2013-02-01 02:02:28 - New Construction market report from Business Monitor International: "South Africa Infrastructure Report Q1 2013"
BMI View: World Cup excesses, heavy bureaucracy and continuing political wrangles have weighed heavy on South Africa's previous glories. Though the country can still boast with the continent's most advanced infrastructure, we are now highlighting a significant relative regional decline. Despite a slow return to positive territory, with a real construction industry growth of 3.6% for 2013, the risks are still plentiful: policy uncertainty, cumbersome bureaucracy, intense credit rating pressure and violent clashes in relation to several strikes at mines across the country. Hence, even the announcement of Zuma's new US$462bn infrastructure plan does little to change our outlook for the country's construction sector.
Full Report Details at
- www.fastmr.com/prod/529543_south_africa_infrastructure_report_q1 ..
Though we are seeing a slow return to growth, South Africa's
construction industry is still lagging behind many of its neighbours, registering a strong average growth of 6% for the same time period.
Following the 2010 World Cup government finances were pushed to the limit in order to complete projects on time. Hence, a drawback in funding and subsequent activity was noticed almost immediately after the tournament. Real growth decelerated from 7.8% year-on-year (y-o-y) in 2009 to 0.9% y-o-y in 2010, and continued to weigh heavily on domestic construction companies in 2011, which resulted in falling share prices. That said, growth levels are unlikely to ever return to those seen before the World Cup, as they were driven by an artificial stimulus and a front-loading of the project pipeline.
However, with economic growth slowly ticking up, we are seeing a gradual improvement within the wider South African construction sector. This has been underscored by the measured improvements seen in the performances of numerous construction companies.
Our medium-term outlook for the country's construction sector is one of cautious and modest growth. Statistics South Africa registered a weak 2.4% real growth for the first six months of 2012, in line with our full year 2012 estimate of 2.5%. On the back of this we maintain our 3.6% real growth outlook for 2013. That despite President Zuma's announcement of a new infrastructure plan, which does little to alter our view. In fact, the 15year, US$462bn, plan contains little detail of how to overcome both the regulatory and the funding constraints which continue to block South Africa's infrastructure potential.
Furthermore, it remains unclear how this new scheme aligns with previous infrastructure plans, such as the ZAR3.2tr announced in a budget speech in February 2012, where five geographically focussed infrastructure development programmes were identified:
* Develop and integrate rail, road and water infrastructure centred around the Waterberg and Steelpoort areas of Limpopo, to unlock coal, platinum, palladium, chrome and other minerals.
* Improve the movement of goods through the Durban Free State Gauteng logistics and industrial corridor by prioritising a range of rail and port improvements, supported by Transnet over seven years.
* A new 'South Eastern node' in the Eastern Cape, to bolster industrial and agricultural development and export capacity. Including construction of a dam on the Umzimvubu river and a 16mn tonne/year manganese export channel through the Port of Ngqura.
* An initiative to expand transport and electricity infrastructure in the north-west of the country, including the upgrading of 10 priority roads.
* A number of projects on the West Coast, including the expansion of the Sishen-Saldanha ironore corridor to 100mn tonnes.
However, much of this plan drew upon huge capex schemes by the country's state-owned infrastructure operators, including Eskom, Transnet, Prasa and Sanral. They all have multi-billion dollar plans in the pipeline; but, financing proved and continues to be a major obstacle. With little government funding available, huge sums are required from the international financial community. For this reason, investment is far from assured and thus we have refrained from incorporating these investment plans into our medium-term forecasts for the sector.
About Business Monitor International
Business Monitor International (BMI) offers a comprehensive range of products and services designed to help senior executives, analysts and researchers assess and better manage operating risks, and exploit business opportunities, across 175 markets. BMI offers three main areas of expertise: Country Risk BMI's country risk and macroeconomic forecast portfolio includes weekly financial market reports, monthly regional Monitors, and in-depth quarterly Business Forecast Reports. Industry Analysis BMI covers a total of 17 industry verticals through a portfolio of services, including in-depth quarterly Country Forecast Reports. View more research from Business Monitor International at www.fastmr.com/catalog/publishers.aspx?pubid=1010
About Fast Market Research
Fast Market Research is an online aggregator and distributor of market research and business information. We represent the world's top research publishers and analysts and provide quick and easy access to the best competitive intelligence available.
For more information about these or related research reports, please visit our website at www.fastmr.com
or call us at 1.800.844.8156.