Construction hurt by 'wait and see'

International credit insurer Coface said on Thursday that the South African construction industry had been hampered by a “wait and see” approach over the first six months of 2010.

Speaking at the group's head office in Johannesburg, Jayson Naidoo, building and construction sector analyst at Coface South Africa, said the sector had been characterised by a slow and monitored recovery.

"The building industry has had a major slowdown in the past three months due to the Soccer World Cup. We are reminded that the core employees are unskilled labourers in this sector where football is a passion. Hence productivity levels would have been low," Naidoo said.

"Some large construction companies have had half days during the World Cup which has had an impact on productivity," he said.

Looking at the second half of the year, Coface said the industry would see a return to productivity, and the completion of World Cup infrastructure including roads and rail.

"The building of the nation through unity and the soccer will have significant impact on the motivation of its people to stand together to build a brighter future," Naidoo said.

A blot on the sector, however, was the high level of unemployment, according to Coface. "Employment may improve due to projects starting up again," he said.

Naidoo highlighted government’s R846bn infrastructure budget as a feature going forward. "Infrastructure spending on economic services, including the provision of electricity, roads, pipelines, bulk infrastructure for water and sanitation and housing, would account for 85,3%, or R720bn of the R846bn spend, while 11,3%, or R93bn, of the total would be spent on social services, including schools and hospitals," he said.

The group noted that the residential sector remains slow, with no real movement over the first six months of 2010.

"Continued slow movement is expected due to a high number of the unemployed, the banks’ lending criteria and a constraint on consumer spend," Coface said.

Looking at the long term for the industry, the credit insurer said that foreign investment through the World Cup exposure would have an impact going forward.

“We are hopeful that this sector, especially infrastructure, will improve in the next six months due to government’s R846bn rand budget as mentioned. But we will only be able to see this once productivity returns post World Cup,” Naidoo concluded. – I-Net Bridge