There are some positives to be found in the South African construction market, despite the Covid-pandemic, says Industry Insight senior economist David Metelerkamp.
This first positive lies in the resilience of the civil engineering sector, where there was a 12.7% increase in civil tenders awarded in 2020 compared with 2019.
“Yes, we are at a very low historical level, but this is very good, considering that we are in one of the worst economic collapses in 100 years,” says Metelerkamp.
He says Industry Insight has seen a “a lot of activity” in the roads, power and water segments of the civils market, with a number of big projects awarded.
Unfortunately, tender activity was a little bit weaker last year, he notes, with civil projects out to tender declining by 4.8% in 2020.
“This was largely due to what happened in April and May, when everything shut down and there was no activity in these two months.”
More good news is that there was 15% growth in the estimated value of civil tenders that came out in the second half of 2020, year-on-year, says Metelerkamp.
“That is a lot better than expected, considering the circumstances.”
Metelerkamp does, however, note that there is a severe shortage in skills at municipalities and State-owned entities to implement infrastructure projects.
“It is positive, nonetheless, and we’ll take it.”
The second positive in the construction industry is a “significant boom” in do-it-yourself and home improvement projects.
Metelerkamp says the renovations market within the construction industry has done “really well” in 2020.
When looking at Statistics South Africa’s retail trade data, there was a 10.7% increase in hardware sales in the second half of last year, compared with a 3.8% decline in overall retail sales.
People are at home more during Covid-19, and this necessitates the need for repairs and renovations.
“We’re not talking small renovations either. It’s timber and steel. It’s structural materials. People are building a room onto their house,” says Metelerkamp.
“This is not exclusive to South Africa. We have seen this happening in other markets as well.
“Whether this can continue, is a good question,” he adds. “In the short run, yes, but, in the long run – it can’t go on forever.”
A third positive in the construction industry is the roll-out of government’s Strategic Infrastructure Projects, although this one comes with some caveats, warns Metelerkamp.
“They have R360-billion for a list of 50, 51 projects which are shovel-ready, but I don’t buy that. Only seven are in implementation phase, according to documents by National Treasury.”
He again points to a severe skills shortage in government to implement these projects, while also emphasising the divisive nature of the current political environment, which is creating a lack of investor confidence.
However, he notes that government has “definitely prioritised” infrastructure, and that this a step in the right direction.
* Metelerkamp participated in the 2021 AfriSam Webinar Series.