Construction & Real Estate
From The Report: South Africa 2014
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The construction sector benefits from strong fundamentals but has grappled recently with a slowdown in big-ticket infrastructure work and falling margins, prompting some firms to focus their efforts outside of their home turf. However, this has helped to stoke growth in smaller and newly established contractors. While significant infrastructure spending has been planned for the medium term, order books, while busy, have yet to provide the dramatic rebound that has been hoped for. Despite the lingering uncertainty, there are signs that momentum is swinging in a positive direction. A number of state-owned enterprises, for example, are beginning to implement and break ground on projects that for years have stalled at the discussion and planning phase.

South Africa’s property market appears to be in a healthy place, demonstrating solid if not necessarily exceptional growth. However, there are exogenous pressures that could hamper demand, including a sluggish economy, eroding business and consumer confidence, escalating running rates, in addition to interest rate hikes, but these could serve as factors that will keep growth in check and temper the market from becoming over-exuberant. The scope for potential growth varies, unsurprisingly, but broadly speaking the outlook for the near term is fairly robust.

This chapter contains interviews with Henry Laas, CEO, Murray & Roberts; and Louis van der Watt, CEO, Atterbury Group

Articles from this Chapter

Overview

Construction activity rebounds from post-World Cup dip
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South Africa’s contractors, who comprise one of the continent’s more robust and largest construction sectors, have had to navigate a challenging few years. While significant infrastructure spending has been planned for the medium term, order books, while busy, have yet to provide the dramatic rebound that has been hoped for. “After the 2010 World Cup, the industry has been treading water,” Norman Milne, president of the South African Federation of Civil Engineering Contractors (SAFCEC), told…

Interview

OBG talks to Henry Laas, CEO, Murray & Roberts
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Interview:Henry Laas To what extent do South African construction companies rely on public infrastructure projects for their local order books? HENRY LAAS: South Africa’s top engineering and construction companies tend to target large-scale infrastructure projects across the civil, energy and industrial sectors in both the country and the rest of the continent. The segment relies heavily on public infrastructure spending, consisting of developments such as power projects, roads, dams and…

Analysis

Major investments in infrastructure are catalysing growth
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The National Development Plan (NDP) provides the underlying blueprint for socio-economic development until 2030. It sets out the aim of achieving an annual growth rate of 5.4%, which the government projects as necessary to eradicate the triple challenges of unemployment, poverty and inequality. In recognition of infrastructure’s role in improving service delivery, job creation and stimulating the economy, the NDP aims to increase the contribution of gross fixed capital formation (GFCF) to 30%…

Interview

OBG talks to Louis van der Watt, CEO, Atterbury Group
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Interview:Louis van der Watt How sensitive is the property market to volatility in interest and exchange rates? LOUIS VAN DER WATT: The listed property sector will come under pressure as interest rates rise over the next couple of years. The value of properties is indirectly correlated to interest rates, so as they rise, premiums will start coming down. The real estate market is generally saturated in South Africa, whether for retail or office space, and at the moment there is an oversupply…

Overview

Rising price trends reflect strong growth for South African real estate
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Signs that price movement, which appear to be driven by underlying demand with little evidence of speculative activity, are instilling confidence in South Africa’s property sector. Despite a sluggish local economy, residential and commercial prices are appreciating at a pace higher than GDP but are comfortably on par with lending rates, while financing for the sector has proven comparatively stable. The scope for potential growth in each segment varies, unsurprisingly, but broadly-speaking the…