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Sep 19, 2012

Engineers see too few signs of SA’s infrastructure promise

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Power|PROJECT|South Africa|Transport|Water Infrastructure|Graham Pirie|South Africa
power-company|project|south-africa|transport-industry-term|water-infrastructure|graham-pirie|south-africa-region
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Capacity utilisation levels in South Africa’s consulting engineering industry dipped to 89.1% in the first six months of 2012, from an average utilisation rate of 90.9% in December 2011, Consulting Engineers South Africa’s (Cesa’s) bi-annual economic and capacity survey shows.

It also indicated that 63% of its 480 member firms expect capacity utilisation rates to remain unchanged for the coming six months, owing partly to a slower-than-expected pick up in public-sector workflow.

The South African government has indicated that it and its State-owned companies (SoCs) plan to invest about R860-billion on power, transport and water infrastructure over the three years from April 1, 2012 to March 31, 2015.

But while the South African Reserve Bank’s September Quarterly Bulletin showed a pick up in gross fixed expenditure to 5.7% as compared with 5.3% in the first quarter and 4.8% for 2011, the domestic construction sector continued to describe the environment as being weak.

As with the construction majors, Cesa members were, therefore, “looking north for work across our borders”, CEO Graham Pirie said.

The latest survey confirmed that the “industry is not firing on all cylinders”, that “government is not spending” and that “although there appears to be a lot of planning taking place the physical manifestation is just not happening”.

Conditions in the first six months of 2012 had been more difficult than expected, despite the fact that most of the larger firms had been busy during the period.

Fee income increased by 12% to an estimated R20-billion in the first six months of 2012, which was in line with expectations.

About 9.4% of fee earnings were outstanding for longer than 90 days, compared to 24% in December 2011 and 18% in the June 2011 survey. “This is the lowest rate since the December 2002 survey,” Pirie said, but still translated to an estimated R1.9-billion in outstanding fee earnings.

Overall confidence in the industry fell by 6.4% to 81.8 as at June 2012, from 87.4 in the last six months of 2011, but Pirie said firms were bullish that conditions would improve in the next 6 to 12 months.

Project postponements and delays in project implementation affected confidence in the contracting fraternity. Civil contracting confidence improved marginally to 34 and 38 in the first two quarters of 2012, but is still well below levels experienced between 2005 and 2008.

Cesa members indicated that unlocking greater private sector participation could be a critical element to fast-track and improve delivery.

The contribution by the private sector fell to 34.3% in the June 2012 survey, down from an average of 44.8% in 2011. Pirie said it was the lowest contribution by the private sector since 2005.

The contribution of SoCs improved to 20.5%, from an average of 13% in 2011, while the provincial government contribution rose to 14.3%, from an average of 9.7% in 2011.
 

Edited by: Creamer Media Reporter
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