The construction and infrastructure industry should expect another tough year during 2019 following reduced budget allocation to the sector by the minister of Finance Tito Mboweni, this according to South Africa’s leading economists speaking at the Annual AfriSam Post-Budget Breakfast event. Political analyst Aubrey Matshiqi adds that national elections on 08 May will add to business pressures, despite that the African National Congress (ANC) being expected to retain its majority position in parliament.
South Africa’s construction materials giant hosted an insightful post-budget breakfast session with Dr. Azar Jammine director and chief economist at Econometrix, David Metelerkamp, Senior Economist at Industry Insight and political analyst Aubrey Matshiqi.
“2019 is going to be tough for the local economy, but better than 2018. There were positive signs in the budget. There are still some risks especially around the function of the SOEs, slow-down in the global economy because of the trade wars between the US and China, as well as Brexit. On the local front the power supply challenges at Eskom is South Africa’s biggest quandary,” says Dr. Jammine.
On infrastructure, Dr Jammine says the budget showed very little of President Cyril Ramaphosa’s pronouncement to increases infrastructure spend. “The numbers presented don’t show increased spend on infrastructure even though we are hearing the President and minister of finance talk of infrastructure”. He adds that in nominal terms, budget allocation for infrastructure rose by about 4%.
Metelerkamp highlighted the reduction of infrastructure spend from 2017 to 2019. State-Owned Enterprises (SOE’s) are the biggest contributors to poor infrastructure spend in the economy, resulting in the construction industry being at recessionary levels. “The year 2018 was not a good year for construction as there was a 15% decline in the nominal value of construction projects awarded”, said Metelerkamp.
He adds that if the R864,9bn allocated to construction and infrastructure is spent effectively, it could be a step in the right direction for the economy and job creation. In addition, a positive cleanup of the SOEs (restructuring Eskom being a step in the right direction), implementation of renewable energy projects, road upgrades, and the building of affordable housing could restart the economy.
Matshiqi said South Africa could be facing another recession and downgrade by credit rating agencies if steps are not taken to change current economic course, boost foreign investors’ confidence, and dealing with corruption and some of the negative sentiment emerging from the various commissions of inquiry. “Change will only come with the decisions we take as individuals”, encouraged Matshiqi.
AfriSam Sales & Marketing Executive, Richard Tomes said the construction market was facing serious headwinds, some of which could be resolved if the state-owned entities are fixed and made to function efficiently, especially Eskom.
This second Annual AfriSam Post-Budget Breakfast event brought together more than 200 infrastructure, materials and construction specialists to review the impact of the national budget on the sector.
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This article was published by Archy Hlahla, Hlengani Communications on behalf of AfriSam.