State of the South African Construction Industry

Company Profile Industry Insight supplies construction business intelligence through regular services and customized requests. We provide an independent, objective and unbiased information service to the construction industry, embracing four key market segments, including residential, social housing, non-residential and civil works. As part of our unique service, we have developed a quantitative “fact-based” time-series database of construction activity across the country, based on private and public contracts out to tender, including a value added drill down facility to view project descriptions. Each project has been geo-coded according to the coordinates of its location, to provide real-time spatial analysis of construction activity. To find out more about our company and services please visit www.industryinsight.co.za.

Services provided 

Business services packages include a combination of the following services: o

Quarterly state of the industry reviews

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Monthly newsletters

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Industry Insight project database

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Time series database of project trends based on contracts out to tender and awarded, by city, client, number and value

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On-line extraction of project descriptions

Annual budget review – implications for the construction industry

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Price Monitor – review of construction costs, including the Industry Insight building cost

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Index, contract price adjustment provisions, average rates per m2 by type of building.

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Construction Tender Indices – measures activity in the construction industry in the residential, low cost, nonresidential and civil markets.

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Statistics

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Construction in Business Seminars, hosted in Sandton

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Electronic library

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Municipal Budgets (High capacity municipalities)

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Preferred Supplier Trade Survey – find out who is the preferred material supplier in your product category, by type of project and / or by province.

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Investment Map (Project Location intelligence) – geographical analysis of investment in towns and cities, based on the value of private and public sector contracts awarded. Please note our on-line service has been temporarily suspended. Kindly contact our offices for customised mapping

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Geocrime Intelligence – Data analysis is fast moving in the direction of more defined spatial analysis, where large amounts of data can be easily viewed and monitored in relation to spatial boundaries. Industry Insight compares geographical construction infrastructure investment patterns with occurrences of reported crime. There is a direct link between construction development and criminal behaviour that can be further explored through the CPTED (Crime

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(Prevention Through Environmental Design) principle. For more information about crime patterns or CPTED please contact our offices.

Advertisers in this publication  Plascon SA  PERI Formwork Scaffolding Engineering  DPI Plastics  Databuild  Merkels  Billcost

For advertising opportunities and bookings please send an e-mail to [email protected] or contact our offices at 021 554 0688

Our Pledge to you

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State of the Construction Industry 2012Q2

State of the South African Construction Industry 2ndQuarter 2012

You, our partners, can benefit from a number of service offerings, whether you a contractor, architect, specifier or asset owner, with our 360 degree partnership pledge programme. In addition we have re-evaluated and improved our Specifications and Preferred Applicator Contractor offerings. Our Specifications service now will allow you access to improved specifications with a focus on speed of delivery. The Preferred Applicator Contractor will ensure compliance to the agreed standards of the programme with the use of regular audits. All contractors will also be graded according to a set of requirements and expertise and experience on application. With the utilisation of our National Technical Services consultants we will also do site assessments prior to commencement of projects, site monitoring to ensure compliance to specification.

We will also guarantee you the following services:             

Training of staff Quality products New technology and innovations Green solutions Personalised attention Tailored specifications Assistance with colour trends and visualisation Assistance and reliability with managing projects Assurance that building is maintained or painted effectively Long term costs savings and benefits CSI initiatives including training of BEE applicators The assurance and endorsement of a large brand A Plascon Guarantee

Chapter:

To find out more about the benefits of the Plascon 360°Partnership, please contact the Plascon Advisory Service Team on 0860 20 40 60 or visit www.plascontrade.co.za or www.plascon.co.za

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Report objective The State of the Construction Industry Report is a focus report used by stakeholders and related industries, to monitor developing and changing trends including economic indicators, pricing trends and financial indicators that affect the current and expected outlook in the construction industry. Data pertaining to the construction industry is scattered with most data sources measuring only a certain aspect of investment or performance in the industry. Industry Insight aims to continuously research available sources of information in the industry to provide a more holistic and comprehensive view of the market. We have developed a unique time series database of projects at various stages, which is the only national dataset independently surveyed. The Industry Insight Project Database forms the basis of many of our discussions and includes projects initiated by the private and public sector. It includes both building and civil projects. Each project has been geo-coded according to its location, making it the only GIS compatible infrastructure dataset in the country. Other sources of information incorporated into the report on a regular basis include: 

Statistics South Africa

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South African Reserve Bank

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Provincial Government Departments

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Financial institutions

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Industry Insight Library

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Industry Insight Trade Surveys

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Databuild

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Global Insight

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Cement & Concrete Institute

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Forecasts are calculated based on expected trends in short to medium term leading indicators that have a strong correlation with investment in construction.

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Sources:                    

ABSA House Price Index , ABSA, www.absa.co.za ABSA Housing Review, 2010Q3, www.absa.co.za South Africa Economic Perspective, 2010Q1, ABSA, www.absa.co.za. Business Confidence Index, RMB/BER, www.ber.ac.za. Global Insight, www.globalinsight.co.za Rode’s SA Property News, Rode & Associates Statement of the Monetary Policy Committee, South African Reserve Bank, www.resbank.co.za Consumer price index (CPI), Statistical Release P0141, Statistics South Africa Producer price index (PPI), Statistical Release P0142.1, Statistics South Africa Gross Domestic Product (GDP), Statistical release P0441, Statistics South Africa Statistics of liquidations and insolvencies (P0043), Statistics South Africa Selected building statistics of the private sector as reported by local government institutions (P5041.1), Statistics South Africa, www.statssa.gov.za Quarterly labour force survey (QLFS), Statistical release P0211, Statistics South Africa, www.statssa.gov.za Quarterly financial statistics, Statistical release P0044, Statistics South Africa, www.statssa.gov.za General household survey, Statistical Release P0318, 2009, Statistics South Africa, www.statssa.gov.za South African Federation of Civil Engineering Contractors (SAFCEC), wwww.safcec.org.za Billcost, www.billcost.co.za Merkels, www.billcost.co.za Databuild,www.databuild.co.za Organisation for Economic Cooperation and Development

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Executive Summary Official numbers for gross fixed capital formation for the first quarter of 2012 was not available at time of publication. In the last quarter of 2011, residential investment declined by 2,2% y/y, while the nonresidential sector reported a contraction t of 1,3% y/y. According to the South African Chamber of Commerce and Industry, business confidence fell to the lowest level in three years to 94,3 points in April 2012. By contrast, the RMB/BER Business Confidence Index improved to 52 points in the first quarter of 2012, up from the previous quarter’s level of 38 points. Headline consumer annual inflation slowed 6% in Mar-12, from the 6,1% in Feb-12. CPI is expected to fall and stay within the 3% to 6% target band during the next two years, according to Gill Marcus. The total number of liquidations decreased by 39,4% y/y in Mar-12. Based on MAT values, the number of liquidations in the construction industry fell by 28,8% y/y to 158 (Mar 12-MAT) from 222 (Mar 11-MAT). Liquidations are on a downward trend. Employment in construction fell by 4,4% y/y in 2012Q1 to 986 000, and was down 6,7% compared to 2011Q4. Outlook for construction employment remains bleak considering the depressed market conditions. The number of sqm approved for private sector new residential developments declined by 0,4% y/y (Mar 12MAT), which was the first contraction over the last 12 months. . The annual change in the total number of sqm approved for all residential projects (including renovations), slowed to -2,9% y/y (Mar 12-MAT). The turn in sqm approved comes as a bit of a surprise as the

market seemed to have started a slow recovery. We hoped that the affordable market would have reacted more aggressively, but the overall outlook for the residential market remains bleak. Government continues to focus on social infrastructure expenditure through the development of social housing, hostels, schools and hospitals. However, the investment has moved away from new developments and has started focusing on servicing sites. Health sector developments have taken some priority with government understanding that the implementation of the National Health Insurance requires major transformation within the sector. Of total construction expenditure that took place, according to the Databuild/ Industry Insight Database, in the first quarter of 2012, the health sector received the largest portion of 29% or R2,5bn in construction expenditure The number of SQM approved for new private sector nonresidential developments increased by 7,1% y/y to 2 620 259m2 (Mar 12-MAT) from 2 445 609m2 (Mar 11-MAT). We hope that the current upward trend shown in pipeline activity continues, which could provide some relief to the beleaguered building industry. The renovations market weakened throughout 2011, as the number of SQM approved for both the residential and non-residential sectors weakened. The number of sqm approved for renovations in the residential sector, contributed 33,9% to the total number of residential sqm approved in the twelve months to March 2012. The number of sqm approved for renovations in the non-residential sector, contributed 28% in March 2012 to the total number of non-residential sqm approved. At the beginning of 2012, hotel operators reported l 208 hotels (with just over 38,000 rooms), for future development in Africa. Pipeline work in Africa has seen a massive increase, with a 31% increase in hotels and a 21% increase in rooms.This is just one sector providing more exciting opportunities for South African contractors looking to increase their African footprint. Other opportunities include energy, road and water services.

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Domestic GDP slowed to 2,7% q/q in the first quarter of 2012, compared to 3,2% in the 4th quarter of 2011. Growth in the first quarter was led mainly by the manufacturing sector, agriculture and construction, but pulled down by a sharp contraction in the mining and quarrying sector.

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Planned Industry Insight Focus Forums for 2012

Focus Forums held: 2011

Budget Review 15 March (Speaker- Elsie Snyman, Industry Insight)

African Growth & Development 22 February 2011 (Speaker - Duncan Bonnett, White House and Associates)

Mass Housing – A Contemporary Approach 26 April 2012 (Speaker – Hennie Botes, moladi Housing)

Budget Review 15 March 2011 (Speaker - Elsie Snyman, Industry Insight)

Consumer Protection Law 24 May 2012 (Speaker – Sean Bosse, Bosse & Associates)

Carbon Credits 14 April 2011 (Speaker - Adam Simcock)

Civil Indicators (Speaker – Elsie Snyman, Industry Insight)

Affordable Housing 19 May 2011 (Speaker - Kimberley Bull, Industry Insight)

Building Indicators (Speaker – Kimberley Bull, Industry Insight) Residential Market 22 August 2012 (Speaker – To be confirmed)

Building (mid-year) Indicators: 15 June 2011 Speaker: Kimberley Bull, Industry Insight

19 September: To be confirmed

Civil (mid-year) Indicators: 14 July 2011 Speaker: Henk Langenhoven, SAFCEC

Forecasts 17 October 2012 (Speaker – Kimberley Bull, Industry Insight)

Overview of the South African Housing Market 20 September 2011 Jacques Du Toit, Absa Retail Bank

22 November: To be confirmed

Green Building in SA: The Status Quo & the Opportunities 12 October 2011 Brandon Abdinor, MBA KZN Competition Law & the Current Focus of the Competition Authorities in SA – 16 November 2011 Tamara Dini, Bowman Gilfillan

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State of the South African Construction Industry 2nd Quarter 2012

Contents Company Profile ....................................................................................................................................................................2 Services provided ..................................................................................................................................................................2 Advertisers in this publication ..............................................................................................................................................3 Report objective ...................................................................................................................................................................6 Executive Summary ..............................................................................................................................................................8 Figures ................................................................................................................................................................................11 Tables ..................................................................................................................................................................................13 Economic Conditions ......................................................................................................................................................15 Global Economy ..................................................................................................................................................................15 Domestic Conditions ...........................................................................................................................................................17 Gross Domestic Expenditure...........................................................................................................................................17 Gross Fixed Capital Formation (GFCF) ............................................................................................................................18 Inflation...........................................................................................................................................................................18 PPI ...................................................................................................................................................................................19 Interest Rates ..................................................................................................................................................................20 Business confidence........................................................................................................................................................21 Liquidations ....................................................................................................................................................................22 Construction: General overview .........................................................................................................................................23 General Sector Employment ...........................................................................................................................................24 Construction Employment ..............................................................................................................................................24 Critical Success Factor Index: Building ................................................................................................................................26 Expenditure in the Public and Private Sector .....................................................................................................................27 Residential Construction .....................................................................................................................................................28 Social housing .................................................................................................................................................................31 House Prices ...................................................................................................................................................................33 Non-residential construction ..............................................................................................................................................35 Landscape of Non-residential buildings ..........................................................................................................................38 Office Space Development .............................................................................................................................................39 Retail Space Development ..............................................................................................................................................41 Industrial and Warehouse Space Development .............................................................................................................43 Government Expenditure on Social Infrastructure .............................................................................................................46 Building Renovations ..........................................................................................................................................................49 Tourism Accommodation ...................................................................................................................................................51 Longer term outlook: Investment in buildings ...................................................................................................................54 10



Civil Construction Expenditure ...........................................................................................................................................56 Current market activity ...................................................................................................................................................56 Clients .............................................................................................................................................................................63 Civil Engineering Price Indices ........................................................................................................................................68 High profile Projects announcements: 1st Quarter 2012 ..............................................................................................77 Tender indices ................................................................................................................................................................78

Figures Figure 1: Global CPI rates

(OECD) ................................................................................................................................15

Figure 2: Global GDP Projections Figure 3: GDP Quarterly

(OECD) .....................................................................................................................15

(Stats SA) ...............................................................................................................................17

Figure 4: Household Savings and Debt to Disposable Income (SARB)..............................................................................17 Figure 5: GDE vs Final Consumption Expenditure (SARB) .................................................................................................17 Figure 6: GFCF: Construction (% Change) 2011Q4 (SARB)...............................................................................................18 Figure 7: GFCF: Gov, Public and Private Sector (% change) 2011Q4 (SARB) ...................................................................18 Figure 8: CPI

(Stats SA) ..........................................................................................................................................19

Figure 9: PPI March 2012 (Y/Y% change)

(Stats SA) ....................................................................................................19

Figure 10: CPI vs PPI March 2012 (Y/Y% change)

(Stats SA) .........................................................................................19

Figure 11: Interest Rate vs CPI vs PPI (Stats SA) ................................................................................................................20 Figure 12: Repo Rate

(SARB) .......................................................................................................................................20

Figure 13: ABSA HPI vs SQM Approved: Residential Figure 14: SACCI vs FNB Business Confidence Indices Figure 15: Liquidations in the Construction Sector Figure 16: GFCF Total Construction Figure 17: Net Profit before Tax

(ABSA) .......................................................................................20 (FNB) ...................................................................................21 (Stats SA) ......................................................................................22

(SARB) ...................................................................................................................23 (Stats SA) ..................................................................................................................23

Figure 18: Sector Contribution to Total Construction

(Stats SA) .................................................................................24

Figure 19: Women to construction employment: 2012Q1 ...............................................................................................25 Figure 20: Contribution of Women to total employed in the Construction Industry 2012Q1.........................................25 Figure 21: CSF Index vs Investment in Building .................................................................................................................26 Figure 22: Value of Contracts Awarded Residential Sector: Public vs Private Sector (R'm) y/y% change ......................27 Figure 23: Value of Contracts Awarded Non-Residential Sector: Public vs Private Sector (R'm) y/y% change ..............27 Figure 24: Dwellings <80sqm BPP vs BPC (y/y% change) ..................................................................................................28 Figure 25: Dwellings >80sqm BPP vs BPC (y/y% change) ..................................................................................................29 Figure 26: BPP by segment: March 2012 ...........................................................................................................................29 Figure 27: Residential Contracts out to tender .................................................................................................................29 Figure 28: Residential BPP vs BPC......................................................................................................................................30 11



Figure 29: Residential Projects Postponed March 2012 ...................................................................................................30 Figure 30: Residential Sector by Segment: March 2012 (MAT) ........................................................................................30 Figure 31: Jabulani Hostel Redevelopment Project: Soweto ............................................................................................31 Figure 32: Low-income housing: Contracts (y/y% change) ...............................................................................................32 Figure 33: ABSA HPI

Figure 34: Price Differential: New vs Existing Property (ABSA) ..............................................33

Figure 35: Non-residential investment ..............................................................................................................................37 Figure 36: Non-residential BPP: New vs Renovations (y/y% change) (MAT) ...................................................................37 Figure 37: Non-residential New Space development: BPP vs BPC (MAT) ........................................................................37 Figure 38: Non-residential Development Index: Index 1999=100 ....................................................................................37 Figure 39: Landscape of private sector BPP for Non-residential Construction: March 2012 (MAT) ...............................38 Figure 40:Non-residential Value of Projects Awarded by building type: 2012Q1 ...........................................................39 Figure 41: Office space BPP vs BPC ....................................................................................................................................40 Figure 42: Office space y/y% change .................................................................................................................................40 Figure 43: Retails Sales vs Retail SQM Approved ..............................................................................................................42 Figure 44: Retail space BPP vs BPC ....................................................................................................................................42 Figure 45: Retail space y/y% change .................................................................................................................................42 Figure 46: Industrial space vs Manufacturing Production (y/y% change) ........................................................................44 Figure 47: Industrial space BPP vs BPC ..............................................................................................................................44 Figure 48: Industrial space y/y% change ...........................................................................................................................44 Figure 49: Contracts Awarded: Health and Education ......................................................................................................48 Figure 50: Value of Contracts Awarded: Education and Health 2012Q1 ..........................................................................48 Figure 51: Renovations Market .........................................................................................................................................49 Figure 52: Contribution of Renovations to Total SQM approved .....................................................................................50 Figure 53: Construction of tourist accommodation ..........................................................................................................52 Figure 54: Hotel Contracts Awarded: Value (R’m) vs Volume ..........................................................................................52 Figure 55: Foreign Travellers into South Africa .................................................................................................................53 Figure 56: Hotel construction postponement rate............................................................................................................53 Figure 57: Investment in Building: Constant 2005 Prices (R'm) 2011-2016......................................................................54 Figure 58: Civil infrastructure expenditure vs Economic production (SARB) ...................................................................56 Figure 59: Source: South African Reserve Bank Quarterly Bulletin ..................................................................................56 Figure 60: GFCF: Civil Works, Rm 2005 prices ...................................................................... Error! Bookmark not defined. Figure 61: Nett profit or loss before taxation ...................................................................................................................57 Figure 63: Pieter Snyman looks after stakeholder relations with a range of Northern Cape Communities. (www.ska.co.za) .................................................................................................................................................................58 Figure 62: Team currently working at SKA project in Northern Cape, Eskom, Conco and BV1 Consulting Engineers ....58 Figure 64: Northern Cape Key infrastructure developments............................................................................................59 Figure 65: Civil construction activity .................................................................................................................................61 12



Figure 66: Value of projects awarded: 2012Q1 .................................................................................................................61 Figure 67: Projects postponed 2012Q1 | Number ............................................................................................................61 Figure 68: Civil projects postponed vs Postponement rate ..............................................................................................62 Figure 69: Number of civil projects out to tender vs the number of civil projects postponed........................................62 Figure 70: Tendering activity: Civil: y/y change ................................................................................................................62 Figure 71: Client profile, value of civil contracts awarded (Rm): 2012Q1 ........................................................................63 Figure 72: Client profile, civil contracts out to tender (Number): 2012Q1.......................................................................63 Figure 73: Civil contracts awarded (Rm, 5qtr avg), by client type ....................................................................................63 Figure 74: Civil projects out to tender by client ................................................................................................................63 Figure 75: Civil Industry Confidence Indicators .................................................................................................................65 Figure 76: Civil Engineering price indices ..........................................................................................................................68 Figure 77: Presidential Infrastructure Coordinating Commission (Source Budget 2012/13) ..........................................70 Figure 78: High impact construction projects announced 2012Q1 ..................................................................................77

