The civil engineering industry is reporting a 28% increase in turnover for the first quarter of this year and a healthy order book for the next quarter — signalling that the decline may finally be over for the sector.

Over the past three years there had been a severe contraction in the sector and a drop in contract activity, leading to the loss of more than 100 000 jobs.

A state of the industry report released yesterday by the South African Federation of Civil Engineering Contractors — which represents 270 employers and 110 “emerging” members with turnover of less than R5m a year — said 44% of its members were considering hiring in the next quarter as their order books swelled.

The report, which measures data from large, medium and small contractors, found revenue in the industry shot up 28% in real terms in the first quarter of this year compared with the same period last year.

Norman Milne, part of the federation’s management and economic committees, said members were “cautiously optimistic”.

He estimated the industry had lost up to 40% of turnover since the 2010 Soccer World Cup.

“We believe there is light at the end of the tunnel — but we don’t know how long the tunnel is,” he said yesterday. “What is encouraging is that our members say they will consider hiring in the current (second) quarter.”

But he warned industry profits and margins were still low. Large construction companies had been “very reliant” on contracts from state-owned enterprises such as Eskom, Transnet and the South African National Roads Agency.

He warned that South Africa’s public-private partnership policies were in trouble.

“Bids have sat in limbo,” Milne said, referring to costly tenders to build prisons over the past three years, after the government reneged on plans to allow private-sector building and operation.

This week listed black empowered civil engineering and construction group Sanyati Holdings was liquidated after the nonpayment of R60 million by the Free State roads department.

The survey found employers believed that opportunities presented by the government’s infrastructure expenditure programme were limited, and infrastructure expenditure was projected to increase 5% at the most over the next few years.

“The larger firms are able to diversify between the opportunities presented in both the building and civil industries, and recent projects awarded by government in the health and protective services, could influence the confidence levels of the larger firms, while medium to smaller firms, not able to diversify as effortlessly, are affected by the slow pace in road and other civil construction.

“Important drivers affecting larger firms in the next two years, include finalisation of public-private partnership policies and resolution of the e-tolling system,” the report read.

Paul Stuiver, CEO of Pretoria Portland Cement, said yesterday that the outlook for cement sales was starting to brighten, with contracts picking up even at municipal level.

Roger Jardine, CEO of South Africa’s largest construction company, Aveng , said earlier this week the sector was hurt by lower spending on infrastructure. He said in 2009, the construction and engineering industry had employed 200 000 people and half those jobs had since been lost.

Mr Jardine said it would be detrimental to the long-term health of the country if the state-run Construction Industry Development Board banned building and construction companies from government contracts for up to 10 years if found guilty of collusion.

The South African Federation of Civil Engineering Contractors report concluded: “We maintain the view that 2012 is likely to improve on 2011, albeit in single digits.”

allixm@bdfm.co.za

Source: Business Day