The worst may finally be over for South Africa’s civil engineering industry‚ says the South African Federation of Civil Engineering Contractors (SAFCEC).

The local civil engineering industry has endured a period of severe contraction due to a decline in contract activity‚ which has led to job losses.

In SAFCEC’s State of the Industry report‚ several indicators suggest the industry’s performance improved in the first quarter of 2012. These include improved turnover (albeit from low levels)‚ improved order books‚ the expectation to hire rather than retrench staff in the next quarter‚ and marginally improved profitability.

dicators suggest the industry’s performance improved in the first quarter of 2012. These include improved turnover (albeit from low levels)‚ improved order books‚ the expectation to hire rather than retrench staff in the next quarter‚ and marginally improved profitability.

Following several years of lower turnover and diminished profitability‚ the focus remains on internal strategies to operate efficiently‚ effectively and profitably.

Lower employment and low tender prices are signs of an industry still under stress‚ in spite of some of the other indicators showing “improved” conditions‚ it says.

SAFCEC maintains the view that 2012 is likely to improve on 2011‚ albeit at a single-digit rate.

The opportunity presented by the government’s infrastructure expenditure programme is limited‚ as infrastructure expenditure is projected to increase by single digits (below 5%) at most over the next few years.

Shifts in terms of economic infrastructure in favour of social infrastructure have created more opportunities for the building industry‚ while the civil industry is becoming more reliant on state-owned expenditure‚ including spending by Eskom‚ roads agency SANRAL‚ Airports Company SA and Transnet‚ the body said.

“It is perhaps also worth noting that 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‚” the report says.

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

Medium-size companies are ideally placed to capitalise on the opportunities in the health‚ protective‚ education grants‚ and road maintenance programmes‚ while smaller firms have to rely on more effective municipal spending.

SAFCEC is a national employers’ organisation that represents the interest of its members.

Source: I-Net Bridge