Big construction companies still wait for upturn
THE MAJOR listed construction companies are still seeing little in the tender market of the government’s multibillion infrastructure expenditure programme and would be going backwards if they relied on the South African market for work.
President Jacob Zuma told the National Council of Provinces earlier this month the government would be spending R847 billion on infrastructure over the next three years.
This is a similar amount to the infrastructure expenditure figures quoted by government in recent years.
Mike Upton, the chief executive of Group Five, said last week there had been some pockets of activity in water and the SA National Roads Agency (Sanral) had put work out to tender, but these contracts did not make South Africa a big infrastructure market.
Upton said there had been a few recent roads and water infrastructure projects, the building market had been more buoyant and the public healthcare sector had been a bit busier. “But if you add it all up, our markets are very constrained and if we were all to rely on the South African market we would be going backwards.
“We don’t see the big infrastructure spend, which is embedded in the National Development Plan (NDP) or the work of the Presidential Infrastructure Co-ordinating Committee. “I think there is a lot of going on behind the scenes in terms of planning, but we haven’t seen it in the tender market,” he said.
Upton added the heavy infrastructure construction sector would only take about a third of the R847 billion expenditure by the government on infrastructure with the balance going to suppliers to government and other industries.
Eric Vemer, the chief executive-designate at Group Five, said one of the objectives of the NDP was to get gross domestic fixed investment expenditure as a percentage of gross domestic product up to 30 percent, but it was only at 18 percent and had fallen from the 24 percent achieved a few years ago.
Vemer said a lot of the R847bn was money being spent by Eskom under its existing power projects while Sanral had always spent between R9bn and R10bn a year in terms of their general capital expenditure roads programme and continued to spend at that kind of level. “But nothing tangible is progressing at the moment with the big strategic infrastructure projects.”
Azar Jammine, the chief economist at Econometrix, said the government’s infrastructure expenditure figure had been virtually unchanged for the past four years, but the make-up of the figure had changed.
Jammine said it was heavily focused on energy, transport and water, but was now heavily weighted towards transport.
If inflation was taken into account, the amount the government was spending on infrastructure had not increased.
Tumi Dlamini, the executive director of Master Builders South Africa, welcomed President Zuma’s announcement, but stressed the sustainability of industry now relied on the government implementing these projects. Dlamini urged the government to move a lot more swiftly to find the necessary capacity to deliver on these projects.
Llewellyn Lewis, the principal consultant at BMI-Building Research Strategy Consulting, said smaller construction firms were not doing badly, but the bigger construction companies did not tender on smaller jobs because they wanted the critical mass.