Letting go
Murray & Roberts is to dispose of its infrastructure and building businesses. This means the company, headed by Henry Laas, will no longer build large infrastructure projects in SA, including ports, roads, dams and buildings.
The move comes at a time when the formal civil engineering market in SA is all but dead. Despite some significant private sector building work still taking place in Sandton and some statefunded road building, tenders for civil engineering work are hugely competitive and margins are razor thin.
The group is unburdening itself of a business that has been in dire straits since the end of the 2010 soccer World Cup.
It will now focus on three core sectors — underground mining, oil and gas, and power and water.
But many of these projects will not be based in SA. Government has justly punished construction and engineering companies for continuing to engage in collusive practices.
However, instead of also conducting parallel and huge countercyclical national infrastructure spend after 2010, as it promised to do, government appears to be limiting infrastructure spend to rural development, amid costly and politically controversial delays to state energy and railway infrastructure.
Murray & Roberts will also be selling Genrec, its steel-making and engineering services group.
It says the disposal raises the “possibility of creating the first wholly black-owned civil and building construction company of scale in SA”.
But despite such noble objectives in a largely untransformed industry — and along with the flatlining of SA’s mining and steel sectors — continuing government hostility towards business in SA has brought the construction industry and general manufacturing close to the edge.
It is to be hoped that such empowerment deals, including one being negotiated by ArcelorMittal SA, will end the national infrastructure drought.