Western Cape building industry concerned about tough business conditions

THE FIRST National Bank and Bureau for Economic Research Building Confidence Index 2016 for the first quarter showed that more than 60 percent of respondents are dissatisfied with prevailing business conditions – the lowest confidence since the beginning of 2013.

Respondents include architects, quantity surveyors, main contractors, sub-contractors – such as plumbers, electricians, carpenters and shop fitters – manufacturers of building materials – cement, bricks and glass – and retailers of building material and hardware.

Despite members of the Master Builders Association of the Western Cape (MBAWC), being fairly satisfied with the current business conditions, there is a degree of trepidation and uncertainty about the future, according to MBAWC executive director, Allen Bodill.

“This is due particularly to the recent increase in the interest rates, coupled with the repeal of the old black economic empowerment ( BEE) construction sector codes announced in a Government Gazette notice issued by the Department of Trade and Industry regarding the construction sector codes for BEE. The old BEE codes for the sector have been discarded with immediate effect, without any transition period, which has significant implications for businesses in the builtenvironment.”

The MBAWC is a registered trade association for employers in the building industry with a membership comprising builders, building subcontractors, building merchants and manufacturers of building products. According to the index, the robust growth in residential building seen in the first half of last year seems to have come to an abrupt stop, and non-residential building remained weak.

Bodill says: “MBAWC members who are active in the residential market appear to have a reasonable current order book, but competition is fierce and margins remain under pressure.

“In the non-residential local arena, our region has a number of large projects under construction, as well as some sig- nificant projects in the pipeline, such as the new West Coast shopping mall.

The extensions to the Cape Town International Convention Centre, the development of the silo district project at the V&A Waterfront, the construction of a new distribution centre for Shoprite and the building of a new hotel development at the top of Strand Street, are some of the projects that have created a steady stream of work for some of our larger members.

“While some of the larger projects referred to above will keep a number of the major contractors busy until the end of this year – and even beyond into next year – the likelihood of further interest rate increases this year is likely to affect some of the new, smaller developments – particularly in the residential market for new builds as well as alterations and additions,” he says.

He believes that certain macro- economic considerations, such as the possibility of a downgrade of South Africa’s credit rating, will affect the confidence levels of all sectors of the economy and will affect the local building industry.

“It remains to be seen whether our region can grow significantly under the difficult economic circumstances that prevail,” says Bodill.