The South African Federation of Civil Engineering Contractors’ (Safcec’s) latest Economics Report shows that the South African civil engineering industry could achieve a nominal turnover of around R50-billion this year, the biggest since the heady days of 2008 and 2009, says Safcec president Norman Milne.
“The recovery we have seen in the industry from the third quarter of 2009, when the market bottomed out, is continuing.”
Nominal turnover in the civil engineering industry reached R8.6-billion in 2000, climbing steadily to R58-billion in 2008, and then declining sharply to R32-billion in 2010, following the global recession and the completion of the many FIFA Soccer World Cup projects ahead of the 2010 event.
Employment in the industry has not shown the same degree of recovery, however. Peaking at 174 927 people in 2009, it has dropped to 105 522 in the third quarter of 2012. However, this is up on the 98 837 people employed by the sector in the first quarter of last year.
Milne says 2012 was a year that produced “more of the same” for the South African civil engineering industry.
“It was very mixed in terms of our members, with the bigger companies doing reasonably well, as they had managed to secure a significant portion of their order books outside South Africa.”
However, notes Milne, medium and small companies continued their financial struggle, hindered by unsuccessful project implementation at local and provincial government level.
“These companies are especially reliant on these levels of government to provide them with work.”
Milne says much of the recovery seen in the civil engineering industry has come from increased spend by State-owned enterprises such as Eskom, Transnet and, to a lesser extent, the Passenger Rail Agency of South Africa (Prasa).
“Prasa is not only buying rolling stock, but also refurbishing its stations. The South African National Roads Agency Limited is also seeing more and more roads returned to it from provincial governments.”
Milne says he is hopeful the recovery seen to date can be sustained at a steady speed, especially as government fast-tracks the roll-out of its eighteen proposed strategic infrastructure projects, or Sips. The framework provided by the National Development Plan, approved by Cabinet, will also assist.
A stop-start project flow, as often seen in the past in South Africa, has been the culprit in the massive job losses, largely of unskilled staff, seen in the industry, says Milne.
“This feast-famine project situation is not beneficial to the country. Our biggest challenge in this industry is to ensure a steady flow of projects, so that people can migrate from one project to the next, creating sustainable employment and the continual improvement of skills.
“We all need to work together, to understand how we can best roll-out the projects government requires and provide certainty of delivery.”
Labour Negotiations Coming in 2013
One of the other, newer challenges facing the industry in 2013 is the labour unrest seen in the local mining sector, which has already affected civil engineering project flow from this sector of the economy.
“Mines are a significant source of work for our members. We are concerned about the current situation, as mines are cutting back their capital expenditure. Hopefully the Sips can fill the gap now left by the mines, while Eskom also has to start thinking beyond the Kusile and Medupi coal-fired power stations they are currently building," says Milne.
The civil engineering industry will also this year for the first time enter into wage negotiations within a new bargaining council structure.
The Bargaining Council for the Civil Engineering Industry was registered in December last year.
The council comprises of Safcec, as the national registered employer’s organisation for the civil engineering industry, together with the National Union of Mineworkers and the Building Construction and Allied Workers Union.
“We have no doubt that other unions will look to become part of the council. In the light of the current labour situation, negotiations are going to be challenging,” notes Milne. “The precedent created at the mines is quite worrying.”