PRETORIA – Confidence levels in the consulting engineering sector deteriorated to their lowest level ever in the first six months of this year, with many companies reporting that they were operating in survival mode.
The latest Consulting Engineers SA (Cesa) biannual economic and capacity survey said the sentiment fell significantly to reach a record low net satisfaction rate of just 27percent in June.
It said large firms were by far the least confident with only 15.4percent confidence compared with 69.1percent for medium-sized firms, 57.9percent for small firms and 57.8percent for micro firms.
“People are clearly very worried about the overall outlook for the construction industry in general and the economy,” the report said.
However, the report said firms believed the lowest point in the cycle had been reached, with overall confidence levels improving to 47.1 percent for the six months to December this year and to 45.6 percent for the six months to June next year.
Fee earnings in the first six months of this year decreased 10percent compared with the last six months of last year. The report said this was “quite a massive drop in such a short space of time” and followed a 2percent increase in the last six months of last year, but earnings were expected to increase marginally in the second half of this year.
It added that 71.6 percent of firms were not satisfied with profit margins, compared with 61.2percent in the previous survey, with only 3.9percent of firms reporting their margins as good, 24.2percent were satisfied with their margins and no firms reporting that their margins were exceptional.
Firms reported that 38.8percent of their overall income was still outstanding. Contributions to fee earnings by the private sector increased to 46percent, which was slightly above the two- and five-year average.
The contribution to fee earnings by provincial fell to 11percent from 17percent in December last year and that of local government to 12percent from 18percent. The report said the contribution to fee earnings by state-owned enterprises (SOEs) slumped to 5percent from 15percent.
“This is quite a stark decline and makes sense with very slow roll-out of projects reported from the SOEs. We also speculate that with the radical changes at the executive level, this is stalling projects,” it said.
The report said the public sector was generally regarded as the most important client to the industry and, despite the reduced contribution by the public sector in the past six months, stressed that the role of the public sector remained critical to the engineering professions.
It said fraud and corruption were affecting the ethos of the country’s society, with a lot of talk and little action accompanying the growing evidence of corruption.
“Cesa is aware that members are under pressure from contractors and corrupt officials to certify payment for work not completed. This is regarded as an extremely serious matter for Cesa,” it said.