SA construction sector not well

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SA construction sector not well

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Aveng says in South Africa the private sector is currently about 85% of order book, no big projects from government in spite of infrastructure backlog.

Construction major Aveng says that global economic uncertainty and slower than expected domestic economic recovery, means the health of the South African construction sector remains poor.

However, in its statement to shareholders yesterday, the group said other sectors and geographies were showing growth and resilience, to the benefit of both its open pit mining division Aveng Moolmans, and offshore operation McConnell Dowell.

The group said the potential order pipeline remained stable at R110bn, but its two-year global order book had increased 18% in the three months since the end of June, to R43,5bn.

But about 85% of the order book was from the private sector, and 73% from projects outside SA. "So there is a lot of capacity in SA," Aveng CEO Roger Jardine said yesterday. "SA remains very quiet." He said the group wanted a 50%-60% private order book.

"So this level is very distorted," Mr Jardine said.

Recent contracts in SA included a water augmentation project near Lephalale, a casino in Port Elizabeth, and railway line project in Durban.

But none of these were worth billions of rands. The group said construction and engineering in SA continued to be hit by delays in contract awards, particularly in the public sector.

This despite Finance Minister Pravin Gordhan’s medium-term budget statement last month, in which he said public sector infrastructure spend was about R233bn, or 7,8% of SA’s gross domestic product, with state infrastructure plans for the next three years rising to R802bn.

But the reality is local construction is wallowing in recession. "I think the industry ... is waiting for (public) infrastructure spend," Mr Jardine said. Asked for comment, Michael Canterbury, an analyst at Sanlam Investment Management, said: "It’s kind of what we expected. There is nothing really different from the full-year results (in June)."

He said it was not clear when domestic infrastructure projects would start to flow, nor what the catalyst would be.

 

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