Conditions in the South African engineering sector in the first half of the year were better than expected, driven chiefly by improved earnings and increasing levels of employment, Consulting Engineers South Africa’s (Cesa’s) latest Bi-annual Economic and Capacity Survey, released on Friday, showed.

According to the report, this came as the industry continued to adapt to a low-growth environment, and despite infrastructure spending being hampered by poor economic growth, lower-than-expected government revenue, international economic instability, price volatility and low private sector confidence.

Amid the challenges, confidence levels improved by 20% to 84 on the index, and were expected to be relatively stable in the next 12 months, with a slightly better outlook for the industry in the first six months of 2014.

“However, business sentiment, which reached a neutral level of 50, is unlikely to be sustained or even improve, in light of the expected negative impact of August strike action on the economy,” Cesa CEO Lefadi Makibinyane commented.

Despite sweeping labour issues, Cesa reported a 22% increase in employment in the sector, which saw 24 356 people employed and which was accompanied by a 14% increase in the employment of nonwhite professional engineers.

Similarly, the number of black executive directors, nonexecutive directors, members and partners, increased to 35.5% of overall numbers, which Makibinyane said demonstrated significant progress in terms of industry transformation.

Meanwhile, capacity levels in the sector improved over the period to 91% after deteriorating to 87% in the previous two surveys.

“A level of 91% is the highest level reported by participating firms since the December 2008 survey, when it was at 95%,” he noted.

In addition, the fee income earned by member firms accelerated at a faster pace than expected in the first six months of 2013, after slowing down in the last half of 2012.

Some 9.9% of fee earnings were outstanding for longer than 90 days, compared with 8.3% in the December 2012 survey and 24% in December 2011. This translated to an estimated R2-billion in outstanding fee earnings.

INTRINSIC CHALLENGES

Despite broad improvements in the industry, Makibinyane emphasised that fraud and corruption remained an intrinsic challenge.

“This is affecting the ethos of our society, with a lot of talk and little action accompanying the growing evidence of corruption,” he asserted.

To combat corruption, Cesa earlier this year established a R1-million anticorruption fund to pursue legal action against municipalities and private companies that it suspected of having acted illegally in the awarding or securing of contracts.

In July, the organisation took steps to lodge its first case involving a district council with the regional office of the Public Protector.

“Cesa is also engaging with National Treasury to include the concept of an integrity pact into the Public Finance Management Act and the Municipal Finance Management Act,” he commented.

The Cesa head added that service delivery, particularly at municipal level, remained a critical issue, and that the consulting engineering industry was threatened by incapacitated local and provincial governments.

“The way that infrastructure projects are planned and packaged requires a concerted effort by government, and the inclusion of consulting engineering firms at this initial planning stage needs to be emphasised,” he contended, adding that Finance Minister Pravin Gordhan had identified the underspending of infrastructure budgets as a serious concern.

Data released by the National Treasury in August showed that South African municipalities had again failed to spend their full capital budgets for the financial year ended June, which the National Treasury said reflected the challenges of planning for the implementation of capital projects.

The country’s municipalities spent R41.7-billion in the financial year, which was only 76.7% of the collective adjusted capital budget of R54.4-billion for the year. Metropolitan regions spent 85%, or R22.7-billion, of the collective R26.7-billion budget.

Meanwhile, Makibinyane further called for the standardisation of procurement procedures across government departments and tiers of government.

He said this would limit the involvement of non-Cesa member organisations in government tenders and procurement, as these firms threatened the standard and performance of the industry.

“Non-Cesa members do not seem to comply with the same standards and principles as those firms that are members of Cesa,” he said.

Makibinyane also warned that the lack of infrastructure maintenance posed a “serious” problem for the industry, adding that, while Cesa had shown its support for the National Development Plan, more intricate and assertive work needed to be done for the plan’s objectives to be realised.

“In particular, more needs to be done to break the 18 strategic integrated projects down into tangible and costed programmes,” he said.