Johannesburg – The health ministry’s promise to outspend the Fifa Soccer World Cup on upgrading the country’s hospitals is not expected to resuscitate fortunes in the construction industry, analysts said on Tuesday.
In preparation of the National Health Insurance (NHI) scheme, Minister of Health Aaron Motsoaledi announced that state hospitals can expect an upgrade worth more than R40bn.
“This is a bit of bright news amidst the darkness,” said Olof Bergh, an equity analyst at Sanlam Private Investments.
“But the upgrading of hospitals is not solely dependent on the passing of the proposed NHI in its current form. Currently the NHI can be viewed as an ANC wish list with much uncertainty surrounding funding, timing and duration.”
Analysts said all the listed construction companies will be able to adapt and so also benefit from these health infrastructure projects. Last year, Basil Read Holdings [JSE:BSR] bought Mvelaphanda Construction, which specialised in doing government-related projects on hospitals and prisons. Wilson Bayly Holmes - Ovcon [JSE:WBO] also has experience in constructing hospitals.
However, the fast-track of public health development is but a drop in the ocean compared to the much-anticipated R846bn infrastructure roll-out, and won’t be able to lift the industry out of its post-World Cup depression, analysts said.
Imara SP Reid analyst Stephen Meintjes said the delay in infrastructure spending is due to the higher-than-inflation wage hikes unions negotiated this year, and the increase in unemployment.
“I’m looking forward to seeing what is in the medium term budget speech next month,” he said.
Dirk Noeth of Avior Research said the government is moving in the right direction, but one of his concerns is the actual execution of the revamping and rebuilding of the hospitals.
Noeth said the tender processes have been slower than usual due to a number of issues which include a lack of skills and the financing of these upgrades.
The construction data service Industry Insight reported in June that 161 public sector projects have been postponed since the beginning of last year.
The 2010 third quarter FNB Civil Construction Index, released on Tuesday, showed renewed pressure on the industry as new projects dwindle.
“Never before have so many civil contractors experienced lower volumes of work as in 2010,” said Cees Bruggemans, FNB chief economist.
Bruggemans said some local governments appear to be delaying new projects as their income from rates and taxes decreased due to the recession.
“Public corporations, such as Eskom and Transnet, had to defer some projects, partly because international capital markets became extremely tight after the global financial crisis,” he added.
Grand and noble idea
Industry players are pinning their hopes on large construction projects, including Eskom’s Medupi and Kusile power stations and various road improvements and renovations across the country.
Contractors are already busy working on some of these projects, but have only been able to secure small and short-term contracts, indicating government’s uncertainty about funding for these projects.
“I don’t understand how we’ll finance the building of the hospitals if we can’t even pay our medical practitioners,” said Vestact’s Sasha Naryshkine.
“It’s a grand and noble idea and I hope it works,” he said.
Durban's King Edward VIII Hospital, Nelson Mandela Academic Hospital in the Eastern Cape, Dr George Mukhari and Chris Hani Baragwanath Hospitals in Gauteng and the Limpopo Academic Hospital will be the first hospitals to be upgraded.
- Fin24.com
In preparation of the National Health Insurance (NHI) scheme, Minister of Health Aaron Motsoaledi announced that state hospitals can expect an upgrade worth more than R40bn.
“This is a bit of bright news amidst the darkness,” said Olof Bergh, an equity analyst at Sanlam Private Investments.
“But the upgrading of hospitals is not solely dependent on the passing of the proposed NHI in its current form. Currently the NHI can be viewed as an ANC wish list with much uncertainty surrounding funding, timing and duration.”
Analysts said all the listed construction companies will be able to adapt and so also benefit from these health infrastructure projects. Last year, Basil Read Holdings [JSE:BSR] bought Mvelaphanda Construction, which specialised in doing government-related projects on hospitals and prisons. Wilson Bayly Holmes - Ovcon [JSE:WBO] also has experience in constructing hospitals.
However, the fast-track of public health development is but a drop in the ocean compared to the much-anticipated R846bn infrastructure roll-out, and won’t be able to lift the industry out of its post-World Cup depression, analysts said.
Imara SP Reid analyst Stephen Meintjes said the delay in infrastructure spending is due to the higher-than-inflation wage hikes unions negotiated this year, and the increase in unemployment.
“I’m looking forward to seeing what is in the medium term budget speech next month,” he said.
Dirk Noeth of Avior Research said the government is moving in the right direction, but one of his concerns is the actual execution of the revamping and rebuilding of the hospitals.
Noeth said the tender processes have been slower than usual due to a number of issues which include a lack of skills and the financing of these upgrades.
The construction data service Industry Insight reported in June that 161 public sector projects have been postponed since the beginning of last year.
The 2010 third quarter FNB Civil Construction Index, released on Tuesday, showed renewed pressure on the industry as new projects dwindle.
“Never before have so many civil contractors experienced lower volumes of work as in 2010,” said Cees Bruggemans, FNB chief economist.
Bruggemans said some local governments appear to be delaying new projects as their income from rates and taxes decreased due to the recession.
“Public corporations, such as Eskom and Transnet, had to defer some projects, partly because international capital markets became extremely tight after the global financial crisis,” he added.
Grand and noble idea
Industry players are pinning their hopes on large construction projects, including Eskom’s Medupi and Kusile power stations and various road improvements and renovations across the country.
Contractors are already busy working on some of these projects, but have only been able to secure small and short-term contracts, indicating government’s uncertainty about funding for these projects.
“I don’t understand how we’ll finance the building of the hospitals if we can’t even pay our medical practitioners,” said Vestact’s Sasha Naryshkine.
“It’s a grand and noble idea and I hope it works,” he said.
Durban's King Edward VIII Hospital, Nelson Mandela Academic Hospital in the Eastern Cape, Dr George Mukhari and Chris Hani Baragwanath Hospitals in Gauteng and the Limpopo Academic Hospital will be the first hospitals to be upgraded.
- Fin24.com