Construction World January 2019

COMMENT

The IMF’s ‘World Economic Outlook’ report of July 2018 states that the outlook for the global economy is on track to grow by 3,9% in both 2018 and 2019. This figure includes those advanced economies that are growing at a healthy pace (e.g. the USA) and those economies (e.g. the Euro area and Japan) that are growing at a slower rate.

In emerging economies the situation is slowly but surely worsening and growth expectations often have to be restated quarter on quarter. This is because the risk factors for such economies are volatile and seem to be increasing. Higher oil prices and the dollar’s appreciation (the USA is on track to meet growth predictions) are at the heart of the less than ideal growth. In addition, aspects such as geopolitical conflict and increasing trade tensions are adversely affecting these sometimes fragile economies. Despite these challenges, the report states that emerging economies will grow by 4,9% in 2018 and 5,1% in 2019. Half the international prediction In contrast to this, South Africa’s growth is not on par with other emerging economies. In 2018 growth was worse than predicted by economists. In the second quarter the economy contracted by 0,7% and therefore the country entered a technical recession (two consecutive quarters of negative growth). Although South Africa’s overall growth rate is in positive terrain, it is nowhere near the IMF’s prediction for 2018 and will most likely not come close to 2019’s prediction. This contraction was mainly caused by significant contractions in the agricultural, wholesale and retail trade, transport and communication sectors. In the second quarter, the construction sector unexpectedly showed some growth (2,3%) – the first growth in six quarters. The South African Forum for Civil Engineering Contractors (SAFCEC) said that this was primarily due to the private sector and not

the civils sector. The latter is in survival mode and the bit of growth that there was can be attributed to the unblocking of the backlog for renewable energy projects. This, SAFCEC said, was not sustainable. Third quarter growth and decline In the third quarter the South African economy grew 2,2% which means that the country’s economy has now exited the recession. Even though the shrinking of the economy had slowed, agriculture, transport and trade had weighed down the country’s ability to bounce back. The economic rebound was on the

higher end of what economists had predicted, with the main growth drivers being secondary industries (trade, transport, finance, government and personal services). SAFCEC’s words were true: The construction sector shrank by 2,7%, however. The worst is that South Africa had better growth under a more corrupt Jacob Zuma administration than under that of Cyril

Ramaphosa. This is something, no matter how you view it, that is extremely disheartening.

Wilhelm du Plessis Editor

@ConstWorldSA

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CONSTRUCTION WORLD JANUARY 2019