Tables Table 1: Macro Economic outlook ............................................................................................................................15 Table 2: Number of Liquidations (y/y% change)........................................................................................................22 Table 3: Labour Force, Construction, by Province: 2012Q1........................................................................................24 Table 4: CSF Index ....................................................................................................................................................26 Table 5: Investment in Housing, Rm 2005 Prices (SARB)............................................................................................28 Table 6: Provincial Integrated Housing and Human Settlements Development Grant Expenditure 2005/06 - 2011/12 ................................................................................................................................................................................33 Table 7: House Price Growth by size 2007-2011 ........................................................................................................34 Table 8: non-residential Investment, 2005 Prices (SARB) ..........................................................................................35 Table 9: Plans Approved for building construction March 2012 (MAT) Private Sector (Stats SA) ................................38 Table 10: Office Space Development Indicators ........................................................................................................39 Table 11: Key office projects awarded, tendered and postponed: 2012Q1 ................................................................41 Table 12: Retail Space Development Indicators ........................................................................................................41 Table 13: Key retail projects awarded, tendered and postponed: 2012Q1 .................................................................43 Table 14: Industrial Space Development Indicators ..................................................................................................43 Table 15: Key industrial projects awarded, tendered and postponed: 2012Q1 ..........................................................45 Table 16: Key Health Projects 2012Q1 ......................................................................................................................47 Table 17: Key Education Projects 2012Q1 .................................................................................................................47 Table 18: SQM Approved: Renovations and Additions (Private Sector only) ..............................................................49 Table 19: Top 10 Countries for Hotel Development in Africa: ....................................................................................51 Table 20: Key Hotel Projects 2012Q1 ........................................................................................................................52

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Table 21: Investment in Buildings: Rm, Constant 2005 prices: 2011-2016 (Base Case Scenario) .................................54 Table 22: Civil Investment ........................................................................................................................................56 Table 23: 2012Q1 VS 2011Q1 ...................................................................................................................................64 Table 24: 2012Q1 Annual percentage change (smoothed 5-qrt mov. avg.) .....................................................................64 Table 25: Civil Industry Confidence Indices .......................................................................................................................66 Table 26: Civil Tender Index: 1998=100 (smoothed).........................................................................................................67 Table 27: Civil Tender Index: 1998=100 (smoothed): ANnual Change by quarter ...........................................................67 Table 28: Civil Engineering price indices (Stats SA) ...........................................................................................................68 Table 29: Investment in construction Constant 2005 prices.............................................................................................72 Table 30: Investment in construction Constant 2005 prices: Y-Y % chg ...........................................................................73 Table 31: Market Share by Type of Projects (based on nominal value of construction projects awarded) ...................74 Table 32: Large Construction projects awarded: Jan - Mar 2012 (Databuild) ..................................................................75 Table 33: High Profile Projects announcements: 2012Q1 ................................................................................................77 Table 34: Construction Tender Index 1999=100, by quarter: y/y% chg ...........................................................................78 Table 35: Construction Tender Index 1999=100, by quarter: Smoothed .........................................................................79

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Economic Conditions Table 1: Macro Economic outlook Indicator

2010 Annual

Q3 2010

Q4 2010

Q1 2011

Q2 2011

Q3 2011

Q4 2011

Q1 2012

GDP

2.8%

2.6%

4.4%

4.8%

1.3%

1.4%

3.2%

2.7%

Gross Fixed Capital Formation (GFCF)

-3.7%

-1.4%

0.2%

1.4%

2.4%

4.9%

5.6%

-

Residential

-6.9%

-6.8%

-6.0%

-4.9%

-7.8%

-3.8%

-2.2%

-

Non-residential

2.1%

1.3%

2.1%

2.1%

-2.5%

-2.6%

-1.3%

-

1.7%

2.3%

-

2.5%

1.7%

0.8%

0.4%

-0.1%

GFCF by Private sector

-4.4%

3.8%

5.2%

5.6%

5.3%

5.4%

5.5%

-

GFCF by Public Enterprises

3.5%

-0.7%

0.3%

-0.4%

2.7%

5.8%

7.7%

-

GFCF by Government

-10.9%

-8.2%

-3.3%

-0.8%

0.1%

1.2%

3.1%

-

Investment in construction as % of GDP

10.0%

9.0%

9.0%

9.0%

9.0%

9.0%

9.0%

-

Construction works (civil)

(Source: Stats SA and South African Reserve Bank) Not all data available at release date of report.

Global Economy The global economic deterioration has deviated further since the beginning of 2012, with the European and Asian retreating back into a recession and continues to put pressure on global economic outlook. Growth and recovery of developed economies under structural revision has reported weaker growth than originally anticipated. On the other hand emerging markets and the US market has picked up slightly. Global unemployment remains high in many of the OECD economies. According to a report released by the OECD consumer price inflation in the OECD areas had increased by 2,7% for the year to March, compared to a 2,8% measured for the year to February. The easing of inflation resulted primarily from the slower growth recorded in energy and food prices from 7,9% and 3,8% to 6,5% and 3,5% respectively.

The Euro zone growth rate came in below the projected growth rate estimated during late 2011. Despite the Euro zone strain on global economic growth, the International Monetary Fund (IMF) increased their growth forecast mildly alongside calls for policies to restore confidence in advanced economies. The IMF increased global growth forecast for 2012 to 3,5% from the 3,3% forecasted three months ago, acknowledging slight but volatile improvement in global prospects. Projections for 2013 are expected to strengthen to 4%. The IMF stated that the 17-Nation Euro zone is likely to slip back into a mild recession in 2012 with output contracting by 0,5%, however the organisation increased its growth forecast for both the US and Japan to 2,1% and 2% respectively.

Figure 2: Global GDP Projections Figure 1: Global CPI rates

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(OECD)


(OECD)


The Euro zone admits the plight of establishing fiscal and structural reforms to abate further economic stagnation. No final solution has been published as yet. The OECD maintains the Euro zone rebound forecasts for 2012, forecasting a growth of 0,3% and 0,7% in the third and fourth quarters of 2012 respectively. Unemployment rose to a 15 year high of 10,8% earlier this year. The sovereign debt market showed poor indication of improvement, with weakening confidence in monetary policy. Andrew Balls, head of European Portfolio Management at Pacific Investment Management Co., sited imminent likelihood of Greece’s ‘Euro zone exit. Economic strains in Greece fragmented socio-political conditions, creating uncertainty. The Greek government is still to pay a €14,5bn payment, initially due on March 20 2012. Government is currently looking to source funds from civilians, to avert a collapse of the economy as the collapse could spark a new round of contagion in the Euro area, specifically for Italy and Spain. The Italian economy reported the largest declines throughout the 3 year recession and is at high risk of contagion in the event of the Greek Euro zone exit. The Italian economy decreased by further 0,8% in first quarter following 0,7% contraction in previous quarter. Unemployment in youth labour force (aged between 15-24) has risen to 35,9% in 2012 from 21,3% in 2007. A reform programme announced in April is expected to strengthen public finance, restore growth and improve competitiveness of economy. The programme should help government cut deficits as efficiently as possible. The Russian economy is still showing signs of recovery with continued petition, from the OECD, to consolidate future fiscal reforms. The Russian economy could realise high potential growth from natural oil resources. Investment is hampered by the requirement for improved social policy; business and economic security; and industrial development. Levels of corruption in the fore mentioned sectors challenges the rate of privatisation and foreign trade within the country. Increased fiscal stringency could raise GDP growth forecasts from 4,1% to 4,6% for 2012. Russia stands to benefit from the current high oil prices of $115/barrel, with resolved fiscal policy.

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China’s growth rate was lower than expected, with the IMF cutting the economic growth outlook to 8,2% from 9% for 2012. Growth in China is more moderate than expected, following the Euro zone economic stagnation. The sharp downturn in the European market could see China’s growth rate nearly halve. The IMF said an 8,2% growth forecast could be reduced by up to 4% if Europe’s crisis causes large declines in credit and output. According to OECD statistics China’s inflation increased from 3,2% to 3,6% in March 2012 year-on-year. According to IMF, the BRICS countries account for approximately 18% of global GDP, 40% of its population, 15% of global trade and holds 40% of global currency reserves. Emerging economies are key to global economic recovery. Brazil, who will host the 2014 Soccer World Cup and the 2016 Summer Olympics, has benefited substantially from being a member of BIRCS, through boosting its international standing by strengthening its ties to international individuals said to take leading roles in the 21st century. Brazil over took the United Kingdom as the world’s 6th largest economy this year, fuelled in part by growth in domestic consumption as millions of people climbed out of poverty and into the middle class. The IMF projections indicate a 3% growth for 2012, up from 2,7% growth rate in 2011. GDP growth is expected to reach 4,1% by 2013. With substantial oil and gas reserves continuing to be discovered off Brazil's coast in recent years, the country is now the world's ninth largest oil producer, and the government wishes to ultimately enter the top five. India’s growth rate is estimated at 7,7% for 2012 by the United Nations (UN). The government lowered its forecast to a 7,0% annual growth rate for the year from an earlier estimate of 8,5%. The IMF maintains its projection of the growth rate at below 7%. The slowdown has resulted from the Euro zone crisis together with domestic monetary tightening and political paralysis having discouraged investment.

State of the South African Construction Industry 3rd Quarter 2010

Domestic Conditions Real gross domestic product (GDP) slowed to an increase of 2,7% q/q (seasonally adjusted, annualised) in the 1st quarter of 2012, compared to 3,2% in the 4thquarter of 2011. Growth in the first quarter was led by the manufacturing sector (up 7,7% from 4,2% in the previous quarter), agriculture (which recovered to an increase of 3,4% from -5,0%), and construction (up 3,8% from 1,9%). Mining and Quarrying contracted by 16,8% after having showed no growth in the fourth quarter of 2011 and a 17,8% contraction in the third quarter of 2011. Mining was negatively affected mainly due to lower production in mining of gold. Gold was a safe haven for investors, but following on the trend of other commodity prices, the price of gold has slumped by over 20% from its peak of USD1895 in the third quarter of 2011 to around USD1574 at the end of May 2012. Gross value added by the construction industry (in simple terms this means the total selling price to the client less production costs associated to materials and services – and thus bluntly put, refers mainly to labour and profits), reported the most positive growth since the 3rd quarter of 2009 when it increased by 8,1%, at the start of the downward cycle, which is now in its third year. According to Stats SA the construction industry expanded by R6bn to R34bn in nominal terms, contributing just over 3% to the production side of the economy.

Figure 4: Household Savings and Debt to Disposable Income (SARB)

Household savings as a percentage of disposable income improved from -0,1% in the third quarter of 2011 to 0% in the last quarter. A zero rate is the most positive level since the last quarter of 2005 following extensive periods of a negative savings rate.

Gross Domestic Expenditure The Gross Domestic Expenditure (GDE) based on constant 2005 prices, annualised, improved to an annual increase of 4,0% y/y in the last quarter of 2011, from 3,7% y/y in 2011Q3. Final Consumption Expenditure by households slowed in the last quarter of 2011 to a 4,5% y/y increase compared to a 4,7% y/y increase in the third quarter, keeping the trend on a downward slope. Final consumption expenditure by general government increased by 5,2% y/y in 2011Q4, expanding from the 4,5% y/y increase in consumption expenditure reported in the previous quarter and improving even further from the 3,1% y/y incline measured in the second quarter.

Figure 3: GDP Quarterly

(Stats SA)

The household debt to disposable income ratio improved to 74,6% in the last quarter of 2011, from 75% in 2011Q3.Although the ratio, which implies that 74,6 cents of every Rand is going to paying off debt, is still relatively high, it is the lowest level recorded since 2006Q3.Lower debt ratios of between 50% and 65% had been measured prior.

17


Figure 5: GDE vs Final Consumption Expenditure (SARB)


Gross Fixed Capital Formation (GFCF)

works (including civil works, mechanical and electrical engineering), machinery, equipment and transport.

Gross Fixed Capital Formation for the residential sector fell -2,2% y/y in2011Q4 based on constant 2005 prices, from R24,83bn to R24,29bn. The non-residential sector fell by 1,3% y/y in 2011Q4, to R37,08bn from R37,56bn in 2010Q4. GFCF in construction works rose 2,3% y/y in 2011Q4, the highest growth rate over the past seven quarters. Investment in construction works increased to R110,36bn in 2011Q4 from R107,89bn in 2010Q4. The annual growth of private sector fixed investment increased by 5,5% y/y , from the 5,1% y/y in 2011Q3. The private sector contributed 63,9% towards GFCF in 2011Q4 from a 64% contribution in the previous quarter. It is anticipated that the pace of private investment will slow. GFCF by Public Corporations increased by 7,7% in 2011Q4, compared to the 6,7% y/y in 2011Q3. Public Corporation GFCF for the last quarter amounted to R86,51bn. Public Corporations contributed 22,3% towards GFCF in 2011Q4 from 22,1% in the third quarter. Momentum is expected to remain stable within Public Corporations. Delays in the construction of Eskom power station came as a result of labour disputes, while design delays were as a result of certain critical civil designs which were not concluded timeously for construction. The construction delays experienced in the boiler area were attributable to structural steelwork design, manufacturing, logistics and construction. The controversial e-tolling by SANRAL has caused much debate amongst residents and various work groups. The calamity continues tarnishing SANRAL’s credibility. Transnet’s R300bn infrastructure development programme is said to be on track to meet its deadline, however possible delays due to the Euro zone crisis could occur. GFCF by General Government increased for the third consecutive quarter and recorded the largest growth rate in 10 quarters, to 3,1% y/y. General Government contributed 13,9% towards total investment in 2011Q4, from 13,8% in the previous quarter. Outlook for further investment is embraced in the budget, where very low real growth rates are predicted. Total GFCF (including machinery, transport equipment and transfer costs) increased by 5,2% y/y for the fourth quarter of 2011 making this the sixth consecutive quarter of positive growth. Note: Gross fixed capital formation include spending on residential buildings, non-residential buildings, construction

18


Figure 6: GFCF: Construction (% Change) 2011Q4 (SARB)

Figure 7: GFCF: Gov, Public and Private Sector (% change) 2011Q4 (SARB)

Inflation Annual CPI rate in March 2012 was 6%, measuring 0,1% lower than the corresponding annual rate of 6,1% in February 2012. The Following items have put strong upward pressure on the CPI: 



 

The annual rate for alcoholic beverages and tobacco index increased 7,6% in March from 6,4% in February, due mainly to increases in excise duties. Housing and utilities index also reported an increase resulting from increases in actual rentals for housing and an increase in owners’ equivalent rent. The transport inflation index increases due to the 28c/litre increase in petrol price. The education and restaurant and hotels indices both measured annual rate increases.

Inflation is expected to average 6,0% in the second quarter of 2012 according to the South African Reserve


Bank and has been forecasted to remain within the target bracket until 2014. CPI is expected to average 6,0% in 2012, 5,5% in 2013 and 5,0% in 2014. Due to the recent improved outcome of inflation, the nearterm forecast was softened as a result of a new lower starting point for forecasting. Administered prices, however, remain on average in excess of the upper end of the target range and are said to be the main factor keeping upside pressure on inflation. Administered price inflation measured 11,6% in April 2012 and 8,9% when excluding petrol, with the key drivers being the 17,3% increase in electricity cost and 9% increase in education prices.

Figure 8: CPI

agriculture, tobacco products, chemical and chemical products and basic metals. Sectors that reported stronger increases in annual PPI were electricity (from 26,6% to 27,6% Mar-12). The PPI for exported commodities increased by 4,6% y/y in Mar-12, from 5,9% in Feb-12. Should PPI, which defines the cost of production, decelerate in annual increases it would imply that the factors considered in determining the index have measured declines and the cost associated to these factors have fallen, however this can be counteracted by increases in other factors. As the cost of raw materials increase PPI increases which in turn causes the seller to raise prices. As a result this affects CPI. With the pace of PPI expansion slowing in South Africa and given the outlook on CPI, it is anticipated that PPI will stabilise.

(Stats SA)

With hesitant domestic growth, inflation is expected to be contained within the SARB target bracket. Despite some evidence of price pressures becoming more broad-based, the moderate pace of ‘core’ inflation remains fairly stable. In a report by Reuters the Reserve Bank Governor, Gill Marcus said that inflation should fall back into the bank's 3% - 6% target range by year-end 2012 "on a sustainable basis".

Figure 9: PPI March 2012 (Y/Y% change)

(Stats SA)

Figure 10: CPI vs PPI March 2012 (Y/Y% change)

(Stats SA)

PPI PPI is the first indicator of inflation as it measures wholesale prices at producer level for consumer goods and capital equipment (physical goods) and excludes services. PPI is an accurate indicator for future CPI, while also assisting investors in industries that analyse potential sales and earnings. The Producer Price Index (PPI) for domestic output increased by 7,2% in March 2012, compared to 8,3% in February 2012. Items that contributed to the slower pace of inflation include: mining and quarrying (down from 8,2% in Feb12 to 6,6% in Mar-12), food at manufacturing level slowed from +10,9% in February to +9,6% in March. Other sectors that also reported slower rates were 19



Figure 11: Interest Rate vs CPI vs PPI (Stats SA)

Interest Rates On May 24 2012 interest rates were kept unchanged at 9% by the South African Reserve Bank, remaining favourable to the consumers at an all-time low, to support the economy while keeping an eye on price pressures. The benchmark repurchase rate was left at 5,5% as announced by the Governor of SARB Gill Marcus, which was in line with the estimates of all 18 economists surveyed by Bloomberg. Global uncertainties continue to impart a downside risk to the domestic economic growth outlook which remains relatively subdued. The crisis in the Euro zone has intensified since the beginning of the year. Although inflation breached the 3%-6% target bracket of the Bank in some months of 2012, it has since slowed, with the forecast of core inflation by the Bank being lower for the near term compared to the estimates announced in the previous MPC meeting. Core inflation is expected to peak at an average of 5,5% in the second quarter of 2013, marginally higher than in the previous forecast, before moderating, and averaging 4,5% in the final quarter of 2014. The rand currency continued to be dominated the changing sentiment of international financial markets. The rand, which has weakened along with other emerging-market currencies in the face of slower global growth, poses an upside risk to inflation, Marcus said. In addition renewed concerns about the Euro zone outlook caused the rand to depreciate further, in tandem with the weakening euro. Given the highly volatile and uncertain environment the MPC would like to maintain the current accommodative monetary policy stance. The Committee has assured that they will continue to monitor all events and asses risks that may impact their outlook and stands ready to act in either direction should it be deemed appropriate. 20


Figure 12: Repo Rate

(SARB)

When the interest rate increases, it implies that borrowing funds becomes more expensive, which dampens the demand for property and leads to a negative impact on the value of property. As calculated by ABSA, South Africa’s house price deflation continued in the residential market based on a year-on-year analysis and on the average value of homes for small, medium and large categories in the middle segment. Nominal house prices for small houses (80m2-140m2) declined by 17,8% y/y in April 2012. The ABSA HPI declined from 379,8 points in Apr-11 2011 to 312, 3 points in Apr-12. The average nominal price for a small home is R622 100. Medium sized houses (141m2220m2) reported a second consecutive month of contraction in nominal prices, falling by 1% y/y in April 2012 to a HPI of385,9 points from 389,7 points in the previous year. The average nominal house price for a medium sized home is currently R964 000. House prices of large sized houses (221m2-400m2) declined for the second consecutive month, measuring -0,5% y/y. The average price for a large home is R1 469 700.

