Engineers lament ‘slow state spend‘
REDUCED government infrastructure expenditure hampered the consulting engineering industry in the six months to June and drove many firms to seek work across the country’s borders, Consulting Engineers SA (Cesa) lamented in its latest bi-annual economic and capacity survey.
The organisation said although a lot of government planning appeared to be taking place, the physical manifestation was just not happening.
Cesa’s comments appear to be contradicted by the survey results, which revealed that the contribution to fee earnings by state-owned enterprises improved to 20.5 percent in June from an average of 13 percent last year. Provincial government accounted for 14.3 percent, up from 9.7 percent on average.
In addition, income from provincial government had doubled since December, while fee earnings from state-owned enterprises had increased by 56 percent and from central government by 66 percent.
The contribution to fee earnings by the private sector dropped to 34.3 percent, the lowest since 2005, from an average of 44.8 percent last year.
Graham Pirie, Cesa’s chief executive, said yesterday that government expenditure had risen but the percentage increase was a distortion caused by the fact that it had taken place off a low base created by the rapid drop in government work after the 2010 World Cup.
He said the pie had shrunk considerably and had not been helped by a minimal private sector contribution.
Pirie said government expenditure engendered confidence in the economy and the lack of it retarded private sector spending.
He said there was a lot of “pent up” money, which Cesa believed the government was unable to spend because of a lack of capacity. The absence of a significant rise in government spend showed in Cesa’s confidence index, he said.
Overall confidence in the industry fell by 6.4 percent to 81.8 points in June from 87.4 in December, and was lower than the expected level of 89 predicted in the previous survey.
However, firms are optimistic that conditions will improve in six to 12 months.
Fee income by the industry increased by 12 percent in the first half, which was in line with expectations. But some larger firms reported lower growth than expected.
More than 60 percent of firms reported positive growth in fee income in the first six months compared with the previous six months and 43 percent reported growth exceeding 10 percent.
Cesa said fee income was expected to rise by about 6 percent in the last six months of this year despite dwindling order books suggesting otherwise.
Total annualised fee income in June was estimated to have increased to just over R20 billion. After taking inflation into account, fee earnings increased by 8.4 percent year on year in real terms. This was similar to the increases reported in the previous survey.
There was a significant improvement in fees outstanding to the lowest rate since December 2002.
About 9.4 percent of fee earnings were outstanding for longer than 90 days in June, which translated into about R1.9bn in outstanding fees.
About 24 percent of fee earnings were outstanding in December and 18 percent in June last year.
Cesa attributed the “improvement” largely to firms reporting only 15.3 percent of monies outstanding from foreign clients compared with 62 percent in December.