Construction industry expects growth in 2005

the south african economy continued on its positive economic growth path, with a 5,5% annualised expansion in the fourth quarter of 2004, the south african federation of civil engineering contractors (safcec) said in its 'state of the civil industry' report released yesterday.

this growth rate was supported by low interest rates, a stable currency and low inflation, it explained.

total construction increased by 9,86% in real terms for the year to september 2004, and this high level of growth was supported by sustained growth in the residential and nonresidential construction sector on the back of the low interest rates, the report stated.

though south african reserve bank figures indicate strong growth in construction works during 2004, the civil engineering market was subdued with lower levels of activity culminating in a real contraction in 2004.

“confidence levels remained subdued until the end of the second quarter of 2004. thereafter it leapfrogged past the 50 mark into positive territory.

the annual rise of confidence levels of 16,5% last year also holds promise for 2005.

“this recovery came on the back of the award of the bergriver dam project, the prospects of the gautrain, the 2010 world cup soccer and potential water-resource developments,” safcec stated.

the fourth quarter saw sustained optimism due to several announcements of major infrastructure investments to address the growing capacity constraints related to transport and electricity provision.

during the 12 months up to december 2004, the civil engineering industry contracted around 6% in real terms.

average employment levels declined during 2004 by 10,71% as a result of lower levels of activity. according to the respondents to the survey, there is an expectancy of increased employment during the first quarter of 2005.

the number of tenders moved more or less sideways, with a marginal 0,49% annual increase. there are, however, major problems reported regarding the delay in awards of contracts coming out to tender, safcec reported.

“the market was characterized by a high frequency of smaller tenders, little fixed capital spending by general government and subdued private sector spending on the back of a strong currency.

“on the back of increased award activity and an increase in the confidence index, the outlook for 2005 is a positive real growth of 3%,” the report said.

“civil engineering turnover generated across our border is in the region of 20% of locally generated turnover. general confidence for sadc remains low due to rand appreciation, as well as legal uncertainty and late payments. there has been a slight recovery in the final quarter of 2004 to above the 50% level, however.” but safcec also noted that the last quarter of 2004 was filled with positive announcements about substantial infrastructure investment.

cabinet approved the first phase of a five-year financing strategy comprising of r84-billion to cover 70% of the r107-billion needed to boost electricity generation by around 5 000 mw by 2009; r23-billion set aside for independent power producers to make up the remaining 30% of the predicted requirement; r37-billion for the maintenance and expansion of transnet infrastructure, including ports, railway lines and equipment; and r21-billion, including some private sector participation, for new transnet infrastructure.