BUILDING: Foundations For A More Stable Industry
Recent Western Cape Business News
The Master Builders Association of the Western Cape (MBAWC) - a registered trade association for employers in the building industry, hosted a seminar to discuss ‘Developing a More Stable Construction Industry in the Western Cape Province’. According to MBAWC President, Allen Bodill, “We called together this forum to pin down some of the reasons for the current depressed state of the industry ...The specific intention of this seminar was to explore the ways in which the various stakeholders of the built environment could collaborate in creating a more stable environment in the building industry in our region”. Speakers from a variety of sectors shared their perspectives on the crisis to the gathering of contractors, architects, quantity surveyors, civil and structural engineers, industry suppliers, skills training providers, developers, academics, media, trade union members and local government representatives.
In his presentation Dr Johan Snyman, Director of Medium Term Forecasting Associates, explained that the South African construction industry as a whole is cyclical in nature. He said, “The bad news is that we are in the downswing of the current recession but the good news is that these cycles do exist and will recur and that we will experience a good period in the future”. In his presentation he explained that these cycles, particularly as they apply to the construction of private housing, correlate with the decline or increase in the level of investment, population migration and interest rates.
Based on the most recent figures from the South African Reserve Bank concerning the level of investment in residential buildings, Dr Snyman has forecasted that the housing industry will start to see an improvement sometime during this year. With regard to construction in the non-residential market which includes factories, warehouses, shops, offices etc, he anticipates that the level of investment will continue to decline but that it won’t be a particularly bad period. He stated that there was approximately a two year lag between the residential and non-residential sectors and as a result the latter would only start to see an upturn in 2012, with two more years of downturn in the interim. In terms of total construction works such as civil works, roads, bridges, gas pipelines and the like, the level of investment has dropped year on year and he expects that this will continue as projects which have boosted investment, such as those ahead of the World Cup, have now been completed. He indicated that this sector will continue to experience a downturn potentially up until 2015, however the level of investment at that time will be vastly superior to what it was in 2000.
Dr Snyman warned that with investment being modest in the residential sector, declining in the non-residential sector and dropping massively in the total construction works sector, combined with lower tender prices will see tough times ahead for Western Cape contractors.
Following on from this, Elsie Snyman of Industry Insight narrowed the focus of her discussion to industry trends in the Western Cape. She said that the Western Cape construction industry has to adapt and change to where the focus of investment lies and that the building industry, in particular, is very sensitive and vulnerable to the needs that are driving private sector investment as well as to factors that influence the confidence levels and decision-making behind these investments. She also pointed out that according to recent construction projects awarded; local government is a critical client of the industry.
In terms of looking at solutions to make the industry less cyclical and more stable, Ms Snyman said that the public sector now can play a much bigger role than what it could in the past. “The private sector is always determined by interest rates, confidence, economic perceptions of growth and actual growth – those kinds of things will always be cyclical in nature. The government, and local authorities on the other hand, are far less sensitive to changes in interest rates in the short term and they have budgets that they plan towards. They also have integrated development plans for the next five years. Therefore, government and local authorities have the power to become counter cyclical in this market and are playing a bigger role as a client so they can influence the market. Thus, it is important that we engage with the public sector on some of these issues”.
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