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New Market Research Report: South Africa Infrastructure Report Q1 2014

New Construction market report from Business Monitor International: "South Africa Infrastructure Report Q1 2014"

 

Boston, MA -- (ReleaseWire) -- 01/09/2014 -- South Africa's construction industry looks set to grow in line with our forecasts for 2013 as our view that the industry's post-World Cup slump finally reached a bottom in 2012 and timidly returned to growth has played out. In light of officially revised data for the previous quarters of 2013 we are tweaking our forecast for real growth in the full year upwards to 2.2% from 1.9% as the industry historically finishes strongly in the last quarter. We maintain the view that we will see a cautiously positive growth story over our forecast period. We see annual real growth averaging 3.8% between 2014 and 2018 with downside risks remaining prevalent - namely difficulty in raising capital for projects, currency fluctuations, social unrest and poor policy making.

Despite still lagging behind its regional peers in terms of growth rate, it is important to note that South Africa's construction industry has begun its recovery after the collapse following the World Cup in 2010. Following the 2010 World Cup government finances were pushed to the limit in order to complete projects on time. Hence, a drawback in funding and subsequent activity was noticed almost immediately after the tournament. Real growth decelerated from 7.8% year-on-year (y-o-y) in 2009 to 0.9% y-o-y in 2010. We are now seeing a return to sustainable growth, noting that levels are unlikely to ever return to those seen before the World Cup, as they were driven by an artificial stimulus and a front-loading of the project pipeline.

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We are seeing a gradual improvement within the wider South African construction sector, although there are still substantial headwinds. This has been underscored by the measured improvements seen in the performances of numerous South African construction companies. Hence, our outlook for the country's construction sector is one of cautious and modest growth, with a forecasted average annual growth of 3.8% between 2014 and 2023.

Many of the grand infrastructure programmes proposed by President Zuma draw upon huge capex schemes by the country's state-owned infrastructure operators, including Eskom, Transnet, Prasa and Sanral. They all have multi-billion dollar plans in the pipeline; but, financing has proved to be a major obstacle and continues be so. Eskom and Transnet have made progress in issuing bonds to raise capital, but Sanral in particular continues to struggle with huge debts, which threatens investment into the road sector. The rail and port sectors are a key source of growth in our forecasts as Transnet has front loaded its spending plans with huge capacity expansion projects, for examples a new dug-out port in Durban.

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