Civil projects are on the rise

There has been a strong rebound by the civil construction sector post Covid-19, with the value of civil projects awarded in November increasing to the highest level in four years and 21% higher year on year compared with the same month last year.

However, construction market intelligence firm Industry Insight reports that the private sector continues to disinvest in buildings and project postponements are accelerating.

Civil construction awards were supported by three significant road projects in KwaZulu-Natal, awarded by the SA National Roads Agency (Sanral) to JSE-listed construction company Raubex.

These were the R1.48 billion contract for the upgrading of the N3 from Dardanelles to Lynnfield Park, the R1.43 billion contract for the upgrading of National Route 2 from Kwamashu Interchange to Umdloti River Bridge and the R1.44 billion contract for the upgrading of the National Route 3 from Cato Ridge to Dardanelles.

Raubex was last month also awarded a $172.2 million lump sum turnkey engineering, procurement and construction contract for the modernisation, expansion, upgrading and improvement of the Beitbridge border post in Zimbabwe.

Industry Insight CEO Elsie Snyman said Sanral has also awarded several other higher-value road projects, valued at about R500 million each, to Triamic Construction in KwaZulu-Natal, and Roadmac Surfacing, Tau Pele and WBHO in the Eastern Cape.

Snyman said the nominal value of civil awards increased by 19.8% year on year in the last 12 months, from an increase of 7.5% in 2019.

Tender activity

She said tender activity also improved in October, increasing by 15.8% year on year and was supported again by an increase in water-related projects, which included several higher-value projects, and a moderate increase in road projects out to tender.

However, Snyman said tender activity was 18% lower year on year for the first 10 months of the year.

PPC South Africa & Botswana MD Njombo Lekula confirmed this week there has been an increase in the number of infrastructure projects awarded and a lot of water treatment projects have come through.

“We have one in Suikerbos that we are busy supplying; we have quite a few road projects that Sanral is busy with and rolling out; and we have some wind farms in the coastal region. All these projects will have an impact on our industrial sector,” he said.

Lekula added that there are quite a lot of residential projects that are being spoken about; quite a few projects by Balwin Properties in the Gauteng area; and quite a few RDP and low-cost housing projects “on the go” in Mpumalanga.

“This is what gives us confidence,” he said. “The infrastructure projects are starting to kick in.”

FNB and the Bureau for Economic Research (BER) reported this week that confidence in the civil construction industry improved in the fourth quarter (Q4) of 2020 to 16 on a 100-point scale, from 11 in Q3 and only five in Q2.

FNB property economist Siphamandla Mkhwanazi attributed the improved confidence to high activity levels and an uptick in overall profitability.

However, Mkhwanazi said activity levels remain below that registered just before the Covid-19 pandemic and are most likely restricted to specific sectors, such as renewable energy.

“The increase in activity this quarter is unlikely to be sustained over the medium term, and this is what the low confidence reflects.

This article first appeared on Moneyweb and was republished with permission.

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