Does industrialisation serve to respond to the lack of labour, the lack of new homes and the urgent need for new housing?

There is another factor. In a world where sustainability is a hot topic, it is irrational to think that something as important as a house, a school, a court, a building, which is constructed and requires capital investment — it is not that traditional construction is better or worse than industrialised construction, although I believe that industrialised construction is of higher quality because it is more precise, more rigorous and less prone to surprises — what we end up with when we build a building in this classic way is a black box. If I need to change something tomorrow, I have to rely on the memory of the person who was in charge of the work, the foreman, who supervised and knows exactly where he put the pipes, how he did it, and in the meantime, he may have done 20 others and doesn’t remember how the work was done.

We are building assets that are black boxes and are the opposite of what we say we need: circular economy buildings, where I can reuse materials, I can modify without waste, without generating rubble. Construction is very much associated with rubble, because we build in a way that is not reversible. I can’t dismantle it, I don’t know what’s assembled, or how it was assembled.

Does industrialisation solve this problem?

Industrialisation brings another component because it is impossible to industrialise without studying how to execute and assemble these parts and how they can fit together perfectly and with quality. The opposite is what we have been doing, which is that every time we build a building, it stays there. You see houses scattered all over the territory and perhaps many of them are vacant. They are no longer comfortable. It is costly to adapt them because they were not designed to be evolutionary, to receive upgrades. The building, the façade, the walls, the place where it stands, could last — and does last — 100 years. The problem is that the interior does not keep up.

But are we seeing an increase in renovation?

At a higher cost. But we have a problem. All these houses that are being renovated don’t have a design plan, or if they did, they’ve lost it. Who do I need to renovate? The master builder. The one who knows how houses were built 20 and 30 years ago. These are the people who have already retired, have already passed away and no longer exist.

Is it a dying profession?

The master builder is the person who can knock down a wall and decide what to do. It is not the architect or the engineer who will tell him. Renovation needs this type of person, who are the scarcest. And that is why it is much more expensive. Why do we have gentrification in urban centres? Because it is those who have money. Only those who have a lot of money can afford renovation. Renovation is happening where real estate is most valuable, which is in city centres, in the centre of Porto, Lisbon, etc. We don’t see it in the suburbs, because the cost of renovating a house in the suburbs is the same as in the centre, but no one pays the same as they do in the centre.

Despite the higher costs, is there still some stigma attached to investing in an industrialised house?

Henry Ford said, “if I asked people what they wanted, they would say a faster horse, because they had never seen a car”. It is difficult for people to say what they want when they have never seen it. Most people, if you mention a prefabricated house, probably think of one of those houses made of wood, prefabricated, in the middle of the woods. And then a tornado comes and blows their house away.

The difference is between a telephone where you had to put your finger on the dial and dial, or a smartphone. It’s still a telephone, but one is smarter and has more capabilities than the other, and the other has better quality. Quality in the sense that it’s sturdy, I can drop it on the floor and it won’t break. And it’s true that Portuguese construction has always been of high quality and has always been ahead of Spain and many other countries. People still have this quality in mind, but it’s not what they’ll get today when we build in the traditional way. The people involved in this construction don’t have a tenth of the qualifications that the people who built the houses 20 years ago had, perhaps where they are living today. The construction we do today will be of lower quality. In industrialised construction, the materials are the same, but the standards are higher.

There is scope to improve the quality of materials because I am reducing waste and unskilled labour. This leaves more value to improve the quality of the product. Factories produce on a large scale.

Is the concept of construction changing?

The tiles come from a factory. The flooring, before being installed, comes from a factory. The plasterboard comes from a factory. All the components we install, the door, the handle, come from a factory. The difference is that we are assembling these materials not on site, but also in a factory. We get the materials that already come from another factory and assemble them more rigorously, in a more predictable way, in a controlled environment, and then the people who do the installation, that third of the people who are on site, will install a kit. It’s the same thing that happens in the automotive industry. There’s a factory that produces the seats. When it gets to the assembly line, no one is there sewing the seat. Then someone puts it in the car.

Casais already has several industrial construction projects. How much do you expect this to weigh on the group’s future works? How much does it weigh today?

We have several countries and they all have their own modus operandi, and factories are not something we can put in our pockets and transport to other locations. At the moment, the factories are in Portugal. We also have some industry in Angola.

