NEWS
11
Construction sector improvement
depends on government action –
Mace
Growth in the South African construction sector
(and by implication, the South African plumbing
construction sector) will strengthen if government
can succeed in its quest to root out corruption,
modernise state-owned enterprises and assure
investors of stability, according to international
consultancy and construction company Mace.
It forecasts that South Africa’s GDP growth will accelerate to
1.5% this year which should support construction activity.
However, the World Bank in January cut its economic
growth forecast for South Africa to below 1% for 2020
due to electricity supply concerns. It expects South Africa’s
economy to expand by 0.9% this year compared with its
estimate of 1% in October last year.
Kelvin Byres, director for South and West Africa at Mace,
said the central outlook for construction activity across sub-
Saharan Africa is cautiously positive but the overall outlook
conceals wide variations between nations – and headwinds
are strengthening. “Government debt and domestic political
uncertainty are being compounded by the weaker global
economic outlook,” he says. “Overall, investment in critical
infrastructure such as roads, railways and housing is slowly
continuing and supporting construction industry growth.”
Byres said South Africa continues to face significant
headwinds but the outlook for East and West Africa is
brighter. “In busier markets like Ethiopia, Rwanda and
Ghana, there are big opportunities available for those
willing to take risks. Developers should ensure that they
are tailoring their procurement strategy to reflect localised
capacity constraints. Earlier contractor engagement will also
be key in delivering the best project outcomes,” he says.
The Mace report says rising construction costs and weak
demand in South Africa continue to make the operating
environment difficult for construction contractors. It says
construction is bearing the brunt of the economic malaise in
South Africa.
Statistics SA data suggests that construction activity
contracted by a further 2.4% in the first half of last year
after falling by 1.2% during 2018 but IHS Markit’s estimate
for 2018 suggesting output grew by 0.5% in real terms, is
slightly more positive, it says.
April 2020 Volume 26 I Number 02
Mace’s latest cost update for sub-Saharan Africa reports
that construction activity in the region will grow at an
average rate of 7% across the next two years. By contrast,
construction output growth in South Africa is forecast to
accelerate to 1.6% this year from 0.9% last year.
Opportunities exist in busier markets like Ethiopia, Rwanda and Ghana, but conditions in
the local construction sector remain challenging.
"Mace says overall demand for
commercial office space is weak and the
vacancy rate at 12% is relatively high
and several schemes are currently under
construction."
Mace says overall demand for commercial office space is
weak and the vacancy rate at 12% is relatively high and
several schemes are currently under construction. It stressed
that public investment is the lifeblood of the construction
sector in South Africa but an election-induced hiatus in late
2018 and early last year affected spending while the public
inquiry into allegations of state capture, corruption and fraud
has been a further drag. PA
Source: Moneyweb
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