Construction & Real Estate
From The Report: South Africa 2013
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South Africa’s construction industry has felt the impact of the post-World Cup slowdown more than any other sector of the economy. However, ongoing urbanisation trends suggest the sector may pick up in the near future, especially with regards to the social housing segment. South African construction companies have also experienced significant success in their efforts to expand into neighbouring countries. Compared to international markets, local real estate has performed relatively well. Returns, both in terms of capital and income, have on the whole stalled and flattened rather than slipped fully into negative growth. Certain elements of the sector, depending on location and class, continue to present attractive opportunities, especially commercial office property. While there is little sign of a rapid turnaround, there are some positive longer-term indicators, including potential income growth.
This chapter contains interviews with Roger Jardine, CEO, Aveng Group; and Marc Wainer, CEO, Redefine Properties

Articles from this Chapter

Overview

Facing the challenge: After a recent difficult period, the sector may now be recovering
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Looking at the skyline of any major South African city, you will see far fewer cranes than during the construction surge that occurred in the past decade, when the prospects of hosting the FIFA World Cup led to a huge building drive incorporating everything from stadia and hotels to large-scale transport infrastructure projects. More so than any other segment of the economy, the construction industry has felt the impact of the post-World Cup slowdown. The easy days of high margins and abundant contracts…

Analysis

Stable foundations: Cement producers have successfully weathered a tough patch
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The cement industry looks set for a shake-up in the coming 12 months. With new supply coming to market and the major local players regrouping following the Competition Commission’s cartel ruling against them, pricing may begin to head in a more positive direction for the construction industry. Foreign Competitors It has been a difficult period for the country’s leading cement firms. The current key players in the market include: Lafarge Cement, Pretoria Portland Cement (PPC), Natal Portland…

Interview

OBG talks to Roger Jardine, CEO, Aveng Group
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Interview:Roger Jardine How dependent are South African construction firms’ local order books on government projects? ROGER JARDINE: For many of the country’s larger construction firms that rely on and handle big-ticket projects, our business mix has shifted abroad, although we remain South African-domiciled companies. This is not deliberate, but the reality is that you “fish where the fish are”, and for the past few years infrastructure spending in South Africa has slowed down. Certainly,…

Interview

OBG talks to Marc Wainer, CEO, Redefine Properties
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Interview:Marc Wainer How substantial is the appetite for listed property funds as an asset class at present? MARC WAINER: Compared to a market like the UK, South African investors tend to be yield-sensitive and less concerned with net asset value (NAV). I believe the sector is overheated and trading at too high a premium to NAV. Analysts will counter that this is not the case, with South Africa’s property market over the past decade outperforming cash, equity and bonds by a big margin.…

Overview

Long-term promise: Short-term indicators suggest challenges but future forecasts are brighter
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The current global financial woes have hit property around the world as hard as any other sector. Weak export markets, a sluggish local economy, as well as poor business and consumer sentiment have all hindered the performance of local property activity in many markets, including South Africa. However, compared to international markets, local real estate has performed relatively well. Returns, both in terms of capital and income, have on the whole stalled and flattened rather than slipped fully…

Analysis

Above the crowd: Office space continues to provide better returns
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One of the best performing segments of the real estate sector over the past 12 months has been commercial office property. The office segment achieved an 11.2% overall return (income and capital) in 2012, the best performer outside industrial real estate and well above the sector average of 10.4% (retail had a return of 10.1%). Even so, the environment has still been tough for property managers in this segment, with doggedly high vacancies and increasing operating costs making life tough. Resilience As…