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03/07/2008 12:29 PM - (SA) Builders' mood takes a dip 04-07-2008
According to FNB chief economist Cees Bruggemans, overall business conditions remain favourable in the civil construction industry. He however, indicated that although the larger construction companies participating in mega contracts such as the Gautrain, Sanral road building projects, Eskom and Transnet capital expansions remain upbeat about current business conditions, other participants to the survey indicated that a number of factors are tempering their optimism. The more important factors were the sharp slowdown in residential township development work, political in fighting in the Western Cape constraining the flow of new work, weak capacity at the local government level and slow payment by public sector departments and municipalities which often leads to severe cash flow problems and consequent financial stress being experienced by civil contractors. The growth in civil construction activity during the second quarter of this year turned out below the expectations of respondents. The weaker demand conditions experienced by respondents resulted in an intensification of tendering competition for new work, with the result that gross margins took a knock which in turn had a sizeable negative impact on the overall profitability of survey respondents. As a result of the moderation in construction activity, the growth in employment slowed down. Nevertheless, the availability of skilled labour remains a major headache and acts as a major constraining factor hampering the construction activity of contractors. He said that as far as the outlook for the third quarter is concerned, respondents expect business conditions to remain stable.
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