Figure 13: ABSA HPI vs SQM Approved: Residential

(ABSA)


Business confidence Based on the Bureau of Economic research (BER) Business confidence index measured 38 points in the last quarter of 2011, from the 39 points measured in 2011Q3, after recording 55 points in the first quarter of 2011. An index value of at least 50 (preferably 60) is required to stimulate new investment, which means an environment conducive to stimulate new investment is plausible. From this it can easily be understood why investment into the business sector has declined, given the recorded BCI values. According to the South African Chamber of Commerce and Industry, the business confidence level fell to 94,3 points in April 2012, the lowest level in three years. Sentiment remains highly volatile in the uncertain and unpredictable economic climate both in the local and global markets. Three of the six financial sub-indices were negative, while three were neutral based on a month-to-month basis. The chamber said that in order for a higher, sustainable level of business confidence needs solid economic growth to support structural economic fundamentals. An economic environment that induces and seeks private fixed investment could also help to sustain an improving business outlook.

Figure 14: SACCI vs FNB Business Confidence Indices

(FNB)

Explanatory Notes: South African Chamber of Commerce Index (SACCI): Business Confidence Index based on movement in 9 sub-indices, or economic indicators. Not an opinion survey. BER Business confidence: FNB/BER Business Confidence Index is an opinion survey, based upon a quarterly survey amongst businesses by the Bureau of Economic Research

21


The RMB/BER Business Confidence Index climbed to 52 points in the first quarter of 2012, up from the previous quarter’s level of 38 points. An index less than 50 implies that the outlook in the business sector limited investment is taking place. With an index of 52 points, this is the first time in just over a year that a slight majority of respondents are experiencing good prevailing economic conditions. Business mood improved in all five of the sectors surveyed in the first quarter. New vehicle dealer confidence index rose to 73 points as an increase in new car sales were measured, jumping by 23 points from the previous quarter. Confidence for building contractors increased to a three-year high of 31 points, a 12 point increase. Retail and wholesale business confidence climbed by 5 and 10 points respectively in the first quarter of 2012, to 61 and 48 points. On the retail side, not all respondents felt positive movement in sentiment. Softer retail sales in combination with the inability to increase selling prices, has put pressure on profitability. On the wholesale side, there was an increase in confidence in wholesalers selling nonconsumer goods, but a decline in confidence of those selling consumer goods. The FNB/BER building confidence index grew by 5 points to 34 points in the first quarter of 2012 as the confidence levels amongst building contractors, manufacturers of building materials and amongst quantity surveyors. The 2012Q1 index of 34 points is the highest level since the last quarter of 2010. The increase in confidence was supported by increased activity and profitability. It is in the opinion of FNB/BER that the building cycle has bottomed and is now slowly recovering. The confidence of both residential and non-residential contractors rose in the first quarter. Residential contractor confidence registered a more moderate improvement, rising to 28 from 22 index points in 2011Q4. Non-residential contractor confidence climbed from 14 points in 2011Q4 to 38 during 2012Q1. The recovery in the industry remains fragile albeit the increase in activity in the sector, with the slowdown in sales seen by retailers and manufacturers of building materials being a supporter of the moderate growth. Global economic conditions still remain a key player in the outcome of movements in the domestic markets.


DECLINE MEASURED IN CONSTRUCTION LIQUIDATIONS SINCE MARCH 2008.

Liquidations The total number of liquidations that took place in South Africa in March 2012 amounted to 212increasing from the 200 liquidations (Feb-12), but declining by 39,4% y/y from 350 liquidations in Mar-11. Looking at the trend based on a 12 month moving annual total (MAT) the number of liquidations that took place in March 2012 amounted to 3 109 (MAT), slowing from 3 247 m/m (Feb 12-MAT) and 24,4% y/y from 4 110 (Mar 11-MAT).

The total number of voluntary liquidations in the construction sector for March 2012 amounted to 5, from 24 in March 2011 and 13 in February 2012. For the 12 month period a total of 138 (Mar 12-MAT) voluntary liquidations took place, reporting a 32% annual contraction from 203 (Mar 11-MAT). Total compulsory liquidations within the construction sector remained unchanged in March 2012 at 2 compared to the previous month, but increased from 0 (none) in March 2011. The MAT for March 2012 amounted to 20 compulsory liquidations, thus recording a 5,3% y/y increase from the 19 (Mar 11MAT).

The total number of compulsory liquidations that took place nationally in March 2012 amounted to 37 from 27 in February 2012 and grew by 208,3% y/y compared to 12 liquidations recorded in March 2011. The moving annual total for the period to March 2012 amounted 423 increasing 31,4% y/y compared to 322 (Mar 11MAT). The number of voluntary liquidations that occurred in March 2012 slowed to 175 from 338 liquidations in March 2011, and increased from 173 voluntary liquidations in February. For the 12 month period a total of 2 686 (Mar 12-MAT) voluntary liquidations took place, contracting by 29,1% y/y from 3 788 (Mar 11-MAT) voluntary liquidations that took place. Total liquidations in the construction sector to 7 in March 2012 compared to 15 (Feb 12) and 24 (Mar 12). Based on MAT values, the number of liquidations in the construction industry fell by 28,8% y/y to 158 (Mar 12-MAT) from 222 (Mar 11-MAT). THIS IS THE LARGEST

Figure 15: Liquidations in the Construction Sector

(Stats

Table 2: Number of Liquidations (y/y% change)

Construction: Total

Construction Compulsory

Construction Voluntary

Total –All sectors

1.8% 32.8% 4.0% -22.0% 55 29 -26 -47.3%

-44.1% -10.5% -17.6% 28.6% 5 7 2 40.0%

13.4% 38.2% 4.7% -25.2% 50 22 -28 -56.0%

4.7% 25.2% -3.4% -10.8% 1 062 612 -450 -42.4%

2008 2009 2010 2011 2011Q1 2012Q1 additional/less % change (Source: Stats SA (P0043)

22


Total Closed Corporations Construction 41.0% 34.5% 12.9% -35.3% 34 19 -15 -44.1%

Total Company Construction -64.8% 58.1% -28.6% 54.3% 21 10 -11 -52.4%

SA)


Construction: General overview Investment in the construction sector (including residential, non-residential and civil construction works) recorded an expansion of 0,9% y/y for 2011Q4 and has improved from the negative growth rates that were recorded between2010Q1 to 2011Q3. Total construction investment that took place in 2011Q4 amounted to R171,73bn from R170,27bn in 2010Q4.

respectively. The total investment value for private sector investment amounted to R248,15bn, while public corporations amounted to R86,51bn in 2011Q4. Of building type, civil construction works made the largest contribution to total GFCF of 28,4% for the fourth quarter of 2011, from the previous quarter’s contribution of 31%. The non-residential sector’s investment held a share of 9,5% total GFCF, slowing from the 11% contribution recorded in 2011Q3. Residential investment construction contributed 6,3% to total GFCF, after a 7% contribution measured in the third quarter. Of the total investment expenditure that took place in the construction sector, 64,3% went into civil projects, 21,6% was invested into the non-residential sector, while only 14,1% of total expenditure was invested into the residential market.

Figure 16: GFCF Total Construction

(SARB)

Investment growth in civil works measured an increase of 2,3% y/y in 2011Q4 improving from a 1,7% y/y growth rate measured in 2011Q3. GFCF measured R110,36bn in the fourth quarter of 2011, up from R107,89bn in 2010Q4, and increasing from R109,65bn investment values recorded in 2011Q3. The pace of contraction for investment in residential buildings has decelerated and has recorded the smallest contraction in investment in 17 quarters. GFCF in residential for the last quarter of 2011 amounted to R24,29bn from R24,83bn in 2010Q4. Although the residential sector remains under pressure, there has been an improvement in demand for housing, specifically smaller more affordable units, which is likely to enhance construction investment within the sector slightly.

According to Quarterly Financial Statistics P0044, (a sample of formal businesses operating in the nonagriculture sector) profitability in the construction sector improved in the last two quarters of 2011, up 6,4% y/y in 2011Q4, however slowing from a 15% y/y expansion measured in 2011Q3. These profitability growth numbers came off a low base, but showed substantial improvement from the -44,4% y/y and 81,3% y/y declines in profit values measured in the first and second quarters of 2011 respectively. Profitability improved to an average estimated rate of 5,7% in the second half of 2011, compared to an average of 1,7% in the first half of 2011. Spending on capital expenditure (including buildings, improvement, plant, machinery, furniture and fittings and vehicles) fell by 40% y/y in the 2011Q4, although spending on vehicles did increase by 25% since 2011Q3.

Non-residential investment has recorded an annual contraction rate of 1,3% in 2011Q4 from the previous quarter’s decline of 2,6% y/y. Non-residential investment fell to R37,08bn in the last quarter from R37,56bn in 2010Q4. Investment by general government grew by 3,1% y/y in 2011Q4, escalating from the 1,1% y/y increase measured in the 2011Q3. GFCF in monetary value inclined from R52,24bn (2011Q3) to R53,83bn (2011Q4). Private enterprises and public corporations recorded increases of 5,5% y/y and 7,7% y/y in 2011Q4 23


Figure 17: Net Profit before Tax

(Stats SA)


first quarter of 2011, with a loss of 45 000. In 2011Q1 a total of 1 031 000 people were employed in the construction industry. South Africa is amongst the world’s worst countries in terms of inequality, which is being further exacerbated by the low employment growth in the country. The unemployment rate rose to 25,2% in the first quarter of 2012, increasing by 282 000 people compared to the previous quarter and by 162 000 people compared to the same quarter a year ago. The unemployment rate is currently sitting at 4 526 000 which is at the same level observed in 2011Q2. Figure 18: Sector Contribution to Total Construction

(Stats SA)

General Sector Employment According to Statistics South Africa the total employment for individuals between the age of 15 – 64 years grew 2,3% y/y in the first quarter of 2012 from 13,12 million to 13,42 million. Employment did however contract by 0,6% q/q, from 13,497 million in 2011Q4. Formal sector employment declined by 107 000 jobs while the informal sector employment decreased by 28 000 jobs. As the public sector continues to endure in creating new jobs, various sectors have recorded increases in the number of people employed including mining and quarrying, manufacturing, wholesale and retail trade and transport, amongst others. Construction employment recorded the largest quarter-on-quarter decline by sector falling by 71 000 employees or 6,7% q/q. The manufacturing sector declined by 67 000 employees in 2012Q1 compared to the previous quarter, thus recording a 3,7% q/q contraction. The agricultural sector measured the largest quarterly growth in employee numbers, expanding by 4,1% (or 26 000 employees). On an annual basis the utilities industry reported an annual contraction of 6,2% in the number of employees from 97 000 in 2011Q1 to 91 000 in 2012Q1, therefore holding the largest annual contraction rate. The agricultural sector measured the largest annual increase of 8,8% y/y in 2012Q1 to 656 000 employees from 603 000 employees in the same quarter of 2011.

Construction Employment Employment in construction fell by 6,7% q/q from 1 057 000 employees in 2011Q4 to 986 000 employees in 2012Q1. The sector also measured an annual decline in the number of employees when compared to the 24


The large loss of jobs in South Africa has been broad based and has affected both the informal and formal markets. It has been found that excess real wages has a role in suppressing employment creation. Employment levels in our country remain under stress, as demand levels remain subdued and the desire for individuals to take on business risk in the current global and domestic economic uncertainties are limited. Although many SME’s wish to expand, there is inadequate support for many of them to grow. Table 3: Labour Force, Construction, by Province: 2012Q1

Province WC EC NC FS KZN NW GAU MPU LIM TOTAL

2012Q1 (‘000)

Q-Q % chg

Y-Y % chg

135

-6.3%

8.9%

108

-12.9%

-10%

19

0%

35.7%

47

-4.1%

-16.1%

210

-12.1%

-7.1%

46

-6.1%

2.2%

265

2.3%

-6.7%

64

-17.9%

-7.2%

92

-3.2%

-1.1%

986

-6.7%

-4.4%

Provincially, the number of people employed in the construction industry declined in 7 of the 9 provinces on quarter-on-quarter basis. Mpumalanga reported the largest contraction in construction sector job loss of 17,9% q/q from 78 000 in 2011Q4 to 64 000 in 2012Q1. The Eastern Cape followed with a 12,9% q/q

State of the South African Construction Industry 3rd Quarter 2010

contraction in construction jobs to 108 000 in the first quarter from 124 000 in the last quarter of 2011. Looking at employment numbers based on annual rates, the Free State reported the largest annual decline of 16,1% y/y from 56 000 in 2011Q1 to 47 000 in 2012Q1. The Northern Cape measured a 35,7% y/y expansion in construction employment growing from 14 000 in 2011Q1 to 19 000 in 2012Q1. The number of women employed in the construction industry declined by 0,9% y/y in the first quarter of 2012 to 107 000 compared to 108 000 in the same quarter of 2011, while also increasing by 5,4% q/q. The contribution of women to the number of individuals employed in the construction industry softened to 10,9% in the first quarter of 2012 from 11,2% in the previous quarter.

Figure 19: Women to construction employment: 2012Q1

Figure 20: Contribution of Women to total employed in the Construction Industry 2012Q1

(For information about women owned companies that are registered in South Africa, visit www.cidb.org.za

25



Critical Success Factor Index: Building The critical success factor index (CSF), is a weighted index that includes key indicators regarded as necessary to stimulate investment. These include affordability and confidence. It does not take into account external factors that could dampen investment for example, shortage of electricity or the implementation of policies such as those imposed by the NCA. Affordability takes into account the current household debt ratios and changes to the prime lending rate that affects mortgage payments. Confidence levels are represented using the RMB/BER business confidence index.

Table 4: CSF Index

2007

2008

2009

2010

2011

Q1

158.7

131.9

127.4

165.2

189.6

Q2

157.8

125.4

149.7

166.5

183.8

Q3

150.6

117.2

154.1

174.5

178.4

Q4

143.2

116.3

157.1

181.5

175.8

lower lending rates have improved affordability, and although business confidence remain low, by historical terms, the CSF index has improved to an index value of 189.6 (revised) in 2011Q1, but deteriorated to 175.8 in 2011Q4, due to a weakening in business confidence (from 48 in 2011Q2 to 38 in 2011Q4). Savings of households “improve” to zero, after having been in the red since 2005Q4. While not particularly exciting, it is encouraging to see some improvement in the savings rate, a critical ingredient to stimulate higher levels of private sector investment, considering the current risk adverse behaviour of financial institutions. Household debt levels are also finally starting to improve, after a stable lending environment since the beginning of 2011, from 82,7% in 2008Q1 to 74,6% in 2011Q4, the lowest rate since 2006Q3. The improvement in affordability is however subject to a parallel improvement in confidence levels, which has improved to an index value of 52 in the first quarter of 2012, according to the latest figures released by the BER/FNB. Thus if all other indicators also continue to improve and lending rates remain stable, the CSF index should recover in the first half of 2012.

Y-Y Change Q1

-6.2%

-16.9%

-3.4%

29.7%

14.7%

Q2

-6.2%

-20.5%

19.4%

11.2%

10.4%

Q3

-9.3%

-22.2%

31.5%

13.3%

2.2%

Q4

-9.9%

-18.8%

35.0%

15.6%

-3.2%

The CSF peaked at an index value of 169,0 in March 2006 and then dropped 33,0% to 113.2 by September 2008, sending signals that there are constraints in the industry. Since December 2008,

26


Figure 21: CSF Index vs Investment in Building


Expenditure in the Public and Private Sector The value of residential contracts awarded in the month of March 2012by the Private Sector amounted to R105m, with low-income housing amounting to R35m, while the value of residential contracts amounted to R70m. Based on a 12 month moving average to March 2012, the private sector’s total value for residential contracts amounted to R8,1bn, declining 22,9% y/y from contract values of R10,5bn (Mar 11-MAT). The value of contracts awarded to non-residential buildings by the Private Sector R2,26bn for the month of March 2012 increasing from R1,93bn (Mar 11). Looking at the moving annual total for March 2012, the value of non-residential contracts amounted to R21bn (MAT) which increased by 35,3% y/y from R15,5bn (Mar 11-MAT).

Figure 22: Value of Contracts Awarded Residential Sector: Public vs Private Sector (R'm) y/y% change

Construction expenditure in the residential market by the Public Sector for the month of March 2012 amounted to R139,1m, with R107,2bn being spent on low-income housing and R31,9m. Looking at the trend on a moving annual total, Public sector expenditure for residential contracts awarded amounted to R1,5bn (Mar 12-MAT), falling by 32,5% y/y from R2,3bn (Mar 11-MAT). Awarded contract values in the Public sector for the non-residential sector amounted to R1,5bn in March 2012 improving from R784m (Mar 11). The Public Sector recorded a substantial 63% y/y increase in contracts awarded for the 12 month period to March 2012, from R8,4bn (Mar 11-MAT) to R13,6bn (Mar 12-MAT).

27


Figure 23: Value of Contracts Awarded Non-Residential Sector: Public vs Private Sector (R'm) y/y% change


Residential Construction Table 5: Investment in Housing, Rm 2005 Prices (SARB)

Quarter

2008

2009

2010

2011

Investment in housing, Rm 2005 prices, Seasonally adjusted annualised rates R34,157

% Annual change

R33,486

-8.5%

R32,969

-7.3%

R32,012

-7.4%

R 30,824

-9.8%

R 30,280

-9.6%

R 29,797

-9.6%

R 29,339

-8.3%

R27,857

-9,6%

R26,455

-12.6%

R25,233

-15.3%

R24,827

-15.4%

R24,571

-11.8%

R24,400

-7.8%

R24,281

-3.8%

R24,292

-2.2%

-7.2%

Note: All data revised to 2005 base year, revised downward by SARB (Source: SARB Quarterly Bulletin)

Investment into the residential sector contracted by 2,2% y/y in 2011Q4, to R24,292m (seasonally adjusted annualised rate). Although the rate of decline has slowed the industry remains in a recession, with investment having slowed to just 75% of what was invested during 2006 and 2007.

28


The residential market remains tight, with the anticipation of a slight improvement to be seen in the medium term, however what needs to be observed is the demand side of housing (i.e. Affordable units) and the current overpricing of housing. The number of SQM approved for dwellings smaller than 80sqm reported an annual contraction of 3,9% in March 2012 to 1 013 116m2(MAT) from 1 053 970m2 (Mar 11-MAT), this is the first annual contraction for dwellings less than 80sqm to be reported in 6 months. The number of SQM completed softened recording an increase of 2,8% y/y in March 2012, from a 15,4% y/y and 9,9% y/y increase in January and February 2012 respectively. The 12 month moving annual total for building plans passed in dwellings less than 80sqm in March 2012 amounted to 873 931m2 (MAT) from 849 822m2(Mar 11-MAT).

