Construction World February 2016

COMMENT

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The South African construction industry adds significant value to the country. It creates jobs (some 1,4 million people are employed by the industry – permanently or on contract) while government benefits financially from the direct taxes of the total value it creates. It is therefore vital that this industry weathers whatever storms it may be experiencing.

to be sustainable, they have to contend with various risks including compliance with B-BBEE codes; industrial unrest; talent management; retention of staff; expansion; health, safety and sustainability; and tender risk to name but a few. These will have to be managed so as to create a sustainable industry that will overcome the short term difficulties and take advantage of future infrastructure development.

Last year was a challenging year for the construction industry. Not only did it have lower revenue, profit margins and less new projects, but also had to contend with industrial action, delays in projects (often substantial) as well as safety issues pertaining to structural projects. PwC’s recently released third edition of SA Construction makes an interesting forecast for the construction industry in 2016 – based on the financial results of the leading construction companies that are listed on the JSE for financial year ends to June 2015. It is accepted that the construction industry is cyclical and is currently experiencing a cycle that is not favourable. Eight of the nine companies surveyed reflected a decrease in market capi- talisation and financial performance. In fact, the market capitalisation, on aggregate, decreased with 38% to R25,9-billion as at 30 June 2015 (vs. R41,6-billion as at 30 June 2014). The report also analysed the results of the nine companies

from 30 June to 31 October 2015 – this showed a further decline of 9%. For the first time in five years, the secured order book decreased – by 4%. The total revenue for the period was R129,3-billionwhich is 7% lower than the revenue for 2013/14. This was due to the fact that Aveng’s revenue decreased by R8,5-billion, Murray & Roberts’ by R5,4-billion, Group Five’s by R1,6-bil- lion. WBHO’s revenue increased by R0,3-billion and that of Stefanutti Stocks by R1,5-billion. According to the report, the decreases were mainly as a result of the weaker South African economy – and in particular commoditymarkets that have seen a decrease in revenue from oil and gas projects. The management of risk has become vital in this context. Companies will only reap the benefits in the upturn of the cycle if they remain sustainable in the downturn. This is, however, easier said than done. In order for the industry

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Wilhelm du Plessis Editor

@ConstWorldSA

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EDITOR Wilhelm du Plessis constr@crown.co.za ADVERTISING MANAGER Erna Oosthuizen ernao@crown.co.za LAYOUT & DESIGN Lesley Testa CIRCULATION Karen Smith

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The views expressed in this publication are not necessarily those of the editor or the publisher.

CONSTRUCTION WORLD FEBRUARY 2016