South Africa’s construction industry saw its average profit margin plunge from 5% in 2009 to 2.8% in 2011, says Statistics South Africa (Stats SA) statistician-general Pali Lehohla. Income in the sector reached R267-billion in 2011, down from R285-billion in 2009 the year the industry probably benefited the most from the construction of infrastructure for the 2010 soccer World Cup.
The local construction industry in 2011 earned the smallest profit margin of all nine industries it was compared with for the purpose of the study, notes Lehohla, with mining and quarrying at the top, recording a profit margin of 16.5%, followed by finance, real estate and business services at 12.1%.
This data flows from the newest Stats SA report on the construction industry, following on from a previous report, released in 2007.
According to the new report, it appears parastatals have been the big spenders over the last few years.
The share of income generated through services rendered by the construction industry to the private sector declined from 71.9% in 2007 to 58.5% in 2011. However, revenue generated from major public entities (parastatals) increased from 14.7% in 2007 to 23.6% in 2011, with national, provincial and local government upping their share from 13.4% in 2007 to 17.9% in 2011.
Large construction companies earned 64% of industry revenue in 2011, medium-sized enterprises 21%, and small and microenterprises 15%.
Gauteng generated the most revenue for the construction industry at 40.4% (down from 47.5% in 2007), followed by the Western Cape at 13.7% (down from 16% in 2007).
Limpopo (6.8%), Mpumalanga (9.4%), the Free State (4.4%), KwaZulu-Natal (11.2%) and the Northern Cape (2.7%) all showed an improvement on 2007 numbers.
Lehohla attributes the geographical shift to a number of large projects outside Gauteng and the Western Cape, such as the construction of new power stations in Mpumalanga and Limpopo.
The Stats SA report also notes that the construction industry’s contribution to the country’s gross domestic product (GDP) dropped from 4% in 2009 to 3.8% in 2011.
Lehohla says employment in the formal and informal construction sectors amounted to 1.054-million people in 2011, down from 1.16-million people in 2008.
Men made up 89.3% of employees in the sector in 2011 and women 10.7%.
One area where the construction industry can show improvement is in employee benefits.
“You are much better off as a miner than if you are in construction,” comments Lehohla.
Only 11.3% of employees in the construction industry had medical aid, compared with 76.9% in the mining industry. Just more than 43.3% of construction industry employees had paid annual leave, compared with 94% in the mining industry.
The 2011 Stats SA report used data from a sample of 4 000 private and public enterprises operating in the construction industry. The questionnaires were completed for the financial year of the enterprise, which could end on any date between July 1, 2010, and June 30, 2011.
It focused only on income generated in South Africa, says Stats SA large sample surveys manager Tshepo Pekane.
Lehohla explains that 2011 numbers were used, as “data takes time to process”.