Figure 24: Dwellings <80sqm BPP vs BPC (y/y% change)

Dwellings greater than or equal to 80sqm continued in the negative territory but the pace of contraction rate has slowed. In March 2012 the number of SQM approved fell by 0,9% y/y from 3 828 910m2 (Mar 11MAT) to 3 793 060m2 (Mar 12-MAT).


The number of SQM completed for dwelling >80sqm for the 12 month period to March 2012 amounted to 2 812 477m2(MAT) increasing by 0,9% y/y from2 787 363m2 (Mar 11-MAT). Although the number of SQM completed remains in positive territory, the expansion rate has slowed from the 4,7% y/y increase measured in the previous month.

Figure 27: Residential Contracts out to tender

Figure 25: Dwellings >80sqm BPP vs BPC (y/y% change)

The number of residential (including low cost housing) projects awarded for the 12 months to March 2012amounted to 208, where 114 (Mar 12MAT) projects were residential and 94 (Mar 12-MAT) projects were low-cost housing projects. This amounted to an18% y/y decline in projects awarded for total residential buildings, falling from 253 (Mar 11-MAT).

Total SQM approved for residential construction (including new and renovations) based on MAT reported a year-on-year contraction of 2,9% y/y in March 2012, falling from a 2,7% y/y increase measured in February 2012, reporting the largest annual contraction rate since November 2010. The total number of SQM approved for the residential sector amounted to 9 275 606m2 (Mar 12-MAT) from 9 548 344m2 (Mar 11-MAT). The number of SQM completed for total residential buildings, including both renovations and new plans, recorded 3,9% y/y decline from 6 642 194m2 (Mar 11-MAT) to 6 384 152m2 (Mar 12-MAT). The number of SQM approved for new residential building declined by 0,4% y/y in March 2012, weakening from an 8,3% y/y increase in February 2012. A total of 6 133 182m2 (Mar 12- MAT) were approvedfrom 6 156 348m2 (Mar 11-MAT). This is the first annual contraction rate measured in 12 months. The number of SQM completed for March 2012 amounted to only 4 736 926m2 (MAT) from 4 766 720m2 (Mar 11-MAT). Although February measured an increase in SQM completed of 1,3% y/y and March 2012 recorded a 0,6%y/y contraction is the slowdown is far lower than the contraction rates of between 10% and 30% y/y reported from August 2010 to August 2011.

Figure 26: BPP by segment: March 2012

29


As indicated by the information and graphs above, the uptick that was reported late 2011 and early 2012 has taken a knock with most of the indicators slowing. The residential market, albeit the demand, remains highly pressured by consumer affordability. Tough conditions persist and the building sector is


under much scrutiny as the need in the housing sector changes from a traditional buying market of standard middle-segment houses, to higher demand on affordable units, with higher rental demand also remaining in the market. The number of building plans passed for flats and townhouses slowed to a 4,2% y/y increase in March 2012 from a 19,6% y/y growth measured in February 2012. The number of plans passed in amounted to 1 327 006m2 (Mar 12-MAT) from 1 273 468m2 (Mar 11-MAT). SQM completed in this segment continue to report negative growth rates however at a slower pace. In March 2012 a 7% y/y contraction was measured with total SQM amounting to 1 050 518m2 (MAT). The annual decline rate softened from the previous months decline of 12% y/y.

The number of residential projects postponed in March amounted to 169 (MAT), with 104 projects being residential and 65 projects being low-income housing. For the MAT period to March 2012, the number of projects postponed declined by 19,1% y/y compared to the previous year where 209 (MAT) contracts had been postponed. The postponement rate remains on a downward trajectory.

The residential sector is highly sensitive to supply mechanism dependant on developers sentiment as well as affordability which is still of concern despite the low interest rate level. Signs of a slow recovery which take into account the inflationary pressures, the slowing and cutting of the GDP growth rate, increase in fuel and administrative costs and the negative outlook of economic recovery in the international markets, indicates that the road remains difficult for the residential construction sector. Contractors operating in the residential sector will remain under considerable pressure in the medium term, affecting profitability and their ability to create job opportunities.

Figure 28: Residential BPP vs BPC

30


Figure 29: Residential Projects Postponed March 2012

Details of the projects awarded can be downloaded from www.industryinsight.co.za. For more details on geographical analysis pertaining to construction developments please contact our offices or send your requirements to [email protected] for a quotation.

Figure 30: Residential Sector by Segment: March 2012 (MAT)


Social housing Social housing is an integral part of the government’s quest to enhance racial integration in South Africa, according to the Eastern Cape Economic Development MEC Mcebisi Jonas at the official launch of the multi-million rand Southernwood social housing project in East London. The Social Housing Regulatory Authority will build its capacity and credibility as a national regulator, invest in and monitor the social housing sector and form strategic partnerships with both local and international financiers to attract more funds to the social housing sector, this according to the 2012 budget. During 2011 the Minister of Human Settlements and the members of the executive council who are responsible for human settlements approved substantial increases to the finance linked individual subsidy programme (FLISP), which aims to improve a households ability to access finance by providing a deposit. “The amendments to the programme include an increased threshold for participation in the subsidy scheme for households earning between R7 000 to R15 000 per month and an increased subsidy amount from R54 000 to R83 000 with a maximum property value of R300 000. The amendments aim to improve the access of low and middle income working families to participate in the housing programmes and attempts to keep the subsidy level aligned with the general price trends in the residential property market.” Gauteng is said to spend R8,5bn on formalising squatter camps over the next three year period, with the first phase of the R487m Jabulani Hostel Redevelopment Project in Soweto having been opened early in March 2012. The project will see 1 919 community residential and state-subsidised units being completed over the next five years. To be built on the site of the single-sex hostels designed for migrant labourers during South Africa's apartheid era, the new units will provide a more familyoriented environment for the current hostel dwellers as well as other income groups. Bulk infrastructure services will be completed by the end of April, with occupation expected at the end of May. 31


Figure 31: Jabulani Hostel Redevelopment Project: Soweto

Government is focusing on numerous initiatives to resolve this dilemma by 2030. In addition to this, the Department of Human Settlements (DHS) has started looking at a “gap-funding” model which provided a R1bn guarantee fund aiming to bridge the gap in housing loans to middle-income earners. Government continue to cushion the poor and unemployed, with social assistance spending projected to rise from R111,2bn in 2012/13 to R129bn in 2015. Old Mutual financial investor group raised R9bnfor Housing Impact Fund for South Africa, being one of the largest funds of its kind. The funds were raised to build affordable units for rental and sale, in addition to providing housing loans and rental accommodation for students and families. The Fund, together with its partners had several projects with a target of 120 000 affordable housing units. Government continues to consider the use of alternative and innovative building materials to address the back log. Therefore social housing brings some good opportunities for companies, developers and contractors who are involved in such building material. The problem associated with using such building techniques relates to the lack of knowledge by new home owners in addition to governments limited procedures being used to educate individuals about alternative building structures. Pending a joint effort by both private and government sectors, we can anticipate the housing backlog to remain in high volumes.


Activity in social housing has shown signs of improvement recording an annual increase of 15% y/y in March 2012. The number of low cost housing projects awarded, including hostels, grew to 94 (MAT) projects from 82 (MAT) in the same month of the previous year. This improved from February 2012’s projects of 90 (MAT), which increased by 3% y/y. On a tendering basis, the number of low-income housing projects tendered in March 2012 declined to 142 (Mar 12-MAT) from 160 (Mar 11-MAT), thus recording an 11,3% y/y contraction rate, which accelerated from the 6,3% y/y contraction measured in the previous month. Postponements of low-income housing contracts grew by 41,3% y/y in March 2012, increasing from 46 (Mar 11-MAT) projects to 65 (Mar 12-MAT) projects. Although March reported an annual increase, the number of postponed projects slowed from the 72 (Feb 12-MAT) projects in the previous month.

Figure 32: Low-income housing: Contracts (y/y% change)

Currently, the South African Government, through the Department of Human Settlements, builds approximately 200 000 subsidised houses annually, which is impossible to meet the current backlog. The department received R22bn for delivery of housing in 2011, while a further R100bn was allocated to other departments to assist with bulk infrastructure needed to establish successful settlements. According to the department, a subsidised house currently costs approximately R55 000.

32


During the 2010/11 financial year the number of additional residential units completed through the Housing Development Finance Programme amounted to 121 879 units, but is expected to fall to 88 441 units for the current 2011/12 year. Projections for the 2012/13 financial year currently sits at 127 200. The number of additional sites serviced during the 2010/11 financial year was 64 362 and this is also expected to fall during 2011/12 to 33 361, before picking up during 2012/13 to 72 876 units. The Department of Human Settlements reiterated the importance of Public Private Partnerships. A successful partnership came in Mazista/Skierlik in the North West on land that was donated by a farmer.

The Department has strengthened their relationship with Cuba in order to recruit more Cuban engineers. The Department also visited Kenya, Netherlands and India.

Tracking progress in social housing development is difficult due to lack of regularly updated official statistics. However, there is a general perception that while a lot is being done in terms of planning (including drafting a more detailed framework to accelerate delivery); little is being done at roots level. The South African government has earmarked extensive amounts for housing construction, but has not increased the actual number of units to be constructed. This is because the funds allocated to the Department of Human Settlements will be used for integrated development, including additional critical services such as clinics, schools and roads.


Table 6: Provincial Integrated Housing and Human Settlements Development Grant Expenditure 2005/06 - 2011/12 Province

2005/06

2006/07

2007/08

2008/09

2009/10

607

637

337

981

1313

1599

1803

R ‘million

2010/11

2011/12

Medium term estimates

EC FS

370

528

467

859

963

1301

1380

GAUT

1357

1760

2614

2778

3187

3772

4323

KZN

816

1075

1311

1627

2180

2714

3150

LIMP

383

605

633

825

997

1235

1415

MPUM

269

330

652

797

795

976

1118

NC

103

105

231

219

325

273

313

NW

615

697

786

952

1100

1289

1578

WC

552

769

1122

1306

1581

1869

2142

TOTAL

5072

6505

8152

10343

12442

15027

17222

(Source: National Treasury)

House Prices

Figure 33: ABSA HPI

Figure 34: Price Differential: New vs Existing Property (ABSA)

According to the 2012Q1 ABSA Housing Review, the 2011 nominal house price was lower than the nominal prices measured during the previous year, however after taking into account the effect of consumer price inflation, (i.e. Real House prices) were on average lower in 2010. In 2011 the average price of middle-segment housing as measured by ABSA increased by 2,2%, falling from 2010’s average price increase of 7,3%. Real price deflation of 2,7% was reported for 2011, while in 2010 a real prices measured a 2,9% increase. In 2011 price growth for houses were as follows:   

Small houses (80sqm-140sqm) measured a -4,2% y/y nominal and -8,7% y/y real Medium houses (141sqm-220sqm) measured a 1,7% y/y nominal and -3,2% y/y real Large houses (221sqm-400sqm) measured a 3,2% y/y nominal and -1,8% y/y real

33



ABSA house prices for small sized houses fell by 17,8% y/y in April 2012, declining to R622 129 from R756 520 in (April 2011), this is the largest decline within the segment measured to date. Medium sized houses measured a 1% y/y contraction in prices, falling to R964 039 from R973 554. Although this contraction rate was small, it accelerated from the -0,1% contraction measured in the previous month. Large housing units also measured a decline in prices, falling to R1 469 653 in April 2012 from R1 477 571 in the April of previous year. The ABSA housing review noted that affordability of housing remained favourable up to the end of 2011, however high debt-to-income ratio, large portion of consumers with impaired credit records, the NCA and the banks’ lending criteria all played a role in hampering the favourable trend. It is in our opinion that there remains an effective demand for housing. Some may distinguish between real demand and effective demand. Effective demand can be described as the number of individuals applying for home loans, while real demand is the actual number of individuals being granted loans. There may be a rift between the demand by consumers who are willing to take on the debt and the supply of funds by banks granting these consumers access to finance (i.e. The National Credit Act). Table 7: House Price Growth by size 2007-2011

2007 2008 2009 2010 2011

Large houses (221sqm+)

Medium sized houses (141 – 200 sqm)

Small houses <141 sqm)

17.5% 5.4% -0.1% 4.4% 5.8%

17.4% 4.8% -2.6% 4.7% 3.3%

11.4% 5.6% -2.7% 15.6% -10.5%

(Source: ABSA)

Demand for smaller-sized, high-density housing remains high albeit affordability constraints, access to mortgages and rapidly rising housing operating costs. We don’t anticipate much positive movement in the housing market in the short-term. Affordability is however not limited to size only. A report by ABSA says affordability in the residential market improved slightly as a result of, firstly, low interest rates making mortgage interest rate which stands at 9% (33,5% lower than the mortgage rate recorded in December 2008). Secondly, the banks’ selective relaxation of mortgage lending criteria over the past two years, thus both factors supported the residential market. According to Dr. Andrew Golding, CE of Pam Golding Properties, the rising cost of living continues to put pressure on consumer affordability. He also noted that the Groups perspective highest demand for housing falls in the R1,5m – R3m price bracket, but they have also seen a growing demand from young, first-time home buyers wishing to gain a foothold in the owning of a residential unit. The FNB Property Barometer released in April 2012 indicated that the first quarter of 2012 saw an acceleration in house price growth in almost all of the segments when segmented by room number and title deed, contrary to the data released by ABSA. “With wage growth having seemingly slowed in 2011, house price growth more recently accelerating mildly, and no sign of further interest rate reduction since late-2010, it would appear that the steadily improving housing affordability trend since around 2009 has almost ground to a halt.” As indicated by the FNB Estate Agent Survey, large financial pressure on households still exists.

34



Non-residential construction Table 8: non-residential Investment, 2005 Prices (SARB)

Quarter

Investment in nonresidential buildings, Rm 2005 prices, Seasonally adjusted annualised rates

% Annual change

2007

R33,198

20.8%

R33,556

16.7%

R34,036

12.7%

R34,706

9.0%

R34,810

4.9%

R35,859

6.9%

R37,440

10.0%

R38,587

11.2%

R39,534

13.6%

R38,606

7.7%

R38,856

3.8%

R39,088

1.3%

R37,964

-4.0%

R38,163

-1.1%

R38,073

-2.0%

R37,556

-3.9%

R37,356

-1.6%

R37,199

-2.5%

R37,086

-2.6%

R37,079

-1.3%

2008

2009

2010

Non-Residential investment has provided a cushion to the sharp decline experienced in residential investment, but indicators are suggesting a weakening in this market in the next 12 to 18 months, following a sharp contraction in the rate by which new plans are approved, high vacancy rates and poor income yields. The value of projects awarded in the non-residential sector for 2011Q4 increased to R11,1bn, from R3,1bn in 2011Q3 (Constant prices). Tendering activity contracted strongly during 2010, as fewer projects were put out to tender. Excluding tenders related to the education sector (as most of these projects are very small, internal renovations, with no construction associated with it), tendering activity in the non-residential sector looked to recover during 2011 with double-digit growth rates being recorded bearing in mind however these were coming off a low base. The tender index for nonresidential buildings excluding education recorded a 21,1% y/y growth in December 2011, slowing from October and November’s annual increase of 32,1% and 24,4% respectively. Thus considering the leading indicators for nonresidential investment, we expect actual investment to contract in the next few quarters, but are encouraged by the fact that activity levels have started showing some improvement which could support a soft recovery in 2013. Major NEW projects awarded during the 1st Quarter of 2012:   

2011

   

35


R850m New Cradlestone Shopping Mall, Gauteng, Krugersdorp R456m New Brits Hospital, North West, Brits R365m New Government Office Agrivaal, Gauteng, Pretoria R300m New Burgersfort Regional Mall, Mpumalanga, Burgersfort R240m New Platinum Square retail centre, North West, Rustenburg R200m New Office Block , Western Cape, Bellville R200m Alice Lane Office, Gauteng, Sandton


       

R180m New Protea Glen Mall, Gauteng, Soweto R175m New Chemistry Building, University of Western Cape, Bellville R150m New Head Office for GCIS, Gauteng, Pretoria R150m New Makro Store, Free State, Bloemfontein R137m New Casualty-Frontier Hospital, Eastern Cape, Queenstown R135m New Paediatrics Wing-Frontier Hospital, Eastern Cape, Queenstown R130m New Massbuild Distribution Centre, Gauteng, Midrand R100m New Urban Park Development, KwaZulu Natal, Umhlanga

Amidst improved indicators, the outlook for future investment by the private sector remains dim. The number of SQM approved for new private development grew by 7,1% y/y to 2 620 259m2 (Mar 12-MAT) from 2 445 609m2 (Mar 11-MAT). The role of the private sector has deteriorated as a result of affordability constraints and limited access to funding and is expected to remain under strain as the market simply does not provide sufficient stimulus to encourage private sector investment, but they are however still the largest investors by client type. Government investment on the other hand, is supported by demand for improved social infrastructure including increased investment in health, education and protective services. The challenge remains whether or not these allocated budgets can be effectively spent. The renovations market saw signs of improvement from April to August of 2011 with each month under consideration reporting positive growth rates within the non-residential renovations markets. This was short-lived as growth rates slumped and fell back into negative territory with September 2011 and continued to deteriorate recording a 30% y/y decline in March 2012 to 1 020 511m2 (MAT) from 1 457 336m2 (Mar 11-MAT). March 2012 reported the largest contraction since September 2010.

36



Figure 35: Non-residential investment

Figure 36: Non-residential BPP: New vs Renovations (y/y% change) (MAT)

Figure 37: Non-residential New Space development: BPP vs BPC (MAT)

Figure 38: Non-residential Development Index: Index 1999=100

37



Landscape of Non-residential buildings

Figure 39: Landscape of private sector BPP for Non-residential Construction: March 2012 (MAT)

Table 9: Plans Approved for building construction March 2012 (MAT) Private Sector (Stats SA) WC Offices Shops Industrial Housing Renovations Housing Renovations Other TOTAL Non-res % of SQM approved of Total

EC

NC

FS

NW

GAU

LIM

MPU

TOTAL

112 535

24 538

7 423

5 115

86 562

8 668

258 528

4 503

18 724

526 596

113 369

55 670

9 448

54 425

81 867

21 328

130 619

7 376

112 266

586 368

307 932

93 341

13 073

31 672

380 803

36 277

511 647

46 521

86 029

1 507 295

1 333 190

266 876

141 689

307 299

644 727

403 265

2 377 658

270 283

460 772

6 205 759

857648

285827

59540

150749

362806

154745

1068091

135351

67667

3 142 424

275897

100342

51402

48660

149154

36168

318409

29063

11416

1 020 511

3 000 571

826 594

282 575

597 920

1 705 919

660 451

4 664 952

493 097

756 874

12 988 953

27.0%

33.1%

28.8%

23.4%

40.9%

15.5%

26.1%

17.7%

30.2%

28.0%

(Source: Stats SA)

38

KZN


State of the South African Construction Industry 4th Quarter 2011

Figure 40:Non-residential Value of Projects Awarded by building type: 2012Q1

Of total construction expenditure that took place in the first quarter of 2012, the health sector received the largest portion of 29% or R2,5bn in construction expenditure. The retail sector had a construction expenditure value amounting to R2,27bn which amounted to a market share within the non-residential sector of 26% for 2012Q1. Commercial property and the education sector had projects awarded to construction expenditure values of R1,71bn and R1,54bn with market shares of 20% and 18% respectively. Industrial contract values amounted to R411m while entertainment construction expenditure values amounted to R171m in the first quarter of 2012.

