Con­struc­tion sec­tor braces for storms

The Citizen (KZN) - - Business - Roy Cokayne

SA’s dis­tressed con­struc­tion sec­tor faces a host of risks and chal­lenges this year.

These in­clude the con­tin­u­ing short­age of ma­jor projects, non-pay­ment by govern­ment and other state en­ti­ties, the risks to the econ­omy from a sovereign credit rat­ings down­grade and the hi­jack­ing of con­struc­tion sites by the “con­struc­tion mafia” or busi­ness fo­rums.

David Metel­erkamp, se­nior econ­o­mist at In­dus­try In­sight, said 2019 was an­other tough year for the lo­cal con­struc­tion in­dus­try, which has proven to be SA’s worst-per­form­ing sec­tor over the last two to three years.

How­ever, Metel­erkamp added there was an im­prove­ment last year from the dis­mal per­for­mance in 2018, when sharp con­trac­tions were re­ported in con­struc­tion ac­tiv­ity.

He said the data re­leased so far shows an es­ti­mated 2.7% de­cline in the nom­i­nal value of con­struc­tion projects awarded in the 10 months to Oc­to­ber last year (2018: 14.3% year-on-year de­cline).

Ma­jor risks

Metel­erkamp high­lights three ma­jor risks this year:

The 2020/2021 na­tional bud­get, Mil­i­tant un­rest, and

Fail­ing state-owned en­ti­ties (SOEs) and a stag­nant econ­omy.

He said the shock­ing state of the fis­cus was re­vealed in the mini-bud­get speech last year and will have a neg­a­tive ef­fect on in­fra­struc­ture al­lo­ca­tions in the na­tional bud­get due to be tabled next month.

“For the first time in sev­eral years, there was no men­tion of the to­tal amount al­lo­cated for in­fra­struc­ture in the mini-bud­get speech, which gives fur­ther anec­do­tal ev­i­dence that Trea­sury is still plan­ning on how to deal with all of the fund­ing short­falls.”

Metel­erkamp said it was also widely ac­cepted that Moody’s will down­grade SA’s sovereign credit rat­ing to junk sta­tus this year or early next year.

He said the hi­jack­ing of con­struc­tion sites was a ma­jor theme last year, with these dis­rup­tions adding to the mis­for­tunes of con­trac­tors.

A stag­nant econ­omy was one of the big­gest risks to the con­struc­tion in­dus­try, he said, adding that a ma­jor bot­tle­neck to es­cap­ing this low-growth en­vi­ron­ment was eco­nomic and po­lit­i­cal re­form, most im­por­tantly at SOEs, which re­main in a state of dis­ar­ray.

Newspapers in English

Newspapers from South Africa

© PressReader. All rights reserved.