A difficult time for the construction industry – Enter Procurement

“Contest for tenders (in the construction industry) has become exceptionally fierce since the middle of last year” says Cees Bruggemans, Chief Economist at FNB, in his weekly economic comment column. He notes that “never before have so many civil contractors experienced lower volumes of work as in 2010. Although construction activity contracted at a somewhat slower pace in the third quarter (–74% net) compared to the second quarter (–80% net), the decline in work remained widespread.”

In his opinion, the low volume of work can be attributed to the fact that many projects were completed before the FIFA soccer world cup. “Since then few new projects were started due to a variety of constraints at local government level, in some public corporations and in the private sector,” he observes. Despite this gloomy immediate past history, he goes on to say that some companies positioned themselves well at the time of the onset of the global financial crisis and continue to operate at decent capacity levels.

“Some work has continued to flow from certain parts of the private sector,” continues Dr Bruggemans. “But in the case of the residential building sector it almost dried up completely due to the recession. As a result, civil construction companies have kept on retrenching staff on a large scale to contain costs and remain financially viable in this difficult environment.”

He thinks that conditions may improve in the year ahead if government starts to launch new projects.

Listen to Dr Cees Bruggemans, Chief Economist of FNB, talk on the trends that will affect South Africa’s economy over the next 18 months at the SmartProcurement World Conference where he will keynote speaker. SmartProcurement World will be held at Gallagher Convention Centre on November 16th – 18th. Dr Bruggemans holds a D.Com in Economics and an MBA from UCT.

Elaine Porteous is a freelance consultant and contributing editor to SmartProcurement. To contact her email her at editing@smartprocurement.co.za. See her webpage at www.elaineporteous.co.za

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