Government's rally for support in the run-up to next year's elections could go some way to a long way to loosening the grip of the strong rand on the construction sector.
Construction group Murray & Roberts said in its annual report there was a feeling there could be increased infrastructure spending in the next six months or so.
"As SA gears itself for elections in 2004, we are experiencing strong political commitment to increased investment expenditure into the construction economy," Murray & Roberts said.
The industry is feeling the pinch of the rand's gains, which has led to several of its customers putting capital projects on hold.
Delays have occurred, particularly in the mining sector, which generates a large portion of the domestic construction sector's revenues.
In line with the Murray & Roberts' comments, some analysts have forecast a rise in government spending, particularly on large infrastructure projects in an effort to drum up support for the ruling African National Congress before elections next year. Big infrastructure contracts could go a long way to compensating for the slowdown in private sector capital projects over the past year. But it remains to be seen whether government will be able to overcome capacity constraints to deliver large projects.
"Capacity problems in the public sector on the one hand, and uncertainty around legislation and currency volatility in the private sector on the other hand, have combined to restrict the full potential of this market in the short term," says Murray & Roberts .
Carl Grim, CEO of Aveng, the country's largest construction group, was careful not to attribute increased political commitment to the upcoming elections.
"There is a desire to commit to infrastructure in a more plausible way than before," said Grim. He said there had been increased political commitment to infrastructure projects over the past year or two.
Financial director Angus MacKenzie, of construction group Wilson Bayly Holmes-Ovcon's (WBHO), agreed that there were strong indications of political will to execute large construction projects.
"But to date we have not seen them," said MacKenzie, referring particularly to government's pledge earlier this year to spend tens of billions of rand to improve infrastructure and logistics in the country.
MacKenzie suggested the emphasis at the moment was on delivering on smaller contracts, which were typically awarded to small and medium enterprises where government was likely to have a larger support base.
Murray & Roberts chairman Dave Brink said in the annual report that government appeared determined to address deficiencies in SA's transport infrastructure. He quoted data from an Absa report which projects a rise of 8,1% in gross fixed capital formation growth this year, and 6,4% next year.
One projects believed to have potential to win substantial support for government is the Gautrain rapid rail link between Johannesburg, Pretoria and Johannesburg International Airport.
The Skuifraam Dam project in Western Cape was also likely to win support for the ruling party in that province.
These projects are multibillion rand projects which would provide a welcome boost to construction revenues.
