Modern Quarrying Q4 2018

INDUSTRY NEWS

Civils in survival mode for 2018 The construction sector – and particu- larly civil engineering – will remain in the doldrums for 2018 with hopes for some improvement to begin next year, according to Industry Insight senior economist, David Metelerkamp. Speaking to construction indus- try stakeholders at a recent AfriSam breakfast briefing on the State of the South African Construction Industry, Metelerkamp said the civils sector was bearing the brunt of the construction downturn, and companies reported the worst levels of confidence since the early 1990s. “Over the past 18 months, there has been a significant decline in the value of tenders awarded,” he said, pointing to a 26% decrease in the value of proj- ects over the past year. He highlighted that order books across the civils sector remain flat, and even dropped in recent months, possibly as a result of President Cyril Ramaphosa’s planned clean-up of the state-owned enterprises which had in some instances delayed expenditure. But he saw more efficient SOEs as a positive factor in the medium to long term for civils.

“Conditions will remain tough this year, which will possibly be the worst year for the civils sector,” he said, “but we are expecting some improvement next year and the following year.” The civils sector had experienced poor annual growth levels for many years up to 2016, after which its per- formance had worsened further with five consecutive quarters of negative growth. Some good news came recently with Energy Minister Jeff Radebe’s interventions to progress 27 indepen- dent power producer agreements; Metelerkamp noted that civils contrac- tors would have to rely more on the private sector contracts like these. There might also be good news in store as the next national election looms, with an election run-up often coinciding with the issuing of more government tenders. Rob Wessels, CEO of AfriSam, empha- sised the positive role that construction played in creating employment. Urging greater partnership between the stake- holders at the briefing – which included construction firms, retailers, trade unions, management, material suppliers like AfriSam and industry associations General building confidence has been trending downwards since the beginning of 2017. During the third quarter, business confidence shed another 3 index points to register a level of 30. “Business confidence amongst general builders fell to its lowest level in almost seven years. Unfortunately, the outlook for this sector does not look promising, as the demand for new building work remains a constraint,” comments Ntando Skosana, project manager for Monitoring and Evaluation at the cidb. “The third quarter survey results suggest that pressure on smaller building contractors in particular is escalating”. Since last year this time, business confidence for Grades

Flats and townhouses will drive future growth in the residential segment.

– Wessels said that while construction contributed around 3% of gross domes- tic product, it employed roughly 9% of South Africa’s labour force. The sector employs about 1,4 million of South Africa’s total workforce of approximately 16,3 million people.. l

CONTRACTOR SENTIMENT FALLS TO AN HISTORIC LOW

3 and 4 builders has dropped by a cumulative 19 index points to a his- toric low of 28,” adds Skosana. On a provincial level, the deterio- ration in sentiment for both general builders and civil contractors in the Western Cape was of particular interest. “After outperforming other provinces for some time before this quarter, building and civil contrac- tors in the Western Cape recently came under pressure – in line with the other provinces,” says Skosana. “The fact that the lower confidence was so pervasive across grades and provinces highlights the broad- based nature of weakness in the building and construction sectors,” concludes Skosana. l

The cidb SME business conditions survey showed that civil contractor confidence fell by 6 index points to a historic low of 27 during the third quarter. Weakness in all the under- lying indicators, especially construc- tion activity, supported the drop in confidence. Discouragingly, demand for new construction work remains a constraint and implies that activity growth is likely to remain under confidence fell to historic lows of 25 and 15 for Grades 5 and 6 as well as Grades 7 and 8 respectively. Respondents in these grades expe- rienced a sharp slowdown in activity which weighed on profitability. pressure in the near future. From a grades perspective,

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MODERN QUARRYING QUARTER 4 - 2018