If we look at Portugal in isolation – and we build infrastructure such as railways, which are not included in this figure – the buildings we constructed last year alone accounted for close to 20%. This coming year, we expect [industrial construction] to reach around 35% to 40% of buildings. It could even reach half, or more than half, as long as there is a strong commitment to housing and programmes to build several homes, so that it could suddenly exceed 50%.

The government has presented a set of measures for housing. Are they sufficient?

VAT is 17%. 17% is a lot of money, so the measure is positive. The question everyone has is how it will be applied. Simplifying licensing is also important. We need to have a more proactive urban policy. There is no shortage of land with characteristics in the urban PDM. But is that land ready for construction? No. There are few infrastructure-ready developments ready to start building housing. What we need is more infrastructure-ready land where construction can proceed quickly.

And who can do that?

It’s the local authorities. Property in Portugal is a very sensitive issue. Nowadays, it’s impossible for a local authority not to know who the owners are. There are many people who own property but don’t have the capital to transform it. It’s very simple for me to solve this problem, and I’m not saying that people should be expropriated and stripped of what they have. If the local authority makes the investment and puts it on the market, someone will pay them a fair price for it once it has been renovated. Part of this will go towards paying for the work, and part will go to the owner. Now, a property cannot be left vacant to the point where it collapses and puts people’s lives at risk.

But the State itself has a number of properties, many of which are also vacant.

There are countries that, because they have not built anything, carry out an independent valuation of their forests to say “I have an asset that is worth this much, so lend me money and I will mortgage my forest”. If the State were to carry out a valuation of its assets, as we do with gold bars, our State assets would have a very interesting balance sheet. A large part of a Portuguese person’s savings is in their home. Yes, they get into debt and pay it off over 20 years, but at the end of those 20 years, the house is theirs. What happens is that when people retire, their pension is not enough, but they have a house, only the house does not release funds at the end of the month.

There are some measures in the pipeline that will be positive in allowing this pillar of Portuguese families’ savings to release value again. This is an essential measure because what often happens is that children already have their own home, their own debt, and their own place to live, so their parents’ home will not be the home for their children or grandchildren. Gradually putting that asset back on the market for another future family is essential.

Are you optimistic about the sector?

I think so. The difficulty lies in how quickly we can get this up and running in the market, because there are many dimensions to it. The issue of state assets requires a process involving the various entities that own those assets, such as the Ministry of Defence, etc.

If we then look at the infrastructure side of things, it needs to be built, so it’s not an immediate solution. There is always the risk, and this has always happened in real estate, of the bullwhip effect: today I build to respond to demand, and then there comes a time when I have oversupply. The market has always worked like this, with these cycles creating opportunities to buy and other times when prices rise.

But we are in a positive trend, the country is well positioned internationally. Portugal has good living conditions. Any investor today combines the two things: if I am investing in a factory in a country, I will probably invest in a place where I will have to travel to be on top of my business, and I will also add the personal, leisure aspect.

Are there plans to build new factories, both in Portugal and possibly in other countries?

The issue of factories is an important one because we are not doing anything that has not already been done. There have already been two major waves of industrialisation, and there was a boom and also a boost. After the First World War, there was a lot of industrialised, prefabricated construction. After the Second World War, the same thing happened. Ten years later, it disappeared. And we returned to the traditional dragon. Now we are not going to go back, but we need to be cautious. It has to be step by step. As much as it seems to us that there is a lot of demand, a lot of need, from the moment I build a factory, I have to take out loans and pay wages. The fixed costs are so high that if the factory is not producing, it is a loss every day.

Are there no plans for new investments to increase capacity?

On the contrary. We are doing it gradually and we have been growing. We went from 2,000 square metres in 2019 to 11,000 last year. We already have another 4,000 leased. That’s already 15,000 square metres and our outlook is that it will continue to grow. But we will try to do so in line with demand. The international part, yes. We are making our way, particularly here in Europe, because we believe that the need is not only in Portugal, it is a European need, and we feel that with our success and the things we have been doing well, doors are opening for us abroad.

Where?

In the markets that are natural for us: Spain, Germany, France, Belgium, Luxembourg, Switzerland, Austria. A moment ago, when you asked what the percentage [of industrial construction] is, if you want tomorrow to be 100% industrial construction, it’s easy, it’s a decision: we don’t bid on traditional construction projects anymore, we only do industrialised construction.

Would that decision make sense at this point?

No, no. I don’t think we’ll ever stop doing [traditional construction], not least because the existing built heritage, which requires rehabilitation, is there and needs to be done. And we don’t want to lose that expertise. There is room for new construction at the moment, but there is also rehabilitation, and it will always be a combination of the two.