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It’s still tight out there, Group Five chief cautions

4th December 2015

By: Irma Venter

Creamer Media Senior Deputy Editor

  

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The South African civils market remains “very much under pressure”, says Group Five CEO Eric Vemer.

The road-building sector is “very competitive”, with more complex infrastructure projects “very quiet”.

There is also no increased spend on water infrastructure yet, despite the drought and talk of rampant water leaks, but there is hope that this situation will improve.

The mining sector “is dead”, with Group Five busy with some work in Namibia and Burkino Faso, says Vemer.

Group Five’s manufacturing business is also finding it tough going, and is experiencing “more pressure than the previous year”.

“Generally, it is still tight out there,” notes Vemer.

Unfortunately, these conditions will see Group Five shed more jobs in its civils division, as well as in two of its manufacturing businesses, namely Everite and Group Five Pipe, with Vemer unable to currently quantify the loss.

Vemer reported in August that Group Five had cut 2 600 jobs at its civil engineering unit, leaving the current workforce at less than 2 000 people. Just more than 230 of the jobs cut were permanent positions, with the remainder contract employment positions.

Sectors where business still ticked along healthily include the building sector, which remains “robust” and “surprisingly resilient”.

The private sector is continuing investment in high-rise office and residential, as well as retail, developments.

The public healthcare sector is also spending money, with housing developments, public and private, also putting out tenders.

The power sector is still delivering good business opportunities, especially in the renew-ables sector and in countries outside South Africa.

Group Five’s concessions business, which includes toll roads, remains robust, with an increasing pipeline of opportunities in Africa in the transport sector, says Vemer.

Africa remains an important destination for Group Five, he adds. While conditions may be tight in South Africa, there is a healthy pipeline of opportunities in the rest of the continent.

“We see a level of order intake in Africa that provides some compensation for the South African market.”

It is Group Five’s strategy to “create . . . our own order book”, adds Vemer. “We want to be in charge of our own destiny.”

This means the group will typically seek and create project opportunities in Africa, often leveraging private-sector partners.

This process, however, has a longer cycle time, while it also creates “some lumpiness” in the order book.

Group Five is currently executing a R4-billion engineering, procurement and construction contract for Ghanaian energy group Cenpower Generation.

The group is designing and building a 350 MW gas-and oil-fired combined-cycle power plant in the Tema industrial zone.

To date, the key equipment has been delivered and the key subcontracts placed.

“The volume of work will start in the middle of next year,” says Vemer. “We have to complete the contract by the end of the 2017 calendar year.”

China has become a “very strong” presence in Africa, adds Vemer.

However, Chinese construction companies often operate more on a State-to-State model, while Group Five is more involved in private-sector projects.

Selected countries are also starting to resist Chinese participation, notes Vemer, as some companies have in the past imported labour from China and not grown local construction capacity.

Namibian newspaper Die Republikein reported in October that 16 of 22 companies tendering to build a stretch of highway between Windhoek and Okahandja were Chinese firms.

Edited by Martin Zhuwakinyu
Creamer Media Senior Deputy Editor

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