SA construction industry takes a dip

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The construction industry has taken a dip since the boom brought on by the 2010 Soccer World Cup, auditing firm PricewaterhouseCoopers (PwC) said. Picture Henk Kruger/Cape Argus

Johannebsurg - The construction industry has taken a dip since the boom brought on by the 2010 Soccer World Cup, auditing firm PricewaterhouseCoopers (PwC) said on Tuesday.

“South Africa's construction industry has undergone a significant financial decline following the 2010 Fifa World Cup,” PwC partner Andries Rossouw said in a statement.

He was commenting on the company's inaugural edition of a report on the country's construction industry, SA Construction Survey.

“This is largely due to a decrease in margins achieved as cost pressures could not be passed on to clients due to depressed public and private spending as businesses recover from the effects of the economic decline.”

Rossouw said it appeared the economic cycle had bottomed out, with a number of encouraging signs in the financial performance of individual companies. The South African construction industry was cyclical in nature, PwC said.

Between 2009 and 2011 the industry remained flat, but then capital expenditure by public sector institutions increased by 11.7 percent. The total expenditure in 2012 was R202 billion.

The construction industry's total revenue increased by 21 percent to R145.7bn between 2011 and 2012.

“The scale of this increase may be misleading, as new construction work only increased by 3.5 percent to R137bn while plant, machinery and equipment purchased increased by 55 percent to R38bn,” PwC said.

According to PwC, the industry remained key to support South Africa's infrastructure development, despite the financial problems of the last three years. There were however still a number of risk factors that could affect the industry, Rossouw said.

PwC's findings were based on the financial results of the top 10 construction companies listed on the Johannesburg Stock Exchange.

Future growth in the industry depended on government's infrastructure plan and the presidential infrastructure co-ordinating commission, it said.

According to the report, the construction industry had higher salary increases than other sectors.

“These higher increases are indicative of the skills shortage and efforts by the construction industry to retain key resources in anticipation of the potential upswing,” said Rossouw.

According to PwC, the construction industry still faced tax problems after it was listed as one of seven areas the SA Revenue Service would like to focus on in the next four years.

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