BUILDING: Profits Coming Under Pressure
Recent Western Cape Business News
Gavin Maile, KPMG Africa Construction Partner, indicates that “in South Africa profit rates for new contracts are coming under pressure, especially in the housing sector, with numerous contractors bidding on each contract.
“While globally the future for the industry promises huge government stimulus packages with the potential to reinvigorate the infrastructure market, it is unclear how much money will be made available for infrastructure and where it will find its way,” says Maile. “This is a matter of much debate in the boardrooms of engineering and construction companies around the globe. The situation in South Africa is slightly different, where a significant number of infrastructure projects had already commenced before the downturn, especially in the critical areas of power, roads and football stadia.”
Only 12 percent of global respondents believe that proposed government stimuli packages will bring a significant increase in opportunities over the next 24 months. Although contractors in the Asia-Pacific region had the most confidence in government packages, 82 percent of respondents are expecting a moderate or significant increase in opportunities over the next 24 months with 43 percent of respondents from Africa, Europe and the Middle East believing that such stimuli will have no demonstrable impact in that timeframe. In contrast, 73 percent of American respondents are expecting some stimulus impact by mid-2011.
“The direct impact of South African infrastructure projects, on the other hand, is already flowing through the local economy,” says Maile.
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