10

17

19

Continued on

28

EVENTS & EXHIBITIONS

15

Minister Nzimande ’ s vision of SMART Skills Centres becomes a reality

17

CESA Presidential meeting :

CONTRIBUTORS

23

Obituary : Johannes Cornelius Jacobus Coetzee

24

Obituary : Jan Livens

25

Rubbing salt into the wound

26

The Smart and Connected Factory

Dr Azar Jammine , director and chief economist of Econometrix has a speciality in the construction industry and has pointed out some anomalies in the budget . One is that the amount which government plans to dedicate to capital spending – that amount that goes into building and construction – is set to double . On the surface that seems positive .

However , he points out that this figure has been declining for years to less than 3 % whereas fast-growing developing countries like India and China spend well over 20 %. As a result they have GPD growth rates in excess of 6-7 %. He also pointed out at an AfriSam public briefing on 24 February that the steady decline in capital spending is entirely due to government itself – the private sector has continued to invest at more or less the same rate over the past ten years . This private sector investment may not sound incredibly good , but it is when compared to the fact that during that decade government capital spending has collapsed .

The decline in capital investment that is entirely linked to the deterioration of state-owned enterprises which have been “ completely annihilated over the last six years ”. National Treasury has in fact been extremely conservative in projecting an increase in capital expenditure to about 4 % if one simply

looks at projects that have been previously promised by government in previous budgets . Had those promises materialised our growth rate would be above 6 % and every aspect of the construction industry , including HVAC & R would be booming at the moment . Clearly , government is quite accustomed to making empty promises .

Jammine number-crunched some of those promises : 51 projects in housing , sanitation roads , harbours , schools , water and energy promised in November 2021 ; in the Medium Term Budget Policy statement the president promised “ an additional R595-billion of investment ” consisting of 55 projects . In February 2022 , the President announced a R100-billion Infrastructure Investment Fund ; and then in April 2022 , the President announced quite proudly after the fourth Investment Summit , “ we have now secured R1.14-trillion of commitments to capital projects ”. In October 2020 . President Ramaphosa announced an economic recovery and reconstruction programme part of which was R340-billion worth of infrastructure investment to be spared with no time period .

Despite all this , Jammine pointed out that over the past year construction was the worst performing sector of the economy . This of course affects not just the HVAC & R sector but allied industries such as transport equipment and investment in machinery

and equipment , which Jammine says is 20 % down on where it was two years ago .

Not only has the construction sector performed poorly , but within that declining figure there are other variances which skew the pain . Cape Town has overtaken Gauteng as the geography where the highest number of building plans are being passed – meaning the decline is even more severe in places like Gauteng and Durban .

The bottom line of this is that notwithstanding how poor things appear at the moment , the private sector was withstood this recessionary environment well and if this one time , government were to deliver on its promises of increasing capital expenditure , and was prepared to crowd in the private sector – which was a major statement in the Budget – then 2023 may be the year that the HVAC & R component of the broader construction sector may begin to see a turnaround in its fortunes . It would take another two years for the impact of that to really manifest itself – but there would at least be a sense of optimism and hope .

If the numbers mentioned above – of which the actual roll-out has been nonexistent according to a SEIFSA report which described it as “ very little implementation ” – then these numbers are so big , that if we were to actually see full implementation , it would be a game changer not only for the construction sector , but for the entire

economy , claims Jammine . It would mean capital investment would start growing by 20 to 30 % a year , not the measly three or 4 % that the Budget anticipates . More to the point , construction has the highest job creation factor of any sector ( even compared to agriculture which is fast mechanising ) and it would stimulate massive job creation . The economy would grow by between five and 6 % a year . CLA

Eamonn

Source : econometrix . co . za