Analysts predict hard times for construction industry in South Africa
When South Africa was announced the host of 2010 World Cup, construction companies went on a celebratory mode following the construction activities that ensued. Construction firms like Murray and Roberts secured large building contacts bagging in large sums of money. For instance, the Cape Town stadium was developed by Murray & Roberts and Wilson Bayly Holmes-Ovcon (WBHO) triggering a construction frenzy.
However, the construction industry in South Africa has in recent times experienced difficult times thanks to hard economic times in the country. Construction companies in South Africa have been cutting jobs and battling depressed order books as the government reduced large-scale civil engineering and construction contracts that the big companies rely on.
Late last years, the firms which included Murray and Roberts and WBHO announced that they were restructuring to adopt with the prevailing environment. But despite the mechanisms being put in place to cushion the the firms against the difficult economic situation, it seems the problem is getting out of hand.
WBHO Chief Executive Officer Louwtjie Nel says that from where they sit the situation is bound to continue for a long period of time.
“We can’t see it getting better in the short term,” Said Nel “We think we’re going to be under pressure for another year or so, so we’ve just got to keep our heads down and do good projects,” he added.
His opinion has been echoed by analysts who reckon that the construction industry in South Africa will continue to face difficult times despite the restructuring effort.
Roelof Brand, a Cape Town-based analyst at Avior Capital Markets, said that the outlook for the industry was gloomy. The expert says that the situation is expected to be tougher and tougher urging for more infrastructure investment and the starting of mining capital expenditure to salvage the the problem.
South Africa’s economy is struggling in the wake of power outages, a severe drought as well as the effects of plunging commodity prices. Finance Minister Pravin Gordhan last week predicted growth would be 0.9 percent this year, the slowest since a 2009 recession.