Civil engineering up but building stutters

Posted On Tuesday, 21 May 2002 10:01 Published by eProp Commercial Property News
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The civil engineering industry is reaping the rewards of increased spending on infrastructure

Infrastructure IndustryThe civil engineering industry is reaping the rewards of increased spending on infrastructure.

But for the rest of South Africas construction industry, things are not going as well. Both the South African Federation of Civil Engineering Contractors (Safcec) and the Building Industry Federation of SA (Bifsa) said this week there were definite signs of improvement, but the outlook remained fuzzy.

Sector-to-sector analysis shows that there is both recovery and stagnation in the industry.

The residential building sector is still showing signs of growth, but commercial construction is slowing, while fixed investment in infrastructure development remains high.

Investment in buildings, taken at constant 1999 prices, is today more than 20% lower than in the mid-1970s.

The building sectors contribution to gross domestic product has fallen from nearly 7% to just more than 3%. Turnover declined 11% in 1999, the highest annual drop since 1986. And as no growth was reported in 2000, the medium-term outlook for 2002 is fuzzy, with growth expected to soften to 2%.

The prospects are not particularly good. Demand is down and there is an oversupply of office and industrial space, says Barry van Breda, the president of Bifsa.

Industry Insight, a construction management information provider, reports that during the past three years, only 7% of building contract awards (declining to about 5%) had a value greater than R20-million.

March domestic production data, however, indicates that the industrys outlook may be set to improve.

Helped by significant growth in civil engineering, which reported R12-billion turnover in 2001, output rose 4% in the same period.

This followed growth rates of 1.0%, 2.7% and -0.6% in the first three quarters respectively thus reversing the setbacks suffered in the late 1990s.

Economists say the industry is in for a bumpy ride, especially in view of the uncertain short-term outlook for interest rates. However, a global economic upswing could lead to higher domestic expenditure, spurring construction activity. And both the public and private sectors renewed commitment to expenditure on infrastructure should be a vital source for new work for the sector.



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