Tender activity dips in building sector

THE OUTLOOK for the civil construction and building sectors is negative, with declining tender activity in both sectors, according to Industry Insight, which provides project lead information to the construction industry.

David Metelerkamp, an economist at Industry Insight, said the economy lacked the necessary stimulus to support higher levels of private-sector investment while the government was committed to prioritising fiscal discipline, which has adversely impacted on infrastructure expenditure.

Metelerkamp said competition for tendering was rife last year and this was expected to continue this year.

He said there had been a concerning increase in the number of projects cancelled last year, with cancellations in civil projects rising 55.2 percent, while building projects recorded a 38.3 percent increase.

“Cancellations have a more severe impact on the industry as it suggests an indefinite shelving of the project, leading to financial loss for the industry, not considering the time and money wasted for stakeholders involved in the planning and tender process,” he said.

Metelerkamp said the average postponement rate for the construction sector as a whole declined to 7.8 percent last year, down from 13 percent in 2015.

“Although postponements are inevitable within the construction industry, an increase in postponements, ultimately leading to cancellations, suggest uncertainty in the environment as conditions are simply not conducive to implement or complete a project. Its rate is measured in relation to tender activity, and thus an improvement in the postponement rate can also be due to a decrease in tender activity.”

Metelerkamp said tender activity had been subdued for the past three years.