Construction World July 2019

COMMENT

The recent announcement by Stats SA that South Africa’s already flailing economy had shrunk by 3,2% in the first three months of the year, is beyond worrying for industry.

The 3,2% decline is the biggest quarterly fall in economic activity since the first quarter of 2009. Back then the global economic crisis could be blamed and the drop was spectacular – an entire 6,1%. Fast forward to 2019 and external factors played a lesser role in the 3,2% drop. This time it can be attributed to political uncertainty, the dire lack of government infrastructure spending and the lagging effect of the Zuma years. Analysts had predicted a drop in real GDP of around 1,9% but the actual drop sent shockwaves through an already worried industry. The downward prediction was based on depressed expenditure and investment in the economy, weak consumer demand, the negative impact of load shedding and recurring falls in mining production. When compared to the last quarter of 2018, almost all industries contracted in the first quarter of 2019: manufacturing fell by 8,8%, mining by 10,8%, agriculture by 13,2%, electricity by 6,9%, transport by 4,4%, trade by 3,6% and construction by 2,2%. Even though construction’s decline is less than that of the other industries, it continues a decline that started two years ago. It is not surprising that the RMB/BER Business Confidence Index, that was released soon after the shocking GDP figures, flatlined at a worryingly low of

28 in the second quarter. Seven out of 10 respondents are dissatisfied with current business conditions. In fact, the last time sentiment was so gloomy was in 2017 and before that after the global economic crisis in 2009. Apart from this low confidence on the back of deteriorating confidence in the five sectors measured by this index, output of the large business services sector also weakened. Therefore, the risk of another technical recession in the first half of 2019 is a reality. When announcing this Index, the Chief Economist at RMB, Ettienne le Roux, said that South Africa will not be able to shift to a lasting higher growth and prosperity path without more short-term pain. This time around South Africa cannot rely on the global economy to counterbalance such internal adjustment costs as global growth, in general, is cooling down. Enclaves of positivity Despite very challenging economic conditions in especially construction, two major players in South African construction are optimistic – in different ways. Amdec’s Group CEO, James Wilson recently said that there is a lot of pessimism around in SA right now. “It frustrates me because we have a great country and we need to talk it

up, but we keep talking it down. I’d suggest that we start developing optimistic habits,” he recently said in an interview with Lesley Stones (read the interview on page 8). A more pragmatic view is that of the Chief Executive of Corobrik, Dirk Meyer (page 10). In an interview I recently had with him he said that notwithstanding the difficulties in the current climate, he anticipates a slow and gradual recovery over the next 18 months. “After that it should accelerate. What will drive the economy and building industry is the 58 million people in the country. These people need shelter, whether through the formal or informal economy. This need will create demand for the building industry.” This quote certainly gives hope in a time when the construction industry (and all related industries) is in crisis.

Wilhem du Plessis Editor

@ConstWorldSA

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EDITOR & DEPUTY PUBLISHER Wilhelm du Plessis constr@crown.co.za ADVERTISING MANAGER Erna Oosthuizen ernao@crown.co.za LAYOUT & GRAPHIC ARTIST Katlego Montsho CIRCULATION Karen Smith

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CONSTRUCTION WORLD JULY 2019