KZN building business at least starting to look up
THERE is a glimmer of hope for the construction sector, according to analysts, despite Group Five’s bankruptcy filing dealing it the latest blow.
The South African construction industry is expected to grow by more than 2percent this year, an improvement from last year, said Serfaas Badenhorst, a portfolio manager at Momentum Securities.
Afrimat chief executive Andries van Heerden said this week he was “cautiously optimistic” about the anticipated upswing.
Group Five was put into business rescue this week, with its stock suspended after it filed for bankruptcy protection.
Badenhorst said the construction industry had been in trouble for some time.
“In September 2017 confidence in the industry was at its lowest level since the third quarter of 2000,” he said.
The industry had been affected by sluggish economic growth, policy uncertainty and rand weakness restraining infrastructure spending, he said.
These factors had a bigger impact on the financial results and outlook of some companies, with Group Five one of those adversely affected, said Badenhorst. The Afrimat Construction Index (ACI) released this week showed the 3.9 percent recovery in the fourth quarter, from the third, failed to lift the index higher than the level of a year ago.
The ACI averaged 4.7 percent lower last year than the year before and reflected the reality that the sector had been underperforming the national economy since the 2010 Soccer World Cup boom.
However, economist Dr Roelof Botha, who compiles the ACI, was optimistic activity would improve this year as there had been a third consecutive quarter of improvement and the index was now 14.4 percent higher than in the first quarter of last year.
The 2018 building plans data released by Stats SA showed KZN was the worst provincial performer in terms of buildings plans completed, but only the fourth worst in terms of building plans passed.
Construction declined by
0.6 percent in 2017 in KZN, from 2016, and had a 3.9 percent share of the regional economy, compared with 4.2 percent in 2015.
The nominal value of building plans completed in KZN slumped by 31 percent last year, whereas the national total increased by
0.3 percent. The nominal value of building plans passed in KZN dropped by 5.8 percent, against a national slip of 1.6 percent. “Compared with the same quarter a year ago, five of the eight constituent indicators remained in the red,” Botha noted.
According to him, policy uncertainty, especially on the possibility of land expropriation without compensation, and continued declines in capital formation for the key asset types associated with construction activity, continued to affect the index.
He said that a number of measures had been announced in the February State of the Nation address and Budget speech which would strengthen public sector corporate governance and result in market-friendly policies, which should make it easier for KZN organisations to do business.