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Aug 01, 2008

Engineering, construction industry grows despite global market volatility

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Graham Pirie South African Association of Consulting Engineers CEO discusses the role that Government can play in the engineering industry (08/07/2008)
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The current growth in the local and international engineering, civils and construction markets is expected to continue despite the current volatility experi- enced in world economic markets, reports the South African Association of Consulting Engineers (Saace).

Saace CEO Graham Pirie says that even though the local infrastructure roll-out programme and the infrastructure investments from emerging markets such as China were initiated before the period of global market volatility, infrastructure builds cannot be halted as they are vital to the economic growth of countries.

“Government’s commitment of R500-bil-lion, in addition to the money invested in the 2010 FIFA World Cup stadiums, to be spent over three years, means that 2010 is a small component of a larger investment that government is encouraging,” says Pirie.

He comments that the infrastructure roll-out programme is necessary, given the 20-year infrastructure investment backlog that South Africa needs to resolve.

Pirie says that events hosted in the country since 1994 have encouraged infrastructure reinvestment. “Prior to 1994, South Africa didn’t host sporting or political events that would draw an influx of tourists into the country, so the need for infrastructure reinvestment was minimal. “From 1994, with the 1995 rugby World Cup looming, government got serious about resolving this. Certain sporting events, such as the 1995 rugby World Cup, the 2003 cricket World Cup and the 2010 soccer World Cup, focus the right amount of attention on infras- tructure reinvestment at the right time,” says Pirie.

Industry Challenges
Although there is considerable focus on reinvestment in infrastructure, Pirie notes that there are significant industry challenges that must be overcome.

The foremost challenge is the skills crisis. “Because of the 20-year backlog of noninvestment, there was very little focus on building the country’s skills base. “South Africa started to feel the effects in 2005, but the real effects of the crisis are being felt now. Companies are realising that they have to work smarter in order to survive,” says Pirie.

There are a number of initiatives being rolled out to decrease the effects of the skills crisis. Pirie reports that one such initiative is the promotion of engineering as a lucrative career to pursue. “This is predominantly being promoted through the Young Engineers Forum, which is a forum made up of engineers between the ages of 20 and 35. “The Young Engineers Forum visits schools, promoting the selection of engineering as a career path,” says Pirie. He adds that, in the interim, South Africa is importing skills and enticing engineers out of retirement.

In addition, Pirie reports that the 470 Saace member companies currently contribute about R100-million a year towards education and training. Pirie further adds that, should government reinstate bursaries for study towards a career in the public sector, the skills crisis will improve considerably.

International sustainability
In spite of the volatility in the US market and the price of crude oil, the infrastructure expansion in emerging markets is moving ahead at a rapid pace.

Estimations show that China’s consumption of steel, a key component in international infrastructure expansion programmes, will grow by 11,5% in 2008 and a further 10% in 2009, accounting for 35% of the world total in 2008. This is expected to reach 36,7% of world total by 2009. Indian steel forecasts show that apparent steel use will increase by 8,9% this year and a further 12,1% in 2009.

China and India are following the lead of the United Arab Emirates, a country that has seen a plethora of infrastructure expansion initiatives since 2000.

Pirie says that the quality of South African training and education in the past has placed South African consulting engineers and construction firms in high demand oversees.

African Expansion
Pirie says that although there is a large focus on developing emerging markets, such as China and India, it does not mean that there no companies interested in developing African markets.

Pirie reports that there has been a significant amount of capital investment in Africa, which is helping to drive infrastructure reinvestment on the continent. “One has to look at Mozambique and Angola and the transformation in those countries after the attainment of relative political stability,” says Pirie.

“Political stability plays an important role in infrastructure investment. “There is a feeling in the industry that if Zimbabwe can attain political stability, there will be a significant amount of post conflict reconstruction, which will present many opportunities to companies in that market,” says Pirie.

He adds that, in the past, companies found it easy to go into Africa and set up businesses, but found it difficult to move around Africa owing to inadequate road infrastructure.

Pirie says that one has to commend the efforts of the New Partnership for Africa’s Development (Nepad) for promoting interconnectivity within Africa.

“Nepad has done a significant amount of work in improving the state of the roads and related infrastructure so that companies operating in Africa are able to do so without any constraints,” concludes Pirie.

 

Edited by: Laura Tyrer
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