The Civil Engineering Contractor October 2018 | Page 41

Africa’s people want addressed as a
matter of priority (the percentage
mentioned in the top-three issues):
Jobs (37%); Health (32%); Education
(24%); Roads (21%); Water supply
(20%); Crime & Security (14%);
Food (14%); Electricity (13%);
Corruption (12%); and Housing
(11%).”
Land expropriation without
compensation is not addressing any
of these — quite the opposite, as it is
driving away fixed direct investment
(FDI), says Dr Botha. Nor are any
acts of land expropriation imminent
as there hasn’t been a single case of
land expropriation in 11 years, even
though the legislation is already in
place for it to happen. “It is therefore
a storm in a teacup, but one which
is not good for the economy. It will
automatically reduce the tax base and
may even result in junk status for the
economy.”
The E&C sector is not doing
as badly as is commonly thought,
says Dr Botha, because there are
some anomalies in statistics. “There
has been progress in the building
materials sector last year, as there
was in the retail sector covering
hardware, paint, glass, and so on.”
While Q1 2018 is down, Dr Botha
points out that this is an annual
seasonal trend attributable to year-
end holidays. He says there has also
been a steady improvement in the
number of building plans passed and
buildings completed.
He therefore predicts another seven
golden years for the construction
industry — similar to the one
enjoyed before the Zuma years, if
a couple of actions could be taken
by government. One action is to
address high real interest rates. He
describes the high real prime rate
(and consequently the interest rate
we all pay) as “public enemy number
one”. When Gill Marcus was head of
the South African Reserve Bank, the
real prime rate was consistently in
the region of 3%, with a marginally
negative real bank rate after inflation
— as it is even today in most
developed countries.
“After the Marcus era, it doubled
to close to 6%. In the past two
years, the repo rate has dropped
0.5% while inflation has fallen 2.2%
— so we are owed 1.7% at a time
when the GDP growth trajectory is
down.” He points out that although
we managed to avoid junk status,
rating agency Moody’s has warned
the Reserve Bank that its interest
rate policy is credit negative for the
country’s banking sector.
Another negative indicator is that
South Africa’s 0.7% rate of inward
FDI fell to its lowest ever during the
past three years — even lower than
that of the Venezuela failed economy.
It has since recovered under
Ramaphosa and will stabilise at a
healthier 4.1% if he achieves 50% of
his target of USD100-billion within
five years. Dr Botha pointed out
that Ramaphosa had already achieved
34% of that in a few months.
One way to kickstart the economy
would be to reduce the bank rate
BUSINESS INTEL
Leading economist Dr Roelof Botha
gave the keynote presentation at The
Concrete Conference 2018.
to where it should be, and another
would be to revitalise the RDP
housing programme. Dr Botha
explains that in the first eight years of
the programme, three million homes
were built, while the latest budget
provides for less than 7 000 houses.
“This is what the construction
sector should be lobbying
government for. The fundamentals of
our economy are already into a new
growth phase. To reinforce this trend,
we need to get policy certainty and
this primarily means getting the 2019
election behind us, because not much
policy change happens in an election
year. We therefore need to be patient
for the next 9 to 12 months,” says Dr
Botha. nn
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