Office Space Development Table 10: Office Space Development Indicators Apr 11

May 11

Jun 11

Office space approved MAT (SQM; y/y % chg)

-23.3%

-16.3%

-10.0%

Office space completed MAT (SQM; %chg)

-34.6%

-41.6%

Business Confidence (SACCI)

102.5

101.2

RMB/BER Business Confidence (Quarterly)

Aug 11

Sep 11

Oct 11

Nov 11

Dec 11

Jan 12

-7.2%

-2.5%

3.6%

8.2%

17.8%

21.2%

22.1%

18.0%

16.6%

-30.1%

-31.1%

-26.1%

-23.1%

-26.3%

-37.2%

-35.2%

-30.8%

-34.4%

-37.9%

102.4

99.0

98.6

98.4

97.5

97.4

99.1

97.1

99.5

95.7

48

Jul 11

39

(Source: Stats SA, RMB/BER, SACCI)

39


38

Feb 12

Mar 12

52


The number of SQM approved in the commercial property market reported its first positive annual growth rate in 30 months in September 2011 and continued to improve recording a 16,6% y/y increase in building plans passed from 451 702m2(Mar 11-MAT) to 526 596m2 (Mar 12-MAT). The annual growth rates recorded slowed in March 2012 compared to the growth rates measured between November 2011 and February 2012. In the Office Vacancy Survey report released by SAPOA, which covers 15,1 million SQM of stock across 50 commercial nodes, the vacancy rate remained unchanged at 10,4% in the first quarter of 2012 compared to the previous quarter, while increasing from the 9,9% vacancy rate measured in 2011Q1. The report states that it is in their opinion office vacancy rates are beginning to stabilise. Since the second quarter of 2011, the SQM of new office space available for rent due to “new” additional space, increased by 39% to 709 135m2. Of this, 373 040m2 are still available for rent, which implies a vacancy rate for new office developments of 52%. While still extremely high, it has improved from 61,8% in 2010Q3. Most of the new additional office space was added in Rosebank, contributing 13% to the national total, with a vacancy rate of 24,7% for new space and 7,7% for existing space. Sandton contributed 11,7% to the national total, but with a much higher vacancy rate of 89%. The average R/m2 for new space was R160/m2in Sandton vs R140/m2 in Rosebank. Other areas where new space is being added include Menlyn, Cape Town CBD, Eastern suburbs of Pretoria, Centurion, Umhlanga, Cresta and Randburg, to name a few. On the supply side, the number of square meters approved for March 2012 contracted by 37,9% y/y, the highest annual rate measured in three months. Total building plans completed amounted to 367 823m2 (Mar 12MAT) from 591 948m2 (Mar 11-MAT). The annual rate of -37,9% y/y measured in March 2012 declined further from the 34,4% y/y contraction measured in the previous month.

According to research conducted by Broll, Sandton CBD is a major growing node for office space development in Gauteng. New developments in the planning stages are expected to produce 400 000m2 of high rise modern buildings. Rentals have stabilized, with some rentals having been reduced in some cases. New developments are expected to rent at R140 –R150/m2 for 2013, while existing prime grade rentals can be negotiated from R125/m2. New buildings are currently under construction for several large users, including Alexander Forbes (36 000m²), Ernst & Young (23 000m²) and Marsh (18 000m²).

Building activity has already contracted sharply in this sector, and with further declines reported in pipeline activity, the market is not expected to recover in the short to medium term. Optimism within the business sector is highly sensitive to consumer behaviour which is directly and indirectly impacted by factors taking place within the international market. RMB/BER business confidence level has improved, but conditions remain tough and highly competitive. Figure 41: Office space y/y% change

40


Figure 42: Office space BPP vs BPC


Table 11: Key office projects awarded, tendered and postponed: 2012Q1

Province

City

R mill (Current prices)

Western Cape

Bellville

R200m

New Alice Lane Offices

Gauteng

Sandton

R200m

New Head Office - GCIS

Gauteng

Pretoria

R150m

Project Status Awarded

Description New Office Blocks- First Rand Bank

Tendered

-

Postponed

New Offices – Seers on Maude

-

-

-

Gauteng

Sandton

R900m

(Source: Databuild/ Industry Insight Database)

Retail Space Development Table 12: Retail Space Development Indicators

Retail space approved MAT (SQM % chg y/y) Retail space completed MAT (SQM % chg y/y) Residential approved (SQM % chg y/y) Retail trade

Apr 11

May 11

Jun 11

Jul 11

Aug 11

Sep 11

Oct 11

Nov 11

Dec 11

Jan 12

Feb 12

Mar 12

-40.6%

-25.8%

-27.9%

-15.1%

-11.8%

-2.0%

19.6%

-5.4%

-0.4%

-30.6%

-21.9%

-15.2%

-29.6%

-35.0%

-18.7%

-25.8%

-17.9%

-16.5%

-29.1%

-19.8%

-4.3%

-0.3%

-4.1%

-3.4%

3.2%

1.6%

2.4%

0.5%

-1.5%

-1.9%

-1.7%

-0.5%

0.6%

1.3%

2.7%

-2.9%

10.0%

1.1%

2.4%

3.0%

7.7%

7.7%

7.5%

7.2%

8.7%

4.2%

6.7%

6.8%

(% chg y/y) (Source: Stats SA)

The approval of new retail space reported a contraction of 15,2% y/yin March 2012 to 586 368m2 (MAT).Consumer confidence remains unstable, while disposable income to debt ratio is still high (although it has showed an improvement to below 75% to disposable income). These factors, in addition to higher fuel and food prices, impact negatively on prospects in the retail sector. With interest rates continuing to remain in favour of the consumer, spending has shown some signs of growth, but not to the degree anticipated. Retail sales in slowed to 4,2% y/y in January 2012 from 8,7% y/y increase in December 2011, but has pick-up to 6,8% y/y in March 2012. According to The Nielsen Company’s retail service director of South Africa and Sub-Sahara, Craig Henry, retailing in 2025 is expected to look a lot like the market does currently. "Considering everything that is happening on the global stage, the changes are small adjustments to the turbulence in the market, they are not dramatic," said Craig Henry. Internet shopping has also picked-up and is said to stay. The company too conducted an online survey that indicated that the number of South African’s shopping online had steadily increased over the past two years, with 58% of respondents in the survey of active internet users saying that they used the internet for shopping. This was an increase from the 53% that said that they shopped online in 2010, and the 44% that gave the same answer in 2009. In addition to increased internet sales, the Global Payment Tracking Survey 2011 conducted by Visa indicated that South Africans

41



are getting more comfortable with spending on their debit card. Between 2010 and 2011 debit cards accounted for 42% of the card market, and consumers are spending more on their cards.

Figure 43: Retails Sales vs Retail SQM Approved

Final household consumption has measured positive growth since the first quarter of 2010 growing to a 5,4% y/y increase in 2011Q2 but has since softened reporting a 4,5% y/y increase in consumption in the last quarter of 2011. Retail sales are said to improve supported by an increase in the emerging black middle class and the slight increase in disposable income. According to recent building statistics from Statistics SA the number of square meters approved for new retail space declined by a minimal 3,4% y/y in March 2012 from 614 649m2 (Mar 11-MAT) to 593 837m2 (Mar 12-MAT). The annual contraction rate slowed in December 2011 to 4,3% y/y from rates of high above 15% between October 2009 and November 2011. January recorded a 0,3% y/y decline, but declined further to a 4,1% contraction in February 2012, before improving to the 3,4% y/y contraction measured in March.

Figure 44: Retail space BPP vs BPC 42


Figure 45: Retail space y/y% change

State of the South African Construction Industry 2nd Quarter 2012 Table 13: Key retail projects awarded, tendered and postponed: 2012Q1

Project Status

Description

Province

City


Awarded

New Cradlestone Shopping Mall

Gauteng

Krugersdorp

R850m

New Burgersfort Regional Mall-Phase 1

Mpumalanga

Burgersfort

R300m

New Platinum Square

North West

Rustenburg

R240m

New Protea Glen Mall

Gauteng

Soweto

R180m

New Makro Store

Free State

Bloemfontein

R150m

Tendered

-

-

-

Postponed

New Letaba Mall

Limpopo

Tzaneen

R600m

(Source: Databuild/Industry Insight Database)

Industrial and Warehouse Space Development Table 14: Industrial Space Development Indicators

Industrial space approved (SQM, MAT) Industrial space approved (SQM, % chg y/y) Industrial space completed (SQM, MAT) Industrial Plans complete (SQM, % chg y/y) Kagiso’s Purchasers Managers Index (PMI) Manufacturing Production (Index) Manufacturing Production (% chg y/y)

Apr 11

May 11

Jun 11

Jul 11

Aug 11

Sep 11

Oct 11

Nov 11

Dec 11

Jan 12

Feb 12

Mar 12

1,293.5

1,357.7

1,290.6

1,322.8

1,279.8

1,370.2

1,434.1

1,461.8

1,454.6

1,446.0

1,483.1

1,507.3

-21.3%

-7.0%

-12.8%

-10.6%

-12.9%

-5.4%

-0.2%

4.8%

8.6%

6.0%

11.5%

15.7%

852.6

841.4

841.5

803.4

728.1

730.3

748.3

785.4

831.6

849.8

864.2

794.7

-35.1%

-33.3%

-33.7%

-35.0%

-40.0%

-37.9%

-32.4%

-22.9%

-12.8%

55.5

54.9

54.2

46.4

48.2

50.2

50.5

51.6

49.4

53.2

57.9

55.1

94.7

102.8

104.9

99.4

107.7

110.5

113.2

117.1

93.1

90

103.7

107.4

0.1%

1.0%

1.1%

-6.1%

5.9%

8.2%

1.2%

2.8%

2.4%

2.3%

4.0%

-2.7%

-9.3%

1.5%

-7.3%

(Source: Stats SA, Kagiso)

An important indicator used to gauge the future prospect for industrial space development is the rate of change in local manufacturing production. Manufacturing production growth fell into negative territory for the first time in 7 months reporting a 2,7% y/y contraction in March 2012 as an economic slowdown in Europe weakened demand for exports. Recently South Africa announced a R5,75bn 3 year program to boost investment in the manufacturing sector and raise growth in the economy. Eligible companies can apply for capital-investment grants and funding to improve their competitive and energy efficiency. Minister of Trade and Industry, Rob Davies said that the manufacturing sector has experienced some challenges including rising electricity prices and volatile currency. With manufacturing accounting for 15% of South Africa’s GDP, it has slowed from the 21% share measured in 1977. Companies will have to agree not to fire workers while receiving support under the program and to meet government targets that seek to draw more of the country’s black majority into the mainstream economy, Davies said.

43



Kagiso’s purchasing manager index (PMI) declined to 55,1 points in March 2012, after having improved in January and February 2012, where new sales orders and business activity indices drove the sharp rise in the 57,9 points in February. Although the PMI level is said to be remaining at a favourable level, however outlook is said to be less optimistic.

Figure 46: Industrial space vs Manufacturing Production (y/y% change)

Figure 47: Industrial space BPP vs BPC

Figure 48: Industrial space y/y% change

The number of SQM approved has taken an upward position recording the largest annual increase since May 2007. A 15,7% y/y increase in the number of SQM approved was recorded in March 2012, growing by a total of 204 655m2 from March 2011 to 1 507 295m2 (Mar 12-MAT). The annual growth rate in SQM approved increased from the February 2012’s annual growth rate of 11,5% y/y which subsequently expanded from the 6% y/y increase measured in January 2012. Building plans completed moved into positive territory reporting a 1,5% y/y increase in March 2012, measuring the first positive annual growth rate in 25 months. Plans completed grew from 851 356m2 (Mar 11-MAT) to 864 219m2 (Mar 12MAT). The expansion in March 2012 improved from a9,3% y/y decline rate measured in February 2012. With government focusing on investment in the manufacturing sector in order to boost economic activity, this creates a positive outlook for industrial space through possible higher demand. The Euro zone recession has caused a slowdown in exports as a result of strained finances and lower demand from their side, the manufacturing sector is being supported through investment. Respondents to the Manufacturing Circle's quarterly survey were optimistic in the light of government's infrastructure investment drive, but said various risks dampened their confidence. These risks included a deficiency in water and electricity supply and scarcity of raw materials like good grade coal and steel. Rising transport and energy costs, and uncompetitive labour costs coupled with the appreciating rand value were also key factors. 44



The East London Industrial Development Zone (IDZ) has announced an R80m automotive component supplier investment for the upcoming Mercedes Benz C-Class W205, at a ceremony hosted at the company’s industrial park in May. The investor, RG Brose, will be suppliers of seat structures, window and door modules for the W 205 C-Class model. “We will initially employ about 80 local workers as we’ll be doing business with the MBSA plant in East London. Once we utilise our position in the IDZ and do business with the likes of VW and General Motors, we then aim to grow to about a 180 jobs by 2017,” says RG Brose Managing Director Stefano Gulmini. Minister of Trade and Industry Rob Davies briefed the media on the gazetting of Special Economic Zones (SEZ) Bill for public comment. The minister said that special economic zones would expand the work done by the Industrial Development Zones (IDZs) and attract more foreign investment. In particular SEZs would also help stimulate industrialisation outside of the country’s main urban areas of Cape Town, Gauteng, Durban-Pietermaritzburg, East London and Port Elizabeth, he said. The department’s IDZ programme was initiated in 2000 and four zones had been designated, with three currently operational – namely Coega near Port Elizabeth, East London and Richards Bay, while the fourth IDZ at OR Tambo International Airport in Johannesburg has yet to come into operation. Table 15: Key industrial projects awarded, tendered and postponed: 2012Q1

Project Status

Description

Province

City


Awarded

New Massbuild Distribution Centre

Gauteng

Midrand

R130m

Tendered

-

-

-

-

Postponed

-

-

-

-

(Source: Databuild/Industry Insight Database)

45



Government Expenditure on Social Infrastructure South Africa is ready to roll out a multi-billion rand state-led infrastructure drive that focuses on infrastructure development in energy, transport and logistics, infrastructure to schools, hospitals and nursing colleges. Deputy President Kgalema Motlanthe unveiled the detailed plan of government which is expected to be taken to the provinces and other stakeholders to start implementation. The plan was first announced by President Jacob Zuma in his State of the Nation address in February 2012. According to the report, Public Private Partnerships are on the table. The social and economic infrastructure projects are expected across all nine provinces, focusing on undeveloped areas. Energy projects will focus on ‘greening’ the nation, supporting sustainable energy initiatives through a diverse range of clean energy options. Several new hospitals will be built, and existing ones refurbished in preparation for the National Health Insurance Scheme. About 122 nursing colleges will be revamped, and 90 new schools will be built this year. In Limpopo investment in rail, water pipelines and energy generation and transmission has been identified, with emphasis on coal and platinum mining for local use and export. In KwaZulu Natal plans exist to strengthen the transport corridor between South Africa’s main industrial hubs, while improving access to Durban’s export and import facilities. Work will focus on strengthening maritime capacity in the Saldanha-Northern Cape linked region in the Western Cape.

Health Sector The government are implementing changes to transform the health sector, which specifically involves improving the quality of and management of health services for national health insurance (NHI). Other interventions include intersectoral collaboration with government departments responsible for key determinants of health such as education, water, sanitation and housing, as well as community participation and partnerships with civil society and the private sector. Expenditure in the health sector grew from R16,4bn in 2008/09 to R26bn in 2011/12 and is expected to increase over the medium term to R33,9bn. The 2012 Budget included new allocations of R97,6m in 2012/13, R618,4m in 2013/14 and R1,9bn in 2014/15. Of the Budget the following took priority, R100m, R150m and R200m was allocated to nursing colleges to plan and coordinate the upgrading, recapitalisation and maintenance of nursing colleges, R128m allocated to provide the first of 5 large hospital PPP’s under the Hospital Revitalisation Grant. Spending on infrastructure includes allocations for the hospital revitalisation, health infrastructure and nursing college grants. The NHI will be implemented over a 14-year period, starting in 2012. Health Minister Aaron Motsoaledi identified 10 districts in the company for the awaited pilot of South Africa’s National Health Insurance (NHI) pilots would focus on the most vulnerable sections of society across the country, reduce high maternal and child mortality through districtbased health interventions, and strengthen the performance of the public health system in readiness for the full rollout of NHI. The districts are: OR Tambo (Eastern Cape), Gert Sibande (Mpumalanga province), Vhembe (Limpopo province), Pixley ka Seme (Northern Cape), Eden (Western Cape), Dr K Kaunda (North West), Thabo Mofutsanyane (Free State) and Tshwane (Gauteng).

