Power constraints pull plug on R6bn worth of projects
by admin on May.05, 2009, under Greencon, Greencon Local Energy Update
Projects with an estimated construction value of between R4 billion and R6 billion were postponed or cancelled up to last September as a result of electricity constraints, the Cement and Concrete Institute (C&CI) says in its industry review for last year.
It says that while the construction industry had several years of good growth between 2000 and 2007, the economic outlook continued to deteriorate last year, due to the lagged effect of higher interest rates, Eskom’s stringent project approval policy, weaker consumer and business confidence, and lower growth in house prices. All of these economic variables hit the construction industry hard.
The institute was established in 1938 for the purpose of “promoting the interests and general advancement of the portland cement and construction industries as a whole”.
The C&CI says civil engineering turnover remained healthy last year, supported by government spending on infrastructure and the growing impetus from state enterprises, including Transnet and Eskom.
“The decline in the number of residential properties deepened as the number of square metres completed reduced,” says the review. “Household finances remained under pressure and access to mortgage finance was limited by the restrictions imposed by the new National Credit Act, and the banks’ reluctance to take risks.
It says activity around the non-residential sector last year centred on the development of office and retail space, driven mainly by past robust economic growth. The high end of the commercial and retail building market remained buoyant throughout the year and the development of retail centres seems to have followed the large residential developments.
The C&CI says regional analysis reveals that 14.7 million tons of cement products were sold in the region last year, which was 3.9 percent below that of 2007.
This tonnage included 1.4 million tons of fly ash and slag, purchased by contractors and concrete product producers for extending and/or enhancing their concrete mixes. The extenders are by-products of the power and smelting industries and do not require cement producing capacity. They should not therefore be included in any cement demand or capacity comparisons.
The review says: “Sales to the nine South African provinces were down 4.6 percent on 2007, with major reductions in the Western Cape (minus 7.9 percent) and Gauteng (minus 11 percent). An analysis reveals that this was largely due to the slowing of building activity in the residential sector, hit hard by the climbing prime lending rates over the previous 12 to 18 months.”
The C&CI says tougher times lie ahead for the industry, although an improved inflation and interest rate outlook could bring some relief in the longer term.
The review says: “The outlook for the civil industry is more promising. Double-digit growth rates were experienced during the past few years, but may be replaced by more modest single-digit growth, provided local and provincial governments are able to effectively implement budgetary allocations to improve service delivery.”
Source: Business Report
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