Political turmoil ‘dented economy’

Consulting Engineers SA (Cesa) says “political turmoil and instability” weighed heavily on SA’s economy in the first quarter of 2017, after growth in 2016 came in well below the government’s expectations.

This has had a “significant effect” on the state’s expected revenue-collection and expenditure plans. In its biannual economic and capacity survey for July to December 2016, released on Wednesday, the industry body said gross fixed capital formation in SA fell for the first time since 2009.

“The consulting engineering industry is threatened by incapacitated local and provincial governments. As major clients to the industry, it is important that these institutions become more effective, more proactive in identifying needs and priorities and more efficient in project implementation and management,” Cesa CE Chris Campbell said on Wednesday.

The public sector remained the most important client to the industry. But government investment had slowed to 1.1% in 2016, from an increase of 13.4% in 2015. This combined with a further contraction in spending by state-owned enterprises and a sharp fall in private sector investment of 6% in 2016.

Now that the country had again entered a recession, Cesa said, investment in construction would remain poor. All economic indicators suggested investment was likely to slow over the medium term, due to slower government spending, financial constraints at state enterprises and the private sector’s lack of confidence.

Cesa said the private sector needed to play a much bigger role in infrastructure delivery. Many projects highlighted in the National Development Plan could only be carried out through public-private partnerships. Cesa had, therefore, teamed up with the government in initiatives such as implementing standards for infrastructure and procurement management through the Treasury.

Elsie Snyman, CEO of Industry Insight, which provides project information to the construction industry, said one of the key challenges facing construction and engineering was the lack of a definitive project pipeline amid infrastructure budget cuts.

Meanwhile, Murray & Roberts, which had sold its South African infrastructure and building businesses to black empowerment entities, said at a Deutsche Bank investor conference on SA, held in London on Wednesday, that oil and gas spending in Africa was forecast to rise, especially in Nigeria, Mozambique and Kenya.