46


State of the South African Construction Industry 2nd Quarter 2012 Table 16: Key Health Projects 2012Q1

Project Status

Description

Province

City


Awarded

New Brits Hospital

North West

Brits

R456m

Refurbishment of Mental Health facility

Northern Cape

Kimberley

R400m

Additions to Thabazimbi Hospital-Phase 3

Limpopo

Thabazimbi

R160m

Additions to Vredenburg Hospital-Phase 2B

Western Cape

Vredenburg

R150m

Structural Repairs –Prince Mshiyeni Memorial Hospital

KwaZulu Natal

Umlazi

R142m

New Casualty/OPD-Frontier Hospital

Eastern Cape

Queenstown

R137m

New Paediatric Wing-Frontier Hospital

Eastern Cape

Queenstown

R135m

New Medi-Clinic

Gauteng

Centurion

R230m

New Williston Health Care Centre-Phase 3

Northern Cape

Williston

R120m

-

-

-

-

Tendered

Postponed


Education Sector The 2012 Budget provides allocation over the MTEF period of R149,6m, R322,1m and R257,5m for a number of priorities including education infrastructure grant for disaster relief (R119,5m in 2012/2013 and R158,9m in 2013/2014). The infrastructure grant to provinces in the National Treasury vote was phased out in 2011/12 and the education portion of this grant became the education infrastructure grant. This grant is used to supplement the ongoing infrastructure programme in provinces, including the construction of new schools and additional spaces such as specialist rooms, and the maintenance programmes of the new and revamped structures built from the schools infrastructure backlogs conditional grant. R18,3bn is allocated to this grant over the MTEF period.R13bn has been allocated over the MTEF period to the school infrastructure backlogs grant, a new grant introduced in 2011/12. The grant’s purpose is to eradicate and replace inappropriate school infrastructure such as mud schools and other unsafe structures, and to ensure that all schools have basic services like water, sanitation and electricity. These funds will be used to replace 395 mud schools, provide water to 1 307 schools, sanitation to 536 schools and electricity to 1 434 schools. Provincial education departments will ensure that the ongoing maintenance costs of these schools form part of their infrastructure plans. R663,7m has been allocated over the MTEF for the technical secondary schools recapitalisation conditional grant to build, refurbish and resource new and existing teaching spaces such as technology workshops and classrooms. Under this grant, 35 new workshops will be built, 124 workshops will be refurbished, 128 workshops will be provided with equipment and 445 technology teachers will be trained. Table 17: Key Education Projects 2012Q1

Project Status

Description

Province

Awarded

New Chemistry Building- University of Western Cape

Western Cape

Tendered

-

-

Postponed

New Cedar Special School

KwaZulu Natal

(Source: Databuild/ Industry Insight Database) 47


City


Bellville

R175m

-

-

Cedarville

R250m


The number of contracts awarded in the health sector increased by 76,2% y/y in March 2012 to 222 (MAT) from 126 (Mar 11-MAT), while also measuring a 3,3% m/m increase from 215 (Feb 12-MAT). The number of projects awarded in the education sector grew 51,0% y/y increase in March 2012 to 586 (MAT) projects from 388 (Mar 11-MAT). The trend for contracts awarded in education continues to decelerate and remains on a downward trajectory. On the other hand, project activity in the health sector has picked up again and is currently moving upward. Figure 49: Contracts Awarded: Health and Education (Databuild/Industry Insight)

KwaZulu Natal held the largest construction expenditure value by province of R589,6m for contracts awarded in 2012Q1 in the health sector. The Western Cape held the largest construction expenditure value by province for contracts awarded in the education sector amounting to R582,9m for 2012Q1. As depicted in figure 49, the value of health contracts exceeded the value of education contracts in 6 of the 9 provinces, indicating the shift from focus on education to health projects. Figure 50: Value of Contracts Awarded: Education and Health 2012Q1 (Databuild/Industry Insight)

48



Building Renovations Table 18: SQM Approved: Renovations and Additions (Private Sector only)

Square meters Approved

% Annual Change

Residential

Non-residential

Total

Residential

Non-residential

Total

5,123,325 4,081,631 3,317,821 3,442,503

1,421,398 1,830,398 1,664,577 2,049,542

6,544,723 5,912,029 4,982,398 5,492,045

-3.1% -20.3% -18.7% 3.8%

-0.7% 28.8% -9.1% 23.1%

-2.6% -9.7% -15.7% 10.2%

2011Q1

750,154

214,869

965,023

-6.9%

-19.8%

-10.1%

2011Q2

790,849

224,896

1,015,745

-6.8%

-17.2%

-9.3%

2011Q3

814,379

271,049

1,085,428

-13.7%

-49.6%

-26.7%

2011Q4

804,534

331,276

1,135,819

-4.9%

-11%

-6.7%

2012Q1

737,989

193,969

931,958

-1.6%

-9.7%

-3.4%

2007 2008 2009 2010

(Source: Stats SA)

Figure 51: House Renovations vs House Price Growth

49


Figure 51: Renovations Market


Figure 52: Contribution of Renovations to Total SQM approved

During late 2010 and most of 2011 the renovations market was a major segment in the building sector, with many contractors finding work only in the renovations market. The renovations market weakened throughout 2011, with the number of SQM building plans passed for both the residential and non-residential sectors reporting fairly high annual contraction rates. As seen in Table 18 above, the pace of contraction has slowed, however negative annual rates are still being reported. Renovations and additions in the residential market contributed 24,2% to the national total of SQM approved for the construction industry (excluding civil projects) in March 2012 compared to a 23,7% contribution measured in March 2011. The contribution of additions and renovations in the development of non-residential space measured 7,9% contribution to total national construction SQM approved for March 2012, slowing from the 8,2% contribution towards total SQM approved measured in February 2012. Given that a portion of the renovations market is unaccounted for due to what’s known as the “ghost market” one could assume that the contributions could be slightly higher than the values measured according to Stats SA. During 2010 and 2011 when the renovations market was at a peak, the affordability of consumers to purchase new houses was limited, therefore consumers opted to renovate their homes in order to add value to their existing property. Renovations in both the residential and non-residential markets have slumped, with the non-residential sector recording a 30% y/y contraction in SQM approved for March 2012, the highest rate of decline measured since September 2010. One would anticipate that new Green Legislation on non-residential properties would maintain levels of renovations in the relevant sector, however the rejuvenation and retrofitting of such buildings, specifically within the inner city, are said to be highly costly and given liquidity constraints in the private sector there has been a slowdown. Total SQM approved for non-residential renovations in March 2012 amounted to 1 020 511m2 (MAT) from 1 457 336m2 (Mar 11-MAT). Renovations within the residential sector have been fairly flat at contraction rates of between 7% and 8% y/y for the past 8 months. March 2012 recorded a decline in SQM approved of 7,4% y/y from 3 391 996m2 (Mar 11-MAT) to 3 142 424m2 (Mar 12-MAT). This rate grew from February 2012’s annual contraction of 7% y/y.

50



Tourism Accommodation Lonrho, an industrial conglomerate is partnering with global private investment company easyGroup to expand the easyHotel.com brand of hotels into Africa, starting in Johannesburg. The first easyHotel.com-branded hotel, which will be known as the "easyHotel Rissik Street", will the first of 50 hotels to be opened in Africa by 2016 under an exclusive 20-year master franchise agreement between Lonrho and easyHotel. The historic Stuttafords department building in Johannesburg will be completely revamped to become the "easyHotel Rissik Street", which is located in the city’s regenerated and rapidly expanding CBD. easyHotel's low-cost business model gives customers an internationalstandard bedroom at a highly competitive price. The "easy" brand is one of most recognised and successful value-formoney brands in the world. In April this year an article was released by ‘How we made it in Africa’ which identified Africa’s top locations for new hotels. It stated that Nigeria-based W Hospitality Group conducted a survey on the international hotel brands’ development activities in Africa. At the beginning of 2012, hotel operators reported a total of 208 hotels, with just over 38,000 rooms, in their development pipelines in Africa. This means signed deals, but not necessarily foundations being laid. Pipeline work in Africa has seen a massive increase, with a 31% increase in hotels and a 21% increase in rooms. Development in North Africa historically outperformed other African regions, with the Arab Spring leading to delays and cancellations. The 2,4% increase in pipeline rooms in 2012 is eclipsed by the chains’ advances in sub-Saharan Africa where, after a reduction in 2011, this year sees a massive 42% increase in pipeline rooms. The survey revealed the Top 10 countries by number of rooms for hotel development in Africa 2012 as displayed in table 19 below: Table 19: Top 10 Countries for Hotel Development in Africa: By number of rooms 2012

Rating

Country

Number of Hotels

Rooms

1

Nigeria

43

6 808

Nigeria,

Africa’s

largest

country

by

population, the powerhouse of West Africa and is said to overtake South Africa this decade as the largest economy on the

2

Egypt

19

5 923

3

Morocco

35

5 809

4

Algeria

14

2 537

continent, has almost 7 000 rooms under contract, up 2 000 on the 2011 figure. New openings have recently included Radisson Blu, Four Points by Sheraton, Ibis and Legacy in Lagos. Many groups have hotels under

5

Tunisia

8

2 096

6

Ghana

11

1 752

construction there, including Accor, Hilton, IHG and Protea, the last named increasing their presence in the country from 10 hotels

7

Gabon

8

1 260

8

Libya

3

1 084

to 16 hotels in the next three years. Other groups hoping to enter the Nigerian market for the first time, and who have signed deals,

9

South Africa

8

990

10

Cote d’Ivoire

3

858

include Kempinski, Mantis, Marriott and Wyndham.

(Source: How we made it in Africa)

51



Table 20: Key Hotel Projects 2012Q1

Project Status

Description

Province

Awarded

Urban Park Development

KwaZulu Natal

Tendered

-

-

Postponed

New Apartment Hotel- Le Chateau

North West

City


Umhlanga

R100m

-

-

Brits

R300m


The number of contracts awarded for hotels in March 2012 increased by 64,3% y/y to 23 (MAT) projects from 14 (Mar 11-MAT). As indicated by the blue line in figure 54, the annual growth rate has decelerated and is currently on a downward trajectory, indicating a slowdown in demand for hotel development, supported by limited private finance. The value of these projects has therefore taken a negative turn and is also on a downswing. Albeit the downturn in value, March 2012 recorded a 1 248,4% y/y increase in the value of projects awarded from R196,8m (Mar 11-MAT) to R2 653,5m (Mar 12-MAT), bearing in mind this growth rate has come off of a very low base. It is important to recognise that given the state of global finances, the tourism industry internationally measured declines, specifically post the financial crisis from 2008 to 2010. The total number of foreign tourists who visited South Africa for holiday purposes measured a 96,4% y/y contraction in number in February 2012, to 21537 (Feb 12) from 598 173 (Feb 11) respectively. January and February 2012 have recorded the largest annual contractions to date of 98% y/y and 96,4% y/y. On the other hand, when looking at the number of travellers who entered South Africa, for whatever reason being holiday, business, study or transit, the number of individuals increased by 8,6% y/y in February 2012, growing to 677 674 from 631 351 (Feb 11).

Figure 53: Construction of tourist accommodation

52


Figure 54: Hotel Contracts Awarded: Value (R’m) vs Volume


Figure 55: Foreign Travellers into South Africa

53


Figure 56: Hotel construction postponement rate


Longer term outlook: Investment in buildings Table 21: Investment in Buildings: Rm, Constant 2005 prices: 2011-2016 (Base Case Scenario)

Residential % Change Non-residential buildings % Change Total Investment in Building % Change

2011

2012

2013

2014

2015

2016

24372 -3.1% 37180 -6.5% 61552 -3.9%

24 902 2.2% 38 031 2.3% 62933 2.2%

25 660 3.0% 39 058 2.7% 64718 2.8%

26 741 4.2% 40 965 4.9% 67706 4.6%

27 718 3.7% 42 598 4.0% 70316 3.9%

29 050 4.8% 44 797 5.2% 73847 5.0%

Based on key economic variables, predicted in the base case scenario outlook, investment in residential buildings is expected to increase by 2,2% y/y in 2012 after weakening during 2011. On average investment in residential building is expected to grow by an annual rate of 2,5%. Non-residential investment also softened during 2011 by 6,5% y/y, but is anticipated to improve in 2012 by 2,3%. Investment in non-residential buildings is expected to grow by an annual average of 2,1%. Growth forecasts for both the residential and non-residential sectors have been revised downward due to uncertain global and domestic market conditions, tight budgets in the private sector, higher administrative expenses and overall higher costs being relayed onto the consumer.

Figure 57: Investment in Building: Constant 2005 Prices (R'm) 2011-2016

54



Medium term forecasts are underpinned by the following considerations: 





Political environment – South Africa’s national government continues to strive for policies that drive change, encourage certain actions, while also preventing other actions. Policies that ensure allocation of resources and execution thereof are done so correctly. There remains a ‘rift’ in the ANC, encouraged after the expulsion of Youth League President Julius Malema. The most recent turmoil in the ANC in media releases was regarding “The Spear” painting of President Jacob Zuma caused much outcry of embarrassment, disgust and hurt towards the President himself, family members and avid ANC supporters. In addition police commissioner Bheki Cele has been probed with allegations of conduct in the awarding of a multibillion rand lease tender to businessman Roux Shabangu, indicating corruption at high levels within government departments. Economic environment –international economies continue to weaken, impacted directly by the negative effects taking place in the Euro zone area, with Greece having fallen back into recession. Domestic economic conditions are still dampened by global markets and growth prospects for 2012 going forward have been cut by organisations including the IMF and SARB. Business conditions are somewhat stable, given improvement in the confidence index; however volatility in other sectors relating to cost factors may impact the markets relatively easily. Inflationary environment – inflation fell back into the 3% - 6% target bracket of the SARB in April 2012 and is expected to stabilise. The inflation outlook has improved in terms of both the projected level of the peak and the profile of returning to the target. There is upside risk to the inflation outlook with the main risks to the inflation outlook remaining the oil price, administered prices and the impact of global risk adjustments on the exchange rate.

55


Financial environment: 

Lending rates – lending rates have been left unchanged for the past 18 months at 9%, the lowest level in 30 years. Given the economic conditions, the MPC wished to maintain its accommodative monetary stance and support expansion through favourable lending condition to consumers. TheMPC has made note of all vulnerabilities and uncertainties in global and domestic markets and monitor events closely in order to act in whichever direction deems fit.



Exchange rate – The exchange rate is being affected by changing investor sentiment in the international finance market. The rand volatility increased and it appreciated to a level of R7,65 against the US dollar before resuming a depreciating trend. “The exchange rate was given some impetus by the announcement in April of the possible inclusion of the rand in the Citibank World Global Bond Index.” Concerns surrounding the Euro zone outlook have caused the rand to depreciate further, feeding into the inflation outlook.



Consumer spending: Minister of Finance Pravin Gordhan noted in his Budget Vote speech in May 2012 that consumer spending and investment are were growing robustly as of the last quarter of 2011, however has shown signs of moderation. Household consumption expenditure is expected to contribute positively towards real GDE in the first quarter of 2012, but at a slower rate than measured in 2011.


Civil Construction Expenditure The civil industry consists mainly of investment in economic infrastructure such as transport, water & sanitation services, energy and mining. Investment in civil works is funded primarily by government and state owned enterprises including Eskom, Transnet and ACSA. This section of the review aims to clarify some of the current trends in civil construction, as well as look at key performance indicators affecting the short and near term outlook in the civil industry. These indicators are monitored on a continuous basis.

Current market activity Investment growth in civil works (including professional and contracting fees) accelerated somewhat in 2011Q4 to 2,3% y/y following a 1,7% increase in the previous quarter. According to the South African Reserve Bank, approximately R176bn was spent on construction works during 2011, up R10bn in nominal terms, compared to R166bn spent during 2010. Spending on civil construction (excluding spending on machinery and equipment) stabilised in the fourth quarter following a 16% q/q increase in the previous quarter (2011Q3). For the year spending on civil contracting is estimated to have increased by 6% y/y, compared to a 39% decrease in 2010, according to surveys compiled by

SAFCEC. Data for the 1st quarter of 2012 was not yet available at the time of publishing the review.

Figure 58: Civil infrastructure expenditure vs Economic production(SARB)

Table 22: Civil Investment

Current prices

Mar-09 Jun-09 Sep-09 Dec-09 Mar-10 Jun-10 Sep-10 Dec-10 Mar-11 Jun-11 Sep-11 Dec-11

2005 prices sea adj annualised

Y/Y Change

Q/Q Change

41828 40584 40736 42368 42330

110751 47.1% 13.7% 109698 33.5% -1.0% 111355 18.2% 1.5% 111880 14.9% 0.5% 110368 -0.3% -1.4% 41149 108881 -0.7% -1.3% 40895 107798 -3.2% -1.0% 41893 107885 -3.6% 0.1% 43199 108434 -1.8% 0.5% 42588 109033 0.1% 0.6% 44276 109653 1.7% 0.6% 46315 110356 2.3% 0.6% Figure 59: Source: South African Reserve Bank Quarterly Bulletin

56


Figure 60: GFCF: Civil Works, Rm 2005 prices

The South African Federation for Civil Engineering Contractors (SAFCEC) was initially more optimistic regarding prospects for 2011 and 2012, supported


by the announcement of several higher value projects. However, delays in project implementation, under spending on capital budgets, and the recent shortage of bitumen, cold delay the recovery for the foreseeable future. Based on a recent survey, total investment in civil construction is estimated to have increased by around 5,8% in 2011. Growth prospects are slightly higher for 2012, but this will depend on government’s ability to improve spending efficiency. The current working environment is characterised by tighter margins and much tougher working conditions, including higher levels of competition in tendering. Smaller firms have been experiencing critical declines in volume of work for some time, but larger players are now also feeling the pinch.

Figure 61: Nett profit or loss before taxation

57


Profitability hit rock bottom in 2011Q2, from 2,0% in the previous quarter to 1,3%. Profitability improved to 5,8% in 2011Q4, but dipped slightly to 5,6% in 2011Q4. Total expenditure by contractors increased by 1,9% q/q in 2011Q4, translating to a 6,2% nominal increase compared to the same quarter in 2010. Spending on interest increased by 30% y/y, while depreciation added 24,9% to total expenditure (contributing 2,2% of total expenditure in 2011Q4). Spending on capital expenditure fell by 40% y/y (2011Q4), after reporting a 6,5% q/q increase, mainly related to increase spending on motor vehicles. Fewer dividends were paid out, down 80% y/y in 2011Q4. (Source Stats SA P0044)


R18,7bn – R R27,5bn Cost to construct the SKA Telescope Figure 62: Team currently working at SKA project in Northern Cape, Eskom, Conco and BV1 Consulting Engineers

R1bn/year estimate for maintenance

South Africa was awarded the contract to host three quarters of the Square Kilometre Array (SKA) project, which means after nine years, this project can finally move forward with detailed planning to get more secure estimates of the cost of building, operating and maintaining the SKA. This project could include the construction of 3 000 radio telescope dishes, each 12 m to 15 m in diameter, as well as other hybrid technologies. The core of the SKA will be constructed at a remote site 80km from Carnarvon, in the Northern Cape. Construction is expected to start in 2013, and achieve operational capability in 2016 and fully operational by 2024. Prospect suppliers registered on the SKA database, will be preferred when tenders and quotations are issued. For enquiries contact Mabela Satekge at 011 442 2434 or by email [email protected]. New tenders are being evaluated for buildings, electrical infrastructure and specialist equipment to manage and protect buildings against radio wave interference. There are already 22 people working on the site as at May 2012.

Figure 63: Pieter Snyman looks after stakeholder relations with a range of Northern Cape Communities. (www.ska.co.za)

58


The contract specifications include strict adherence to employment targets and contractors will be evaluated on a monthly basis and penalised for non-compliance. Maximising local labour is naturally a serious consideration. It will be the responsibility of the contractor (not SKA) to employ local labour and use local suppliers. Now the search for funding begins.


The economic implications for the Northern Cape are significant. Sectors such as mining, construction and science are expected to receive impressive financial injections from the multi billion project. Other major projects affecting the long term economic outlook for the Northern Cape:











Apart from the SKA project, plans are underway to build the solar park that will generate an eighth of the country’s electricity needs – 5000 MW in Uppington. Eskom is leading the R150bn project, but it is expected that smaller private companies will also take advantage of the fact that the area is already zoned for solar power generation. De Aar Freight Transport Hub to upgrade De Aar’s status as a major railway junction. De Aar has 110km of existing rail lines. Douglas / Belmont Rail Branch line. Once updated it will be more viable to build food-processing plants in the area. Uppington International Airport Cargo Hub. The plan is to form a public private partnership that would run the airport as a transport cargo hub. Currently this airport is used as a convenient entry point for tourists. Port Nolleth Harbour Development. The Northern Cape does not have a major harbour. Its main commodity, iron ore, is

59


exported through the Port of Saldanha, in the Western Cape. Port Nolloth is registered as a commercial port. The provincial government is interacting with national government to get the port upgraded and therefore be able to play a bigger part in the provincial economy.

