Construction braces for frigid 2010

Pretoria - The civil construction industry could shrink by almost 40% this year – but higher confidence levels indicate the industry remains hopeful.

This is evident from the latest industry survey by the South African Federation of Civil Engineering Contractors (Safcec).

Until now the expectation has been that the industry could contract 25% in 2010.

Safcec economist Henk Langenhoven said that the sharp contraction is not a consequence of the 2010 FIFA World Cup or the economic crisis, but arises largely from an "institutional vacuum" at municipal and provincial government level.

Leaders are struggling to make investment decisions, there is a lack of technical expertise and a regulatory framework, as well as political interference and corruption.

Although the general economy is slowly starting to recover, capital expenditure – by government in particular – is down.

Capital expenditure by government institutions rose 41% last year, but in the first quarter of this year was up by only 7%. At all government levels capex declined by 8% in the first quarter (2009: 1.2%).

Although at the time of the February budget government promised R846bn worth of capital investment over three years, Langenhoven pointed out that this money would actually flow over a longer period. It takes, for instance, seven years to build a power station.

Safcec data showed that the number of invitations to tender declined by 16% in the year to end-March. In the second half of that year it was down one-fifth compared with the same period a year before.

The value of tenders awarded in the six months to end-March fell by 62%.

 - Sake24.com