State spending the key

THE government’s R800bn infrastructure development programme is the prime driver behind a countrywide surge of major construction projects that is helping to offset some of the worse effects of the economic downturn.

Large cranes dot the skylines of many of SA’s cities and roadworks and bridge-building and blasting operations are an everyday occurrence as the countdown begins to 2010 in the short term, as well as major infrastructure enhancements further down the line.

Fred Platt, CEO of Accéntuate, says: “Much of the focus in SA will be on government infrastructure spend. If what has been budgeted for — and if what government has said it will deliver up to and beyond 2010 comes to fruition — then this will certainly be a buoyant sector of the economy.

“The challenge that we face is the government’s ability to leverage on delivery and to be in a position to roll out that delivery programme. But all the indicators are that the infrastructure spend will come to fruition and that we will see our industry sector in a position to sustain that level of activity in the years ahead.”

Platt says that government infrastructure spend is concentrated on three main areas: education, health and public transport, in addition to the housing programme to which it is already committed.

“With the run-up to the elections, we saw a major slowdown in government activity and we are hoping it will get going again very quickly.

“The key will be how quickly the new administration can pull the vehicle back into gear and get it moving again.”

Platt has no doubt that some of the major infrastructure spend has taken place — and has been accelerated — as a result of the preparations for 2010.

“From a nation’s delivery perspective, public transportation, the stadiums and the supporting infrastructure that need to be in place by 2010 — and the fact that these have been monitored externally by Fifa — has certainly lent some impetus to the infrastructure programme. I believe that a lot still needs to be leveraged and delivered off that programme, and public transportation is one of those areas.

“2010 is a catalyst for the wider transformation of our economy. It is not the end goal but provides the leg up we need in the economy.”

Platt says that there are some significant economic infrastructure constraints facing the country — public transportation, telecommunications infrastructure and rail infrastructure.

“The transportation of goods amounts, on average, to about 10% of the selling price, compared with Europe, where it is at 2,5% to 3%. This is a major constraint on economic development and something that has to be addressed as a matter of priority.”

He says there are enormous opportunities for South African companies in other African markets, such as Angola, particularly on the supply side, “provided that companies manage those relationships properly. We need to undertake these activities on the basis of sustainable business practice and not with short-term gain in mind”.

“A similar situation has occurred in the DRC, where there are huge development opportunities, and given the rand exchange rate against the dollar we can certainly be competitive. As a region we need to start understanding that regional trade can have a meaningful impact on our future.”

The company has recently completed flooring projects for a major hospital in Lagos, along with another assignment in Luanda, with more work in the offing in the DRC. In addition, through its glass and aluminium operation it is involved in domestic housing condiminium projects in Luanda.

“The biggest single challenge that we have in SA is the shortage of skills.

“As part of our own modest contribution to addressing this we have set up an industry training facility at our premises in Steeldale, and this is basically booked out because the need for skills is so critical.

“As an industry we need to take a far bigger responsibility for delivering a skilled workforce. It is only through industry intervention, specifically in the trades, that we will be able to address the skills shortage.”

Willie Meyburgh, CEO of Stefanutti Stocks, says that circumstances changed substantially to some degree during the second half of last year when the amount of work available was reduced as result of a drop in commodity prices.

In addition, the building of another nuclear power station for Eskom was shelved, while the previous cycle of interest-rate hikes also had an effect on commercial buildings and developers, both in the residential and nonresidential sectors.

As a result, he says the initial extremely positive outlook that seemingly saw no end to construction activity in sight has been modified across the industry to a slightly more cautious view, with the private sector ready to capitalise on, and maximise, the government’s infrastructure spend in the future.

Source: Business Day

Article from: www.eprop.co.za