Figure 64: Northern Cape Key infrastructure developments


A few items that made headlines between April and May 2012:

      



        

In April 2012 Anglo American announced the final stage of the $1,4bn Scaw Metals Group disinvestment to an investment consortium led by state owned Industrial Development Corporation (IDC). (Ref: 15449) The Gautrain may be extending its line to the east and west, but not any time soon. However plans are being considered to expand the existing railway network. (Ref: 15440) Group Five continues to look off shore to offset the slow domestic growth. Africa is seen to host many exciting opportunities, according to Mike Upton, CEO Group Five (Ref: 154185) Transnet is developing a new dig-out port on the site of the old Durban International Airport. Several separate tenders have been released. (Ref: 15417). Transnet further announced the possible delay in the implementation of its R300bn seven year investment programme, due to the impact of the Euro zone crisis on domestic demand. Koos Smit, a civil engineer, was appointed acting CE, of the embattled SANRAL, following the resignation of Nazir Alli. (Ref: 15512) PPC reported better results for the half-year ended March, despite being tempered by weak demand in Western Cape and Botswana. Overall cement demand turned positive (albeit from a low base), and PPC is hopeful for this trend to continue. PPC’s revenue increased by 8% to R3,53 billion owing to favourable pricing on cement and lime products. Its profit rose to R407 million from R378 million in the first half of 2011. (Ref: 15561) Evraz Highveld steel and Vanadium (Highveld) recorded a headline loss of R94-million for the three months ended March, mainly owing to lower sales volumes. The quarterly loss compares with a profit of R21-million in the first quarter of 2011. A marked increase in steel imports aggravated the local market situation. (Ref: 15570) They are currently implementing a cost reduction plan, which included labour restructuring. (Ref: 15515) ArcelorMittal SA (Mittal) confirmed the acquisition of nearly 20% of an iron-ore exploration project in the Northern Cape. (Ref 15525). Mittal reported a rise in first quarter profit, but warned that a drop in domestic demand, lower steel prices and higher costs would hit the second quarter (Ref: 15520) Global crude steel production increased by 1,1% to 376.8 million tons in the 1st quarter of 2012. (Ref: 15570) World Steel association expects global steel consumption growth to slow to 3,6% in 2012 from 5,6% in 2011, as China enters a less steel-intensive growth phase and euro zone debt crisis uncertainties continue to persist (Ref: 15464). Steel consumption is expected to reach 1,42 billion tons in 2012. Stefanutti Stocks is experiencing cash flow problems due to lack of skills, payment-system challenges and a high turnaround of staff at provincial government departments, according to Willie Meyburgh, CEO. Although payment is generally received in full, it is more often than not, late. (Ref: 15549) Free State government owes Raubex several million rand for work done. (Ref: 15540) Holcim is launching a targeted cost cutting programme aimed at increasing operating profit by at least 1.5 billion Swiss francs. (Ref: 15535) Esorfranki civil engineering construction group expects earnings to bounce back. Earnings of a share is expected to increase by between 132% an 138% (Ref: 15493) Sasol would inject R40 billion into its southern African operations over the next two years, ranging from expansion of wax production and exploration for natural gas, to investments in low carbon and renewable energy (Ref: 15587) ACSA put out an invitation for the rehabilitation of the runway at the Cape Town International Airport. (Ref: 15584)

60



Key Civil construction indicators

Figure 65: Civil construction activity Figure 66: Value of projects awarded: 2012Q1

The nominal value of contracts awarded in the first quarter of 2012 dropped by 24% compared to the same period in 2011. A major shift was noted in terms of expenditure from road construction (down 57%) to water (up 103%) and rail (up 237%). Rail however has a very small contribution (less than 1% of the total value of contracts awarded), while the contribution of expenditure related to water services increased to 44%. Road expenditure contributed 67% of the total value of contracts awarded in 2011Q1, but moderated to 37% in 2012Q1.

The real value of civil contracts awarded decreased for the second consecutive quarter, down 2,5% in 2012Q1 following a 1,2% q/q contraction in 2011Q4. On a year on year basis, smoothed over a five quarter period, the annual growth slowed from 49% in 2011Q4 to 21,5% in 2012Q1. The number of civil contracts awarded however increased in 2012Q1, up 4% q/q, which translated into a 14% y/y annual growth. It would seem that in recent quarters, activity levels may have improved, but the size of contracts are smaller in rand terms.

61


Bulk of projects postponed during 2012Q1 related to road projects, mostly in Kwazulu Natal.

Figure 67: Projects postponed 2012Q1 | Number

Fewer projects were postponed in 2012Q1, down 2,7% q/q, following a 12,7% q/q increase in 2011Q4. However the annual growth rate compared over a 12 month period is still 31% higher. The impact of postponements continues to weigh heavily on the industry adversely affecting civil contracting confidence. The postponement rate (the number of projects postponed expressed as a percentage of the number of tenders received during the same period) remains above 13% for the overall civil industry, compared to levels of around 5% in 2008.


Figure 70: Tendering activity: Civil: y/y change Figure 68: Civil projects postponed vs Postponement rate

Note: It is important to clarify the definition of postponement, which is defined as any project for which there has been a delay, (irrespective of the time frame), indefinite postponement or cancellation.

Figure 69: Number of civil projects out to tender vs the number of civil projects postponed

62



Clients There wasn’t a major shift in terms of client distribution based on the value of contracts awarded, nor in terms of number of tenders issued in the first quarter of 2012 compared to the same period in 2011. Local government represented 65% of the tenders in the first quarter of 2012, and 48% based on the value of contracts that have been awarded.

Figure 71: Client profile, value of civil contracts awarded (Rm): 2012Q1

contracts awarded during the 1st quarter) increased by 19%, while the private sector (contributing only 5,7%) increased by 68%. Overall these two clients did not have sufficient leverage to prevent the overall contraction in the nominal value of contracts awarded (down 24%). The graph below shows the trend line of the various client types, based on a 5-qtr moving average.

Figure 73: Civil contracts awarded (Rm, 5qtr avg), by client type

Figure 74: Civil projects out to tender by client Figure 72: Client profile, civil contracts out to tender (Number): 2012Q1

Nominal expenditure by central government, corporations (including SANRAL) and provincial government fell during the 1st quarter, down 24%, 53% and 37% respectively. Spending by local government (contributing 48% of the total value of 63


Tendering activity deteriorated in 2012Q (down 2,9%), lowering the annual growth rate in the trend line from 18% in 2011Q4 to 16%. Bulk of the tenders came from local government (64%), but this declined by 2,4% q/q compared to the 1st quarter in 2011. The annual growth rate however for local government tenders (5-qtr mov avg) were still 12%


higher. Tenders by provincial government fell by 19% q/q, contributing 22% of the total number of tenders received during 2012Q1. The number of projects postponed fell by an overall rate of 11% q/q in 2012Q1, but as stated before, the annual growth rate smoothed over a 5-qtr period, was still 32% higher. Nonetheless, fewer projects were postponed in Q1 by central government (down 75%), corporations (down 64%) and the private sector (down 45%). Local governments and provincial departments reported an increase of 5% and 22% respectively. Over a 5-qtr period, postponements have increased by 281% in central government, by 9% in corporations, and by 40% in local government. Conditions were more stable in terms of provincial postponements, falling only marginally over the last 5 quarters, down 1,9%. Refer to tables below: Table 23: 2012Q1 VS 2011Q1

Awarded

Tender

Postponed

Central

-24.1%

16.7%

-75.0%

Corp

-53.4%

56.5%

-64.3%

Local

19.6%

-2.4%

5.1%

Private

68.9%

34.8%

-45.5%

Provincial

-37.7%

-19.2%

22.2%

Total

-24.0%

-2.9%

-11.8%

64


Table 24: 2012Q1 Annual percentage change (smoothed 5-qrt mov. avg.)

Central Corp Local Private Provincial Total

Awarded 336.8% 30.9% 9.4% -32.0% 41.1% 27.0%

Tender 10.9% 13.8% 12.4% -19.4% 41.0% 16.2%

Postponed 281.3% 9.1% 40.5% -7.7% -1.9% 32.0%


Confidence levels remain uncomfortably low

Figure 75: Civil Industry Confidence Indicators

There are mainly three data sets available to monitor confidence levels in the civil construction industry. 

 

CESA’s consulting engineering confidence index (weighted) based on bi-annual surveys conducted amongst the CESA member firms. SAFCEC’s contractors confidence index (weighted) based on quarterly surveys amongst their member companies FNB/BER confidence indices, compiled from quarterly surveys amongst a sample of respondents including contractors, suppliers and professionals.

According to these three sets of indices, it is clear that confidence levels have deteriorated substantially over the last few years. Even though consulting engineers have remained relatively upbeat, even during the global economic recession, contractors became increasingly pessimistic as fewer projects progressed further than “sketch” stage. Even those that did make it through to tender or awarded stage, had a good chance to be postponed or even cancelled. It is therefore not surprising that the contractors were harder hit by the economic slowdown which ultimately impacted on capital funding to finance construction projects. What is important to note looking at recent data, is the seemingly sideways move in confidence, with

65


some level of volatility, encapsulating the level of uncertainty being experienced in the industry. Consultants remain optimistic, fee earnings haven’t deteriorated by any significant measure, while the satisfaction rate of contractors (from both SAFCEC and FNB/BER) seem to start showing signs of having reached the lower turning point. SAFCEC’s results may be distorted by the opinions expressed by larger firms enjoying the benefits of cross border activities, but the underlying message seems to carry through across majority of the firms, that things are not as bad as what they were last year. This of course does not mean working conditions are “good”, simply just showing some improvement from the bad times experienced during 2010 and 2011. The overall sentiment amongst most stakeholders is that conditions will only show some “real” improvement by 2013 (based on current market expectations). For downstream suppliers it means they may have to wait until 2014 to improve sales volumes and increase revenue by more meaningful measures. Poor payment has also reared its ugly head again, according to the latest CESA survey. Amidst financial constraints and growing demand, this is likely to remain an issue in the industry during the next few years. Delayed payment increased to 24% of consulting engineers’ fee earnings in the last 6 months of 2011. For copies of the various State of the industry reports please contact the relevant industry body:  

CESA Bi-annual Economic and Capacity Survey www.cesa.org.za SAFCEC State of the Civil industry www.safcec.org.za


Table 25: Civil Industry Confidence Indices

Quarter

FNB / BER Civil Construction Confidence Index (Source: FNB / BER (http://www.ber.ac.za))

CESA Confidence

Dec-2008

60.00

99.8

Mar-2009

60.00

99.8

Jun-2009

48.00

96.2

Sep-2009

29.00

96.0

Dec-2009

39.00

86.0

Mar-2010

25.00

87.1

Jun-2010

33.00

87.1

Sep-2010

28.00

86.7

Dec-2010

27.00

86.3

Mar-2011

21.00

83.2

Jun-2011

23.00

83.2

Sep-2011

21.00

87.4

Dec-2011

26.00

87.4

Mar-2012

34.00

89.0 (forecast)

66


SAFCEC Satisfaction rate 76 88 65 55 33 73 83 33 99 57 54 42 87 64


Tendering activity dissapoint in 2012Q1, but long term trend line still on recovery path The civil industry tender index(a measurement of tendering activity for civil construction projects – smoothed over a five quarter period)continued on a “recovery road”, in spite of dissapointing numbers for the 1st quarter of 2012. Actual tenders declined by 1,8% in 2012Q1 comapred with the same quarter in 2011, but over a 5 quarter period, tendering activity has continued to show improvement, reporting the fifth consecutive q/q increase in the index, up 3,8% in 2012Q1. The annual growth rate slowed marginally from 19% in 2011Q4 to 17,6% in 2012Q1. We hope that the temporary slowdown in activity in the first quarter will not be setting the pace for theremainder of the year.

Note:The project types included in the various tender indices will be reviewed in the next quarter publication, which could lead to a correction of the activity indices. These revisions will not amend the trend line, but will more than likely adjust the level of the indices (to a lower level). Project types most likely to be excluded include fencing, retaining walls, security fencing, paving, landscaping and so forth. A full list will be provided. The reasoning for this is to to eliminate those projects that affect activity levels that are not directly applicable to the contracting fraternity, and by including these proejcts, will provide a distorted view of current and projected activity and mislead forecasting and strategic information provided to clients.

Table 26: Civil Tender Index: 1998=100 (smoothed)

2005

2006

2007

2008

2009

2010

2011

2012

Q1

230.8

263.8

247.6

258.9

276.9

230.0

215.0

252.8

Q2

224.4

247.6

243.3

248.8

267.0

205.0

221.1

Q3

243.4

253.6

261.2

259.8

270.6

207.3

235.7

Q4

265.1

255.6

260.3

268.2

256.2

203.8

243.6

Annual Average

240.9

255.2

253.1

258.9

267.7

211.6

228.8

252.8

% Change

10.25%

5.90%

-0.80%

1.6%

3.4%

-20.9%

8.1%

10.4%

Source: Industry Insight Project Database Table 27: Civil Tender Index: 1998=100 (smoothed): ANnual Change by quarter

2005

2006

2007

2008

2009

2010

2011

2012

Q1

1.0%

14.3%

-6.1%

4.5%

7.0%

-17.0%

-6.5%

17.6%

Q2

6.9%

10.3%

-1.7%

2.3%

7.3%

-23.2%

7.8%

Q3

14.2%

4.2%

3.0%

-0.5%

4.2%

-23.4%

13.7%

Q4

19.2%

-3.6%

1.8%

3.0%

-4.5%

-20.5%

19.5%

67



Civil Engineering Price Indices Table 28: Civil Engineering price indices (Stats SA)

Year

Month

Civil Material

Fuel

Labour (CPI)

Composite Index1

19.3%

Civil Engineering Plant -2.1%

2011

1

1.4%

3.7%

3.4%

2011

2

1.4%

27.0%

-0.7%

3.7%

4.9%

2011

3

2.1%

33.5%

-0.8%

4.1%

6.2%

2011

4

1.5%

33.8%

-0.7%

4.2%

6.3%

2011

5

0.1%

28.9%

-0.1%

4.6%

5.5%

2011

6

-0.3%

26.8%

0.7%

5.0%

5.4%

2011

7

2.3%

27.8%

1.1%

5.3%

6.4%

2011

8

3.3%

28.9%

1.4%

5.3%

7.0%

2011

9

3.6%

30.0%

1.3%

5.7%

7.3%

2011

10

3.7%

34.7%

0.4%

6.0%

7.9%

2011

11

4.8%

38.2%

0.1%

6.1%

8.8%

2011

12

4.9%

35.7%

1.4%

6.1%

8.9%

2012

1

4.2%

27.5%

2.4%

6.3%

7.9%

2012

2

5.0%

16.6%

1.5%

6.1%

6.3%

2012

3

5.0%

10.7%

0.5%

6.0%

5.0%

Price indices affecting the civil engineering industry include civil materials, fuel, plant and labour. These are combined in a weighted composite index to get a general view on the price pressures affecting input costs in the civil engineering industry (Refer table). Key drivers of input cost inflation in the civil engineering industry, currently, is the cost of fuel, following an increase in the price of oil and a weakening of the currency. The fuel index increased by 35% y/y in December 2011 but has moderated to an increase of 10,7% in March 2012. Hopefully we can expect a cut in the fuel price during the month of June, which could ease some of the price pressures, as the international price of oil has fallen in recent weeks. The higher price of steel has increased the overall trend in the civil materials, but this too is expected to subside as the overall price of steel starts to decrease. With effect 1 May 2012, the price of rebar had already fallen by around 3% on average. We are a little concerned that the labour index is not a true reflection of wage agreements, distorting the impact on input costs, while the trend shown in the plant index is also being questioned. Although no longer in the red, the index does show a very mild increase of just

0,5%, while the general perception amongst plant hiring companies, as well as two new plant indices compiled by Stats SA, earthworks and concrete work, show an increase of

Figure 76: Civil Engineering price indices

1

Composite index comprises of 30% materials, 10% fuel, 30% plant and 30% labour. 68



between 3% and 5%. This was raised with both SAFCEC and Stats SA. No response has been received from either parties at the time of publication.

Outlook for civil engineering turnover In summary, the start of 2012 was disappointing, with fewer awards and lower value projects. Confidence levels remain muted, although showing signs of improvement. Consulting engineers are still busy, and although larger firms are expanding into off shore opportunities, there are still domestic opportunities in terms of higher levels of infrastructure expenditure in water services, health construction, rail and port upgrades, and renewable energy. This year will probably be a year of “stabilisation” setting the pace for a more profound recovery in 2013. Challenges remain in terms of more effective spending of budgetary allocations, in particular spending by municipal departments. More transparent procurement procedures and a clearer directive on the PPP policy will also improve the current negative sentiment in the industry, particularly amongst the larger firms, who have spent millions on failed PPP projects. Minister of Economic Development, Ebrahim Patel, acknowledged problems in PPP implementation, stating that there are opportunities for the private sector to get involved in the 17 identified strategic infrastructure projects (SIP), provided the risk in these projects are more equally distributed. Patel argued that past policies had an unbalanced risk distribution towards government. The use of pension funds to buy “equity” in infrastructure projects is also being considered, based on successful implementation in other countries, but no further details are available at this stage. Government is nonetheless acutely aware of the dire need for key critical infrastructure, and there seems to be greater focus on effective planning going forward, as seen by the recent developments in the National Planning Commission. Refer to the figure below outlining some of the key projects identified across the country. Investment in large capacity projects, such as Eskom is absolutely critical. According to a report by SAFCEC, most of Eskom’s plant will reach the end of its efficient cycle by 2020 – 2025. Investment in these projects requires substantial planning in advance and funding. Energy projects will continue to play a major role in infrastructure in the future, whether it be coal fired, nuclear or renewable energy. Based on SAFCEC’s estimates of total spending on civil contracting (excluding spending on machinary and equipment related to the civil project), turnover is expected to increase by between 5% and 8% in real terms during the next two years. The outlook for 2012 and 2013 is therefore still influenced by: -

Weak contractor’s confidence Fewer high value projects in the pipeline Sharp contraction in government revenue available to finance infrastructure expenditure Slower single digit real growth in overall government infrastructure expenditure in the next three years Review of state owned enterprises capital programmes Lack of private sector expenditure Inefficiencies within particularly provincial and local governments to spend infrastructure budgets 69



-

Poor payment from clients, this has particularly affected the consulting engineering industry, and is likely to play a greater role in the industry in 2012 Poor policy formulation (ultimately affecting implementation) in terms of PPP projects affecting the implementation of Prison and Health PPP projects.

