‘Boom in construction won’t last’

Durban - The proposed R800 billion of public sector investment in infrastructure over the next three years will be a shot in the arm for the construction sector. But it should not be considered a panacea as the spending represents little to no growth in infrastructure investment compared with the previous three-year period.

That’s according to John Orford, portfolio manager for Old Mutual Investment Group Macro Solutions.

He believes the sector’s medium-term prospects will face headwinds due to electricity challenges.

“Any uptick in activity shouldn’t automatically be seen as a cyclical turnaround by investors,” he said in a statement yesterday.

“It’s likely any short-term increase in activity will eventually be tempered by slow economic growth as a result of energy constraints and delays in the rollout of Eskom’s new capacity,” he said.

He said news out of the sector had not all been bad in recent years.

“We have seen positive growth in three of the last four years, with real growth in construction investment at three percent, 11,8% and 14% in 2011, 2013 and 2014 respectively.”

Large construction companies had offset the impact of the weak local market by working elsewhere.

— Business Editor