Cape construction picks up

Cape construction picks up

Statistics from the Cape Construction Expo appears to support increasing evidence from company activity that the local building sector is finding a much firmer footing. The Cape Construction expo suggests as much as 16% of construction activity in SA is taking place in the Western Cape.

More importantly, the province should see an average growth of 5% in construction activity until 2017.

The Western Cape government’s provincial economic outlook showed provincial construction activity peaked between 2006 and 2007 when growth reached sprightly levels of 10,7% and 15,1% a year. The latest growth indicators come as a relief since construction activity had bottomed out at 0,7% growth in 2009 and was trundling along at a pedestrian 1,5% growth as recently as 2011. The Western Cape government statistics also showed how important construction has become in the local economy – ranking as the fastest growing sector which expansion of close to 8% per annum.

This strong growth transpired during residential and non-residential building boom, the huge infrastructure push for the 2010 FIFA World Cup and increased public sector capital spending (including upgrades to the Cape Town International Airport as well as the harbour.) It’s doubtful, however, that the local construction sector will see double-digit growth again. But the 5,5% annual growth predicted for 2016 and 2017 is promising and heartening.

There are, of course, x-factors for the local construction industry. Recent reports suggest the V&A Waterfront has a major new development plan for Granger Bay – which local media suggest could include reclaiming land from the sea. There is also the possibility of a second casino license being re-located to Cape Town, which would require an extensive development project.

Other nearer term developments that could boost construction activity include Ingenuity’s plans for land it recently acquired around Century City. Chemicals and explosives group AECI is also planning to develop its Somerset West property – which includes 18hectares of industrial land in three phases with a mixed-use development to follow. It also has 308,000m2 of bulk beachfront residential development in a pre-planning phase, which could include 100 single residential units and 350 apartment-type units.

Local construction companies are also looking a tad more vibrant. Afrimat recently indicated that its ready-mix cement sales increased revenue 17% to R205m with higher volumes experienced in the Western Cape. Afrimat CEO Andries van Heerden – writing in the company’s annual report - believed the increase in government’s spend on infrastructure development should drive growth, while the incremental rise in building construction activity should bolster demand. “Building activity is on the up as reflected in increased sales to readymix customers countrywide and tender activity is increasing across most construction market segments.”
He added that the improvement in sentiment is evidenced by the turnaround in the Building Confidence Index, which is up 5 points to 37. “These positive trends are confirmed by our experience in the market and seeing our customers’ activities pick up.”

It was also encouraging to see Argent Industrial reporting a profitable performance from its Megamix and Villiersdorp Quarry operations –which service the Western cape buildings sector. Even though CEO Treve Hendry indicated that the construction industry in the Western Cape remained a challenge, he noted the convenient location of the quarry augured well for business from the various wind farm sites. In the year to end March, Argent’s construction division reported turnover of R84m and pre-tax profits to R2m.

But things look rather lively for the year ahead with Hendry quoted in a Financial mail interview as saying: “Our cement operation Megamix just had its biggest month ever. Everybody seems to want cement at the moment.” This is supported by news that cement giant PPC saw its first half of financial 2013 sales volumes up 6% with the company noting a pleasing recovery in the Western Cape. The FM also reported that Hendry described the Villiersdorp quarry as a hive of activity and that the business looked set for a big improvement in performance.

Steel, aluminium and glass claddings specialist, Mazor, is also looking busier, having been awarded “numerous new contracts” - including notable projects such as the aluminium façade for Portside, which is set to be Cape Town’s tallest building in the central business district. CEO Ronnie Mazor said most of the contracts would spill over into the company’s next financial year.

Construction giant WBHO saw its Western Cape division securing the Amalfi apartments in Cape Town and work on the Cape Town harbour for Transnet is due for completion shortly. WBHO said work continued on the Santam Head Office in Tygervalley, the No. 1 Silo project at the Waterfront and residential developments in Greenpoint for repeat clients.

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