Figure 77: Presidential Infrastructure Coordinating Commission (Source Budget 2012/13)

70



Statistical Table

71



Table 29: Investment in construction Constant 2005 prices

Residential

Non-residential

Total buildings

18340

21131

39471

Civil construction (Official SARB) 27100

19586

22614

42200

34371

76571

25877

24925

50802

38116

88918

33455

26565

60020

40739

100759

36198

29567

65765

47879

113644

35882

33874

69756

65674

135430

32965

36674

69639

87240

156879

29986

39021

69007

110921

179928

26093

37939

64032

108733

172765

24372

37180

61552

109369

170921

32770

37440

70210

94177

164387

31911

38587

70498

97369

167867

30550

39534

70084

110751

180835

30226

38606

68832

109698

178530

29820

38856

68676

111355

180031

29348

39088

68436

111880

180316

27857

37964

65821

110368

176189

26455

38163

64618

108881

173499

25233

38073

63306

107798

171104

24827

37556

62383

107885

170268

24553

37356

61909

108434

170343

24381

37199

61580

109033

170613

24262

37086

61348

109653

171001

24292

37079

61371

110356

171727

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

Total construction 66571

Quarter Annualised 2008Q3 2008Q4 2009Q1 2009Q2 2009Q3 2009Q4 2010Q1 2010Q2 2010Q3 2010Q4 2011Q1 2011Q2 2011Q3 2011Q4

Source: South African Reserve Bank 72



Table 30: Investment in construction Constant 2005 prices: Y-Y % chg

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

Residential

Non-residential

Total buildings

Civil construction

Total construction

-1.8%

-7.7%

-5.1%

9.8%

-1.6%

6.8%

7.0%

6.9%

26.8%

12.0%

32.1%

10.2%

20.4%

10.9%

17.6%

29.3%

6.6%

18.1%

6.9%

15.1%

8.2%

11.3%

9.6%

17.5%

11.6%

-0.9%

14.6%

6.1%

37.2%

14.4%

-8.1%

8.3%

-0.2%

32.8%

10.4%

-9.0%

6.4%

-0.9%

27.1%

9.9%

-13.0%

-2.8%

-7.2%

-2.0%

-4.9%

-6.6%

-2.0%

-3.9%

0.6%

-1.8%

-7.9%

10.0%

1.4%

41.6%

20.8%

-7.7%

11.2%

2.6%

31.6%

17.2%

-10.0%

13.6%

1.4%

47.1%

25.6%

-9.1%

7.7%

-2.0%

33.5%

18.0%

-9.0%

3.8%

-2.6%

18.2%

9.5%

-8.0%

1.3%

-2.4%

14.9%

7.4%

-8.8%

-4.0%

-4.4%

-0.3%

-2.6%

-12.5%

-1.1%

-5.9%

-0.7%

-2.8%

-15.4%

-2.0%

-7.5%

-3.2%

-5.0%

-15.4%

-3.9%

-5.2%

-3.6%

-5.6%

-11.9%

-1.6%

-4.2%

-1.8%

-3.3%

-7.8%

-2.5%

-2.7%

0.1%

-1.7%

-3.8%

-2.6%

-1.7%

1.7%

-0.1%

-2.2%

-1.3%

-0.9%

2.3%

0.9%

Quarter 2008Q3 2008Q4 2009Q1 2009Q2 2009Q3 2009Q4 2010Q1 2010Q2 2010Q3 2010Q4 2011Q1 2011Q2 2011Q3 2011Q4

Source: South African Reserve Bank 73



Table 31: Market Share by Type of Projects (based on nominal value of construction projects awarded)

2011

2011 Q4

2012 Q1

Change in Market Share 2012Q1 vs 2011Q1

Change in Market Share 2012Q1 vs 2011Q4

Building Other

1.1%

1.6%

1.6%

0.4%

0.0%

Commercial

19.7%

20.7%

15.3%

-10.9%

-5.4%

Education

13.3%

12.1%

13.9%

-0.2%

1.7%

Entertainment

1.1%

1.0%

1.5%

1.1%

0.5%

Gambling

0.4%

0.0%

0.0%

0.0%

0.0%

Health

11.8%

11.2%

22.5%

16.4%

11.3%

Hotels

6.4%

16.0%

1.1%

0.5%

-14.9%

Housing

16.1%

11.4%

7.4%

-18.8%

-4.1%

Industrial

8.8%

0.9%

3.7%

-0.8%

2.8%

Low-income housing

4.1%

3.3%

4.5%

-0.2%

1.2%

Protective

4.5%

4.0%

8.0%

0.6%

4.1%

Retail

12.8%

17.8%

20.5%

11.8%

2.7%

Air

1.0%

3.2%

0.8%

0.2%

-2.4%

Bridges

2.6%

2.3%

1.8%

-0.2%

-0.5%

Civil Other

6.1%

5.1%

6.5%

-2.5%

1.4%

Power

5.9%

5.1%

7.3%

2.2%

2.2%

Rail

1.5%

6.3%

0.8%

0.6%

-5.5%

Road

54.0%

51.8%

38.2%

-28.7%

-13.6%

Water

28.8%

26.2%

44.6%

28.3%

18.4%

Building Projects

53.2%

57.5%

61.5%

7.1%

3.9%

Civil Projects

46.8%

42.5%

38.5%

-7.1%

-3.9%

Civil

Building

Sector

Project Type

Source: Industry Insight project database

74



Table 32: Large Construction projects awarded: Jan - Mar 2012 (Databuild) Rm, current prices

Period

New Cradlestone Shopping Mall

850

21

Gauteng

Sasol Pension Fund (Investments)

Civil

New Combustion Waste Terrace - Kusile Power Station

700

52

Mpumalanga

ESKOM

Building

New Brits Hospital

456

24

Department of Public Works Roads and Transport

Building

Ceres Golf Estate

445

60

Building

Refurbishment to the Mental Health Facility - Kimberley New Office Building for Government Department - Agrivaal

400

24

North West Province Western Cape Northern Cape

365

26

Gauteng

Public Works Department (National)

New Burgersfort Regional Mall - Phase 1

300

15

Mpumalanga

Resilient Properties

New Platinum Square

240

10

North West Province

Unknown client in the private sector

New Apartments - Cara Blu

203

14

Gauteng

Summercon

New Alice Lane Offices - Phase 1

200

18

Gauteng

Abland (Pty) Ltd

New Office Blocks - First Rand Bank

200

12

Western Cape

Eris Properties

Redevelopment of Brooklyn Mall

200

20

Gauteng

Atterbury Properties

Civil

Rehabilitation of Road

190

25

Free State

Civil

New Dual Carriageway - R82/K57

181

18

Gauteng

New Protea Glen Mall

180

14

Gauteng

Retail Network Services

178

21

Mpumalanga

Independent Development Trust Mpumalanga

175

30

Western Cape

University Of The Western Cape

160

18

Limpopo

160

24

Free State

154

30

150

8

150

New Makro Store - Bloemfontein Improvement and Upgrade of National Route 1 - Section 20

Sector

Building

Building Building Building Building Building Building Building

Building Building Building Building Civil

Description

Rob Ferreira Hospital Phase 4E (Part 1) New Residence New Chemistry Building - University of Western Cape Additions to Thabazimbi Hospital - Phase 3 Rehabilitation of National Road - Route N5

Civil

Upgrading of Road - Main Road 269

Building

Additions to Vredenburg Hospital - Phase 2B New Head Office for GCIS at Hatfield festival

Building Building Civil

75

Province

Company

Orange Tree Developments Northern Cape Province - Transport Roads and Public Works

South African National Roads Agency Limited Gauteng Province - Department of Roads and Transport

Western Cape Western Cape

Department Of Health And Social Development South African National Roads Agency Limited Western Cape Province - Department of Public Works and Transport Western Cape Province - Department of Public Works and Transport

14

Gauteng

Growthpoint Properties

150

9

Free State

Unknown client in the private sector

150

9

Gauteng

South African National Roads Agency Limited



Building

Structural Repairs - Prince Mshiyeni Memorial Hospital

142

10

Building

New Casualty/OPD - Frontier Hospital

137

27

Building

New Paediatrics Wing - Frontier Hospital

135

18

Building

New Massbuild Distribution Centre

130

9

Gauteng

Civil

Upgrading of Road - Atlantis Integrated Rapid Transport Corridor

112.8

18

Western Cape

Cape Town Administration

New C6 Pipeline

106

28

Gauteng

RAND WATER

Civil

New Outfall Sewer and Pump Station Memel/Zamani

105

4

Free State

Phumelela Local Municipality - Vrede

Civil

New Steel Pipelines - Luvhuvu River GWS

104

10

Limpopo

Department of Water Affairs and Forestry - Tender Office

Building

Urban Park Development

100

14

Kwazulu Natal

Misty Blue Investments

Civil

New Electrical and Auxiliary Power Kusile Power Station Extension Of The Hannes Van Niekerk Wastewater Treatment Plant - Civil Works

85

60

Mpumalanga

ESKOM

75

24

Gauteng

Westonaria Local Municipality

Blouberg Mall

70

8

Limpopo

Mc Cormick Property Development

Building

Mixed-use Development - 22 Bree Street

0

18

Building

New Dimension Data Office

0

12

Building

New Low Cost Houses - 3200 Units Pelican Park

0

54

Building

New Shopping Centre - Caledon Mall

0

9

Civil

Civil Building

Source: Databuild, Industry Insight

76


Kwazulu Natal Eastern Cape Eastern Cape

Western Cape Kwazulu Natal Western Cape Western Cape

Department of Public Works Ethekwini Regional Office Coega Development Corporation EASTERN CAPE PROVINCE WORKS DEPARTMENT Atterbury Property Developments (Pty) Ltd

Abland Group J T Ross and Son (Pty) Ltd Cape Town Administration Harry Viljoen Properties


High profile Projects announcements: 1st Quarter 2012

Figure 78: High impact construction projects announced 2012Q1 Table 33: High Profile Projects announcements: 2012Q1 Province / Project Eastern Cape

Rm 10120

Improvement of Coega Industrial Development Zone

8100

Ethanol plant

2000

New Umzimvubu Dam Gauteng

20 1706

Gauteng Department of Education to build 79 new schools 512 new flats for Soweto New Biological Nutrient Removal Plant

1000 -

New Denneboom Taxi Retail Park

526

New Offices - Athol Towers - Phase 2

180

New Soccer Stadium - Giant Stadium

-

Kwazulu Natal

21300

Transnet National Ports Authority development of Durban Harbour

21300

Jozini Community Health Centre Mpumalanga

17000

SA - Swaziland New greenfield railway link

77

-


17000


Western Cape New Pinehurst Shopping Centre - Western Cape

-

Grand Total

50126

Tender indices Table 34: Construction Tender Index 1999=100, by quarter: y/y% chg

Quarter

2006

2007

2008

2009

2010

2011

2012

78

Formal Residential Housing

Low-income Housing

Total Buildings (excl education)

Civil Contracts

Total Construction

-1.3%

Nonresidential Buildings (Excl education) 5.1%

-10.3%

1.1%

14.3%

9.2%

-12.4%

-10.2%

2.5%

-2.0%

10.3%

5.4%

-8.5%

-18.9%

3.9%

-0.4%

4.2%

2.4%

2.1%

-10.0%

3.3%

1.1%

-3.6%

-1.9%

3.2%

7.3%

-0.8%

-0.7%

-6.1%

-4.2%

-6.3%

0.6%

1.9%

-1.2%

-1.8%

-1.5%

-17.4%

19.0%

-5.3%

-7.7%

3.0%

-1.0%

-26.0%

27.1%

-8.6%

-10.5%

1.8%

-2.7%

-43.1%

14.3%

-13.8%

-17.5%

4.5%

-3.6%

-52.3%

11.9%

-16.4%

-20.4%

2.3%

-6.1%

-51.1%

18.9%

-12.8%

-16.7%

-0.5%

-6.2%

-51.3%

13.1%

-6.8%

-13.3%

3.0%

-2.5%

-61.1%

2.7%

-1.7%

-11.7%

7.0%

1.1%

-55.9%

22.5%

1.8%

-6.3%

7.3%

3.1%

-51.7%

10.9%

-1.3%

-8.4%

4.2%

0.3%

-53.6%

-2.9%

-13.7%

-17.0%

-4.5%

-8.3%

-44.5%

0.5%

-19.7%

-18.0%

-17.0%

-17.3%

-44.8%

-10.6%

-26.4%

-24.5%

-23.2%

-23.6%

-50.4%

-30.9%

-24.3%

-24.4%

-23.4%

-23.7%

-44.9%

-20.9%

-13.9%

-14.6%

-20.4%

-18.8%

-32.4%

4.7%

0.8%

-0.2%

-6.4%

-4.7%

-23.4%

-2.1%

13.1%

9.5%

7.8%

8.3%

-10.7%

23.4%

22.2%

21.1%

13.7%

15.8%

-16.7%

28.9%

25.1%

24.0%

19.5%

20.8%

-10.4%

2.5%

0.0%

17.3%

14.6%

14.0%



Table 35: Construction Tender Index 1999=100, by quarter: Smoothed Quarter

2006

2007

2008

2009

2010

2011

2012

79

Formal Residential Housing

Low-income Housing

Non-residential Buildings (Excl education)

Total Buildings (excl education)

Civil Contracts

Total Construction

280.00

120.00

267.34

252.40

263.83

259.63

294.00

126.40

258.40

249.58

247.63

248.34

290.00

113.60

277.64

260.68

253.57

256.18

292.50

115.20

278.05

258.70

255.65

256.77

289.00

128.80

265.18

250.71

247.63

248.76

275.50

127.20

263.28

246.66

243.26

244.51

239.50

135.20

262.87

240.55

261.21

253.63

216.50

146.40

254.20

231.51

260.34

249.76

164.50

147.20

228.46

206.9

258.9

239.8

131.50

142.40

220.19

196.4

248.8

229.6

117.00

160.80

229.13

200.5

259.8

238.0

105.50

165.60

236.86

200.8

268.2

243.4

64.00

151.20

224.53

182.7

276.9

242.3

58.00

174.40

224.25

184.1

267.0

236.6

56.50

178.40

226.15

183.5

270.6

238.7

49.00

160.80

204.47

166.6

256.2

223.3

35.50

152.00

180.35

149.8

230.0

200.5

32.00

156.00

165.04

138.9

205.2

180.9

28.00

123.20

171.27

138.7

207.3

182.1

27.00

127.20

176.02

142.2

203.9

181.3

24.00

159.20

181.84

149.5

215.2

191.1

24.50

152.80

186.59

152.1

221.3

195.9

25.00

152.00

209.35

167.9

235.7

210.8

22.50

164.00

220.19

176.4

243.8

219.0

21.50

163.20

76.00

213.28

171.3

245.2



Macro-Economic Base Case Scenario GDP (2005PRICES) Real Gross Domestic Product (Rm) % Change HOUSEHOLD CONSUMPTION Real Household Consumption Expenditure % Change Non-durable goods % Change Semi-durable goods

2011

2012

2013

2014

2015

2016

1 900 805

1 955 608

2 016 427

2 067 422

2 149 883

2 250 759

3.7%

2.9%

3.1%

2.5%

4.0%

4.7%

1 238 940

1 294 984

1 335 070

1 384 124

1 442 440

1 505 949

4.6%

4.5%

3.1%

3.7%

4.2%

4.4%

432 465

450 629

470 006

488 806

510 802

534 299

3.0%

4.2%

4.3%

4.0%

4.5%

4.6%

143 735

155 090

155 090

162 845

172 127

182 282

% Change

8.0%

7.9%

0.0%

5.0%

5.7%

5.9%

Durable goods

131 907

134 545

133 065

133 065

136 126

139 801

% Change Services % Change FIXED CAPITAL FORMATION Real Gross Domestic Fixed Investment (GDFI)

6.9%

2.0%

-1.1%

0.0%

2.3%

2.7%

530 833

554 720

576 909

599 409

623 385

649 567

4.5%

4.5%

4.0%

3.9%

4.0%

4.2%

379617

387 183

404 491

432 363

465 753

504 272

% Change

4.4%

2.0%

4.5%

6.9%

7.7%

8.3%

Residential

24372

24 902

25 660

26 741

27 718

29 050

% Change Non-residential buildings % Change Machinery and equipment % Change Computers and related equipment % Change Transport equipment % Change Construction Works % Change Civil Turnover SAFCEC % Change Transfer pricing Inventory Investment Real Government Consumption Expenditure % Change Residual Real Gross Domestic Expenditure % Change Real Exports of Goods and Services

-3.1%

2.2%

3.0%

4.2%

3.7%

4.8%

37180

38 031

39 058

40 965

42 598

44 797

-6.5%

2.3%

2.7%

4.9%

4.0%

5.2%

115142

123 317

130 593

137 122

146 721

156 698

10.0%

7.1%

5.9%

5.0%

7.0%

6.8%

30695

34 133

37 000

40 367

44 767

50 587

10.0%

11.2%

8.4%

9.1%

10.9%

13.0%

55801

64 618

72 953

82 583

94 145

106 195

11.0%

15.8%

12.9%

13.2%

14.0%

12.8%

109369

95 260

92 022

96 899

101 550

108 049

-2.0%

-12.9%

-3.4%

5.3%

4.8%

6.4%

15 888

16 428

17 381

18 615

19 807

21 352

1.90%

3.40%

5.80%

7.10%

6.40%

7.80%

7058

6 923

7 206

7 686

8 255

8 896

5 000

8 000

18 500

-5 000

-4 999

-4 998

399 318

421 281

446 979

471 116

493 729

519 897

4.2%

5.5%

6.1%

5.4%

4.8%

5.3%

-8 000

-6 000

-4 500

-4 500

-5 000

-5 000

2 017 529

2 105 449

2 200 540

2 278 104

2 391 923

2 520 120

4.5%

4.4%

4.5%

3.5%

5.0%

5.4%

453 208

482 213

511 146

544 371

582 477

624 415

7.5%

6.4%

6.0%

6.5%

7.0%

7.2%

569 932

632 055

695 260

755 052

824 517

893 777

10.00%

10.90%

10.00%

8.60%

9.20%

8.40%

9.05

10.42

11.58

12.00

11.50

12.50

Rand/Dollar Exchange Rate - Average

7.07

7.40

7.93

8.25

8.10

8.00

CPI Inflation Rate (% year-on-year)

4.8

5.5

5.7

5.9

5.5

5.2

% Change Real Imports of Goods and Services % Change PRICES Prime Overdraft Rate (%) - End of period

80



Industry Insight cc

Contact details CEO:

Physical address:

Elsie Snyman | [email protected]

Unit 82 c, Eden on the Bay, Big Bay, Cape Town 7443

General Manager Kat McClure | [email protected] |T 27 11 475 3324

Postal address :

Research

Postnet Suite # 124, Private Bag X1

Ronel Kotze | [email protected] | T 27 41 368 8977

Big Bay

Judy Daniels | [email protected] | T 27 21 554 0886

7448 Economics Kimberley Bull |[email protected] |T 27 11 475 3324 Cape Town| Tel: +27 21 554 0688 | Fax: +27 21 554 0887

Charles Crous | [email protected] | T 27 21 554 0886

Johannesburg | Tel: +27 11 475 3324 Eastern Cape | Tel: +27 41 378 1469

Accounting Alicia Lombard | [email protected] | T 27 21 554 0886

Email | [email protected]

Website | www.industryinsight.co.za

81


Pricing / Training Elsie Snyman | [email protected] | T 27 21 554 0886

State of the South African Construction Industry

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