South Africa’s construction sector to gain from faster roll-out of government infrastructure projects

Route6 south africa road construction
Rehabilitation of National Route 6 South Africa: real traction in government infrastructure projects, including the US$847bn infrastructure programme, will boost construction sector firms

Improved roll out of government infrastructure projects in South Africa is set to benefit construction sector firms in 2015, if they reposition their businesses properly. Reports indicate that government infrastructure projects, which had stalled, are being rolled out faster.

Jason Musct, an FNB senior analyst has said that there is expected real traction in rolling out local public sector projects, considering comments from government and public corporations. The South African government has also emphasized on need to increase role of private sector.

Musct also said that gaining momentum was likely in consideration of data from Reserve Bank. Construction sector in South Africa has also recorded a 24% increase in construction work in the first quarter of this year, in comparison to the similar period last year.

Construction sector in South Africa also recorded a GDP growth rise by 5%, and according to Musct, the GDP strongly correlates with infrastructure spending in the country. The government has also started encouraging public-private partnerships to expedite the investment programme.

Previously, construction companies have raised concerns that the South African government’s US$847bn infrastructure programme had little chances of being implemented. The government hoped to execute the programme in three years’ time.

Meanwhile, construction firms in South Africa have increased seek for international business to counter the delayed roll out of government infrastructure projects. For instance, reports show that Wilson Bayly Holmes-Ovcon (WBHO) has reduced South African work from 45% to 31% in its R36bn order book.
2015 growth was possible in consideration to the quarter-on-quarter improvement in the sector. A three-quarter lag has also been recorded between fixed investment in construction works and a response in construction sector growth.

Muscat has also added that it has become important to invest in infrastructure in order to realize economic growth. Manglin Pillay, the CEO at South African Institution of Civil Engineering has termed the call for private involvements in the sector as positive. He has talked of the need for private and public sector to look for solutions to ensure efficient tendering and roll-out processes.

PWC has indicated that annual infrastructure spending in South Africa will grow by an annual rate of 10% on average, and reach $60bn by 2025. This was $22bn in 2012. PWC has indicated that transport investments will rapidly grow.

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