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Sector looks beyond 2010
September 9, 2009

By Roy Cokayne

Major construction firms are confident of growth in their order books beyond next year’s Fifa World Cup projects, which have buoyed the industry in the past lean years, though funding remains a pressing concern.

Industry players spoken to yesterday confirmed a respectable order book beyond 2010 from the private sector, but they encouraged the state’s commitment to infrastructure development, which would significantly boost growth.

Brian Bruce, the chief executive at Murray & Roberts (M&R), said last month the group had a project pipeline worth R96 billion in June last year, including South Africa’s nuclear programme, and R59bn of that pipeline was cancelled during the year.

But Bruce said the group had seen R63bn of new projects come into its pipeline in the same period and a lot of other opportunities were still being considered and investigated behind this pipeline.

“So the world has not come to an end. There is opportunity out there,” he said.

Louwtjie Nel, the chief executive of Wilson Bayly Holmes-Ovcon (WBHO), said a question often asked was what would happen after 2010.

Nel said WBHO had an order book of R15.3bn going into its new financial year compared with R18.3bn last year but only R1.9bn of the work left in its order book related to the World Cup, including stadiums, roads and the King Shaka airport.

He said it had picked up R3bn of private sector work in the past three months, including the Mall of the North in Polokwane, its portion of the joint venture for the Sandton City upgrade, the mixed use Lynnwood Junction development in Pretoria and two other retail property extensions for Atterbury Properties.

“I think we are easily going to pick up another R3bn in retail projects before the end of this year,” he said.

But Mike Wylie, WBHO’s chairman, believed the construction sector was headed for a tough 2011 and 2012.

Group Five chief executive of Mike Upton has expressed concern about the six- to eight-month delay in the award of some public infrastructure contracts, particularly by Eskom, that would have put an additional R10bn to R15bn in contracts in the market.

But Upton said the group’s management saw sufficient opportunities to grow.

Marius Heyns, Basil Read’s chief executive, said despite uncertain times, the trend of development, particularly in sub-Saharan Africa, would soon resume, even if the growth trajectory was flatter.

Steve Meintjes, an analyst at Imara SP Reid, said growth in the construction sector would depend on the government’s ability to fund its capital spending programme timeously.

It should be easy for the state to access money offshore as investors could not get yield anywhere and there was reportedly more interest in emerging markets, particularly for state debt related to infrastructure.

The state should continue with its infrastructure expansion and the construction boom would continue although margins were likely to decline and earnings growth to slow, he said.