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Feb 17, 2012

Construction companies’ success to be tested in 2012

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Construction companies will have to find ways to expand their product and service offering, as well as target higher growth markets this year, advises assurance, tax and advisory services provider Ernst & Young.

Ernst & Young director Ebrahim Dhorat adds that local construction companies will be tested on how robust their operations are and how their strategies fare in an uncertain market.

“With investor attention firmly on current and future volumes, contract implosions, working capital consumption and margin declines, key players are refocusing on their core strengths, growth, capital agendas and optimising operations,” he explains.

Further, he points out that the growth plans of companies incorporate offshore ventures, particularly into Australia, as well as Africa, review and adapt strategies, and the undertaking of assessments to ensure they have the right skills, leadership and integrated delivery models.

However, Dhorat warns that the roll-out of sizeable infrastructure projects could leave less room for midmarket players, with global players required to handle large-scale infrastructure projects, including programme management.

Meanwhile, he says, the necessity for the maintenance and upgrading of existing infrastructure is high.

“Governments and the private sector have realised that the pace and level of an upturn in economic growth would be dependent on investment in infrastructure, and government’s plans should incorporate a long-term view coupled with maximum socioeconomic impact.”

Further, he admits that the sector has been under pressure, with some compa- nies facing Competition Commission enquiries, com- petitive tendering conditions and a reduction in order books.

“Theses challenges were made worse because of reduced government infrastructure spend and unstable financial markets that inhibited private-sector spend,” says Dhorat.

Edited by: Chanel de Bruyn
Creamer Media Senior Deputy Editor Online
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